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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Absolute entitlement: mergers of interests: general

If a beneficiary simultaneously acquires all the interests under a settlement, he has become absolutely entitled as against the trustee, and TCGA92/S71 (1) therefore immediately applies.

Take the simple case where property is held in trust for A for life with remainder to B. B’s interest is vested, but it is a remainder, not an interest in possession. If B dies before A then that interest passes to his heirs. He can realize funds by selling the interest; indeed there are long-established companies that carry on a trade of buying such interests. The value of such an interest is based on the life expectancy of A and the value of the trust assets.

Clearly in this situation A and B together hold all the interests under the settlement. They can agree to divide the trust assets between themselves. Alternatively one may buy the interest of the other or a third party may acquire the interests of both. Sometimes the life tenant may surrender his or her interest so that the remainderman can enjoy the property immediately. All these are occasions of charge under Section 71(1).