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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Absolute entitlement: purchase by one beneficiary of other interest

Where an original life tenant of settled property makes a payment to the original remainderman in consideration for which the remainderman surrenders his or her interest to the life tenant, the life tenant becomes absolutely entitled to the property, as against the trustees who are consequently chargeable under Section 71(1). The property is deemed to have passed to the life tenant at market value.

The life tenant is not liable under TCGA92/S76 (2), see CG38040, because he or she becomes absolutely entitled to the property as the holder of both interests and not as the holder of the remainder within the terms of Section 76(2). No allowance is due in respect of the payment.

Although, as a result of the transaction, the remainderman has disposed of his or her interest, no chargeable gain accrues, except that between 10 March 1981 and 18 March 1991 inclusive, there was a charge on the trustees if they ceased to be resident, see CG38061 - CG38063.

The instructions in the first paragraph, also apply to a remainderman who, by making a payment to the life tenant, becomes absolutely entitled to the settled property, see CG37640.