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HMRC internal manual

Capital Gains Manual

Disposal of interests in settlements: example: purchased interests

The application of CG38012(a) and (b) can be illustrated by the following example.

X settles property on trust on terms which confer a life interest on Y. Y later sells his interest under the settlement to Z. Any gain on sale by Y will be exempt, but the gain accruing on a subsequent disposal by Z will be chargeable because he acquired that interest by purchase and is not the original beneficiary under the settlement.

If, exceptionally, Y had paid cash to X as consideration for entering into the settlement and later gifted the property to Z, again no chargeable gain would accrue on that gift because Y was the person for whose benefit the interest was created. But a gain accruing on a subsequent disposal of that interest by Z will be chargeable.