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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Extra-Statutory Concession D40 - example

Mr Smith settled the Smith family settlement in 1986. He had a life interest succeeded by his son with the remainder to his grandchildren in equal shares. Mr Smith died in 1990 before the 1991 changes that would have made him liable to section 86. Mr Smith’s son succeeded him as life tenant. The trustees own all the shares in a close company which makes an interest-free loan to the settlement.

The trustees are an associate of the son and section 451 CTA 2010 ascribes their control of the company to him. Paragraph 8(9) Schedule 5 would prevent this for the purposes of section 86 if he is not participator in the company. But this restriction does not apply because the son’s status as life tenant means he is a participator in the company. The property originating from the company is treated as originating from him and section 86 applies.

But the son is a participator only because he is life tenant. Extra-Statutory Concession D40 applies and the trustees’ control of the company is not ascribed to him and the property originating from the company is not treated as originating from him.