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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Gifts: Inheritance Tax: gifts to non settlor-interested settlements: relevant individual has interest in settlement after hold-over relief obtained

Subject to certain exceptions, any hold-over relief under TCGA92/S260 obtained in relation to a “relevant disposal” (see CG67068C) must be recovered from the transferor if the relevant disposal is to the trustees of a settlement where

  • in computing the amount of the held-over gain in respect of the “relevant disposal” (assuming that no gifts hold-over relief is available on that disposal), the amount of expenditure allowed as a deduction would need to be reduced on account of gifts hold-over relief obtained under TCGA92/S165 or TCGA92/S260 in respect of an earlier disposal (whenever made) by an individual (the “relevant individual”),

and

  • within the “clawback period” (see CG67068C) (but after gifts hold-over relief under TCGA92/S260 was claimed by the person who made the relevant disposal) the relevant individual acquires an “interest in the settlement” (see CG67068A), or an “arrangement” (see CG67068A) comes into existence under which he or she will or may acquire an “interest in the settlement”,

and

  • the transferor (that is the person who made the “relevant disposal”) is not an individual who has died before the “material time” (see CG66921C).

[TCGA92/S169C (1), (3), (5) and (6)]

The exceptions to this general rule are explained in CG67071.

Note that the “relevant individual” need not have any connection whatsoever to the person who made the “relevant disposal”.

CG67069+ tell you how the clawback provisions work and what consequential tax adjustments must be made. If the claim for hold-over relief under TCGA92/S260 is revoked or withdrawn, the provisions of TCGA92/S169C will apply as though the claim had never been made (see CG67066A).

The extension of the definition of “interest in settlement” to include dependent children, see CG67068A, applies only to disposals made on or after 6 April 2006 for the purposes of TCGA92/S169C.

[TCGA92/S169C (10)]