Gifts: Inheritance Tax: claw back of relief if settlement becomes settlor-interested or if a relevant individual has an interest in the settlement
If the circumstances described in CG67067 or CG67067A arise, in that a claim for hold-over relief in relation to a relevant disposal (see CG67068C) has been made before the material time (see CG67068C) and that claim is not revoked or withdrawn, a chargeable gain equal in amount to the amount of the gain that was held-over in consequence of the claim will accrue to the transferor. Although this gain relates to the relevant disposal, it will not accrue until the material time.
For example, on 1 February 2004, Jacob Marley gives shares in Dickens Construction plc to the Scrooge 2004 Settlement in which neither he or any other settlor has an interest. The gain arising to Jacob is £50,000. Jacob claims hold-over relief under TCGA92/S260 in respect of the entire gain. On 25 December 2006, Jacob acquires an interest in the settlement. Jacob now has a chargeable gain of £50,000 arising in the 2006/2007 tax year.
Note: The clawback provisions do not apply where the transferor is an individual who has died before the material time. If the claim for hold-over relief under TCGA92/S260 is withdrawn, the provisions of TCGA92/S169C apply as though the claim had never been made (see CG67066 and CG67066A).
CG67070 tells you about the consequential tax adjustments where there is clawback of relief.