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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 settlor-interested settlements: exceptions to general rule

TCGA92/S169D provides that the rules denying or clawing back hold-over relief in relation to a “relevant disposal” (see CG67068C) do not apply to

  • any disposal to the trustees of a settlement which is made in a tax year in respect of which an election has been made by the trustees for income of the settlement, or any part of it, to be applied for the maintenance of an historic building

[TCGA92/S169D (1)]

or

  • any disposal to the trustees of a settlement where the following conditions are satisfied -

    • immediately after the disposal, the settled property must be held on trusts which secure that during the lifetime of a disabled person, not less than half of the property which is applied is applied for the benefit of that person

AND

* immediately after the disposal, the settled property must be held on trusts
* which secure that, during the person's lifetime, he or she is entitled to not less than half of the income arising from the property, or
* which secure that, during his or her lifetime, no such income may be applied for the benefit of any other person, or
* under which, during his or her lifetime, no interest in possession in the settled property subsists

[TCGA92/S169D (3)]

AND

  • every person who is a “settlor” (see CG67068A) in relation to the settlement and who, immediately after the disposal, has an “interest in the settlement” (see CG67068A) is

    • a beneficiary under the settlement, and
    • a disabled person

(Note the words in brackets at the end of the definition of “interest in a settlement” in CG67068A.)

AND

* if, immediately after the disposal, there exists an "arrangement" (see CG67068A) under which a person, being a settlor in relation to the settlement will or may acquire an interest in the settlement, that person must be
* a disabled person immediately after the disposal, and
* a beneficiary under the settlement if he or she were to have the interest in question.

(Note the words in brackets at the end of the definition of “interest in a settlement” in CG67068A.)

[TCGA92/S169D (4),(5) and (6)]

A “disabled person” for these purposes is

* an individual who by reason of a mental disorder (within the meaning of the Mental Health Act 1983) is incapable of administering their property or manage their affairs

[TCGA92/S169D (7)]

or

* an individual who is in receipt of attendance allowance (under section 64 of the Social Security Contributions and Benefits Act 1992, or section 64 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 or of a disability living allowance (under section 71 of the Social Security Contributions and Benefits Act 1992, or section 71 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992) by virtue of entitlement to the care component at the highest or middle rate.

TCGA92/S169D (7), (8) and (9)]