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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Charities: as beneficiaries of wills and settlements

The exemption in TCGA92/S256(1) applies only if the charity disposes of the asset.

If a charity is a beneficiary of a deceased person’s estate, the exemption does not apply to any disposals made before the date the residue of the estate is ascertained. Any gains accruing on disposals made before then are assessable on the personal representatives of the deceased unless the asset is appropriated to the charity in which case the charity takes as legatee and TCGA92/S62(4) applies. See CG30750+for guidance on disposals by the personal representatives and CG31140+ for guidance on TCGA92/S62(4).

A charity may be a beneficiary under a non-charitable settlement. For example, it may be absolutely entitled to the trust property on the death of the life tenant. The exemption in TCGA92/S256(1) does not apply to disposals by the trustees of the settlement but it is possible that no chargeable gain accrues to the trustees because of TCGA92/S73 or TCGA92/S257(3).

TCGA92/S73 applies if a person becomes absolutely entitled as against the trustees on the death of a person with an interest in possession in the settlement. The trustees are treated as having disposed of and reacquired the trust assets at market value at the date of death but no gain accrues to them. See CG36454. TCGA92/S257(3) applies to other cases in which a person becomes absolutely entitled as against the trustees. The trustees are treated as having disposed of and reacquired the trust assets for no gain/no loss. See CG66623. There are limitations on the application of both sections 73 and 257 which are explained in the guidance on those sections.