576 Person becoming absolutely entitled to settled property

Summary

Provision is made for a charge to capital gains tax on the occasion when a person becomes absolutely entitled to any settled property as against the trustee. Even though the assets remain in the settlement, a disposal of the assets concerned is deemed to take place on that occasion at the market value of the assets, and as a consequence a charge to capital gains tax may arise.

Details

(1) Where a person becomes absolutely entitled to any settled property as against the trustee, the property is deemed to be disposed of by the trustee to that person at its market value with a consequent charge to capital gains tax. From that time on the trustee is then to be treated as the nominee of that person (in accordance with section 567(2)) and any subsequent transfer of the property by the trustee to that person will not mean a further capital gains tax charge. The manner in which this result is achieved is to treat the trustee as disposing of the property and immediately reacquiring it as bare trustee for a consideration equal to its market value at the date when the beneficiary became absolutely entitled to it.

(2) Where a person becomes absolutely entitled to any settled property, any accumulated losses which have accrued on that property and which cannot be set against gains accruing to the trustee are to be treated as allowable losses accruing to the person who became entitled to the property and available for set off against any gains accruing to that person.

Relevant Date: Finance Act 2021