577A Relinquishing of a life interest by the person entitled

Summary

This section provides relief from the capital gains tax liability which would accrue to a trustee of settled property, where a person entitled to a life interest in the property relinquishes that life interest. The relief given is the retirement relief which would have been given to the person entitled to the life interest if that person had owned the property absolutely since the commencement of the life interest.

Details

On relinquishing a life interest the asset will then pass, via the trustee, to the ultimate beneficiary. When this occurs the asset is deemed to have been disposed of and immediately reacquired by the trustee and as such gives rise to a capital gains tax charge on the trustee. This section provides such relief to the trustee as the person with the life interest would be entitled to if that person had owned the asset for the period of the life interest.

(a) The person entitled to the life interest is regarded as having owned the property for the period of that life interest, and

(b) that person is regarded as having acquired, altered and fulfilled any obligations with respect to the property in so far as was done by the trustee. Section 552(1) referred to in this paragraph deals with allowable deductions for acquisition, enhancement and disposal costs in the calculation of chargeable gains.

Relevant Date: Finance Act 2021