578 Death of annuitant

This section applies the rules in section 576(1) and 577(3) regarding the termination of a life interest to an annuity (not being a life interest) which terminates on the death of the annuitant.

Thus, if the property out of which the annuity is paid goes to some person absolutely, the assets forming the property are deemed under section 576(1) to have been disposed of and immediately reacquired by the trustee as a bare trustee of that person. By virtue of section 577(2), no charge to capital gains tax arises on this deemed disposal and the deemed reacquisition is treated as being for a consideration equal to the market value of the assets at the date of death.

However, if the property reverts into the settlement, the assets forming the property are deemed under section 577(3) to have been disposed of and immediately reacquired by the trustee at their market value at the date of death of the annuitant and this may give rise to a capital gains tax charge on the trustee.

Relevant Date: Finance Act 2021