Commentary

I3.611 Interaction between IHT and CGT on lifetime dispositions

IHT, trusts and estates

I3.611 Interaction between IHT and CGT on lifetime dispositions

Capital gains tax

I3.611 Interaction between IHT and CGT on lifetime dispositions

In general, any transfer of value inter vivos which involves the disposition of property other than cash will also involve a disposal of that property for capital gains tax ('CGT') purposes. Broadly speaking, CGT is charged on any capital gain accruing to a disponer by reason of the increase in the capital value of an asset between the time of its acquisition by him and his subsequent disposal of it and this gain is calculated as the excess of the proceeds of disposing of the asset over the cost to the taxpayer of its acquisition, including the cost of any improvements he may have made to the asset while it was in his ownership. For disposals before 6 April 2008 indexation relief and taper relief were also to be taken into account1. The CGT annual exemption is also relevant. Where, however, a disposal for CGT purposes also involves a transfer of value for IHT purposes the disponer will have received either no consideration or only partial consideration for his disposal and so may not in fact have made any capital gain. But this does not mean that no charge to CGT can arise. The CGT rule in these circumstances is to deem that the disponer received the market value of the asset as consideration for his disposal2. CGT will then be charged on this deemed gain. For gains arising on or after 23 June 2010 (and before

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