Commentary

I5.1023 Trustees' capital losses—anti-avoidance provisions

IHT, trusts and estates

I5.1023 Trustees' capital losses—anti-avoidance provisions

I5.1023 Trustees' capital losses—anti-avoidance provisions

Restriction on set-off of trustees' capital losses

Capital losses cannot be offset against gains on assets that have been transferred into a trust using a claim for gifts holdover relief where the transferor (or other connected person) acquires an interest in the trust for consideration after 20 March 20001.

Trust losses cannot be offset where the conditions below are satisfied:

  1.  

    •     a chargeable gain accrues to the trustees on the disposal of an asset which the trustees acquired under gift holdover relief

  2.  

    •     the trustees' allowable expenditure is reduced because the gain on the holdover disposal was in fact held over

  3.  

    •     the transferor who made the holdover disposal to the trustees (or a person connected with them) has at some time acquired (or arranged to acquire) a beneficial interest in the settled property, and

  4.  

    •     a person has received or is entitled to receive consideration in connection with that transfer

In this case, the losses cannot be set against any of the gain relating to this asset, not only the part that was held over2. They may, however, be used against the trust's other gains, if relevant.

Tax avoidance through the creation and use of capital losses

A

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