Commentary

I5.1038 Trusts with vulnerable beneficiaries—CGT relief

IHT, trusts and estates

I5.1038 Trusts with vulnerable beneficiaries—CGT relief

I5.1038 Trusts with vulnerable beneficiaries—CGT relief

Special CGT treatment for trusts with vulnerable beneficiaries—overview

Special CGT treatment applies where trustees1:

  1.  

    •     have qualifying trust gains in a tax year, ie gains arising from the disposal of settled property held on qualifying trusts (see I5.1036) for the benefit of a vulnerable person (see I5.1035)

  2.  

    •     would be chargeable to CGT in respect of the gains if the provisions did not apply

  3.  

    •     are resident in the UK during any part of the tax year (or, before 2013/14, are ordinarily resident in the UK during the tax year); the vulnerable person does not need to be resident

  4.  

    •     make a claim for special treatment for the tax year (see I5.1039)

The basic principle is that the overall liability to income tax and CGT is equal to what it would be if the income and chargeable gains belonged to the beneficiary2.

Where the trustees make a claim for special tax treatment it covers both income tax and CGT for the tax year3. It cannot apply to one tax and not the other, except where4 (see I5.1039):

  1.  

    •     the vulnerable person dies during the year5

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