Produced by Tolley in association with Paul Davies at DWF
  • 19 Oct 2021 23:09

The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Paul Davies at DWF provides comprehensive and up to date tax information covering:

  • Capital losses
  • Calculations and claims
  • Trustees’ use of losses
  • Sale of trust assets
  • Transfer of assets to beneficiary
  • Making best use of losses ― trustees
  • Anti-avoidance
  • ‘Purchased’ trust losses
  • General anti-avoidance rule

Capital losses

Calculations and claims

Losses arising to trustees are calculated in the same way as they are for individuals. Capital losses are automatically set against any gains of the same tax year; any that are unused can be carried forward and set against gains arising in subsequent years. They cannot be carried back and set against gains of a previous year.

Losses brought forward are only set against gains of subsequent years to the extent required to reduce the gains of that year to the amount of the applicable annual exemption. In this way none of the annual exemption is wasted.

Losses must be claimed in order to be allowable, normally on the Capital Gains supplementary pages of the Trust and Estate Tax Return. The general time limit for claims and reliefs is four years from the end of the year of assessment to which they relate. It is advisable to include details of capital losses on the annual tax return as a matter of routine, even though there is no requirement to do so. Then, if gains are made in the future, the losses available for set-off have been recorded and claimed. Once claimed, losses can be carried forward indefinitely.

These general rules are discussed in the Use of capital losses guidance note in the Personal Tax module in relation to individuals, but the same principles apply to trustees and personal representatives.

Trustees’ use of losses

Sale of trust assets

If trustees make an arms-length disposal of trust assets for a sum that is less than their acquisition value then a loss will normally arise.

It may be necessary to research the history of the trustees’ acquisition of the asset bearing in mind

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