I had understood that no exit charge arises on an appointment out of a discretionary trust in favour if a charity, as this is negated by the transfer of value being exempt under s.23 IHTA 1984.
If my understanding is correct, then there can be no opportunity for hold-over to be claimed under s.260 TCGA 1992.
However, does not s.257 TCGA apply to avoid any CGT on the appointment (if valid)?
Turning to the primary question, if the trust deed provides that any such appointment must (or “should” be made by deed), that is an essential pre-requisite and an attempt to exercise the power any other way fails (unless the trust is governed by, say, Jersey Law where “deeds” do not exist and the JRC has interpreted the reference to “deed” as “an instrument in writing”).
Technically, there has been no appointment, so that HMRC could well argue that the sales have been made by the trustees within the settlement, and not on behalf of the charities. Although it might be possible to persuade HMRC to accept that an appointment was made before the sales, that does not wash out the actual breach of trust, which could be actionable by any members of the discretionary class who have not benefitted, or feel they have not received their “just” share.