Interaction between the rebasing relief and s260 TCGA 1992 holdover relief

Trusts Discussion
1

An offshore trust makes a capital distribution of UK-situated assets to a UK resident deemed domiciled beneficiary (non-settlor and not an FDR).

The assets to be distributed have unrealised gain of £1.4m. The distribution is subject to an IHT exit charge. The gain of £1.4m will be stockpiled and matched (under s87 TCGA 1992) in the year of distribution. No other realised gains are stockpiled in the trust.

I am happy that s260 TCGA 1992 holdover relief is due, as well as the rebasing election relief which will reduce the chargeable element of the matched gain (£1.4m) to less than 50%.

If the holdover relief is opted for, will the rebasing election relief still be available when the beneficiary eventually sells the assets in and realises the deferred gain? In other words, which gain is deferred under s260 TCGA 1992, the gain before the rebasing relief or after the deduction of the rebasing relief available.

Would be grateful for a view on the technical point, which I have not been able to find an answer in the tax legislations.

Jihao Zhang
Lutea Consultancy Ltd

2

On the basis that rebasing relief results in an exemption from CGT on part of the capital gain (rebasing not involving a deemed sale and re-acquisition as would normally be meant by rebasing) then hold-over relief would not be necessary for such part. I would suggest hold-over relief applies to the gain after any rebasing relief deduction.

Malcolm Finney

3

Hi Malcolm

Many thanks for your view, which matches the confirmation that I got from another source.

Ji Hao Zhang
Lutea Consultancy Ltd