MH is resident and deemed-domiciled in the UK. She is deemed by s86 TCGA and s624 ITTOIA to be the settlor of an excluded property trust. The trustees wish to appoint assets out of the trust to MH’s grandchildren and adult children. The assets stand at a substantial gain which, it seems to me, will be assessable on MH. If the trustees vary the trust to exclude MH and her husband from benefiting under the trust, will this avoid the CGT charge?
Hugh Lask
Harris & Trotter LLP
It is in principle possible to amend the provisions of a trust so it is no longer a qualifying trust for a tax year for s86 purposes and hence trust gains are no longer assessable on the settlor.
However, I’m not sure that merely excluding the settlor and settlor’s spouse is sufficient to avoid the s86 charge given that the settlor’s children (including adult children) may benefit. A so-called grand-children only trust would avoid the s86 charge.
Also note TCGA 1992 Sch 5 para 2(1©.
Malcolm Finney