Accumulation & Maintenance Trust – s.260 TCGA Holdover Relief

Trusts Discussion
1

I am seeking some practical advice from practitioners who may have experienced a similar problem.

In my case an A&M Trust was created in 1999 for the taxpayer’s daughter. Originally, the rules provided a range of advantages but they were effectively changed through legislative changes but because this was a pre-2006 A&M Trust, s.260 TCGA gift holdover relief was available and the trust, since it provided for the beneficiary to become absolutely entitled on her 25th birthday, did not need amendment.

However, the trustees who were the beneficiary’s parents are not trust professionals and were unaware that a holdover claim had to be made by reference to the date on which the beneficiary became 25; that was in July 2018. Although she became entitled absolutely to both capital and income at that point, she was not regarded by her parents as a businesswoman but someone much more interested in the arts and they continued to manage the trust property portfolio, remitting the income to their daughter and ensuring that tax was paid in full on it.

S.43(1) TMA 1970 imposes a 4 year time limit to making the claim which, of course, means that it should have been made in 2022. The trustees were simply unaware that anything had happened because they continued to operate the assets through the trust and this was, of course, in the Covid period. The request I have is whether any users of the forum have any experience of HMRC using their discretion to extend the time limits in this type of case.

Many thanks in advance

2

I came across a situation a couple of years ago which was similar to yours, in that it involved an omission to claim holdover relief, due to the client’s misunderstanding, although in my case the claim should have been made when investments were transferred by the client into a trust.

The disposal arose some 9 years prior to the omission coming to light, and we then wrote to HMRC with an apology, a calculation, and a claim for holdover relief, asking them to accept this as a late claim. Their response (received 10 months later) was a letter stating simply that the deadline for making a claim had passed and reminding us of the time limits for submitting claims and filing tax returns. We waited, expecting HMRC to write to our client regarding the gains on which he should therefore have paid CGT, but they never did.

My research at the time led me to understand that had HMRC issued an assessment for the tax owed by my client, he would then have been able to submit a claim for holdover relief, but this point was never tested. It may be that HMRC believed themselves to be out of time for raising an assessment.

I imagine their approach may differ depending on the amount of tax at stake.