Hello
I have a question on completing the CGT pages of a tax return when cash is appointed out and would be interested in members views.
The CGT pages ask the question if any person become absolutely entitled to any part of the property during the year (page TC5 box 5.32).
The wording here suggest you would have to report cash. The guidance mentions becoming entitled to any part of settled property.
However CG pages are only required if chargeable assets are disposed of, above the limits.
To me this suggests that as cash is not a chargeable asset it should not be reported on the tax return
Interested if others report cash appointed on the tax return or not.
From a disclosure point of view there is no harm in reporting, but a white space note may be more appropriate?
A Return is required where, inter alia, the trust (or estate) disposes of chargeable assets worth more than ÂŁ48,000.
Cash is not a chargeable asset. No chargeable gains can arise on a disposal of cash.
The reference to a person becoming absolutely entitled needs to be read against the above in which case there is no need to report the cash.
If the only transaction in a tax year was an appointment of cash of say ÂŁ50,000 I would suggest no tax return would need to be filed.
I am generally of the view that in principle gratuitous information should not be supplied. However, if the trustees are that concerned then simply provide the information in box 5.2 with an appropriate Note in the white box.
I would agree on the basis that cash is not an asset.
If the asset appointed out was a property that is, of course, a different matter.
If there are no tax consequences of a cash payment I see no issue with a white space note, but as you say there is no requirement to make this so why would you.
Nick
The question asks whether any person became absolutely entitled to any part of the trust property - it is not directly concerned with the chargeable gain position of the trustees - so the strict answer is yes.
On this basis we always complete these boxes in the case of cash capital distributions - it has no effect on the trust’s own tax position but may help the beneficiary at some point should HMRC decide to enquire into their own personal affairs. Increasingly trusts are now also subject to IHT exit charges on such cash capital distributions and by including this information in a manner that HMRC are easily able to reconcile may reduce the likelihood of future enquiries.
We also often include the information on these pages for non-UK resident trusts (within self-assessment) for similar reasons and to assist with the matching on forms CG50 (although I haven’t actually seen one of these forms for several years) and to support the amounts reported under Q16.
Maxine
Thanks Maxine. I agree the question is worded in that way.
2 replies, both different!
I have also asked the question of HMRC direct. I will post their reply in here.
It is I think misleading to say that you have received two different answers.
It is perfectly clear that read in isolation and read literally box 5.32 requires completion even if the property to which a beneficiary has become entitled is “cash”.
The issue is whether or not the question needs to be read in context.
Maxine states;
“The question asks whether any person became absolutely entitled to any part of the trust property - it is not directly concerned with the chargeable gain position of the trustees - so the strict answer is yes”.
I suggest it is exactly concerned with the tax position pdf the trustees. Where the property to which entitlement arises is cash then there are no CGT implications for the trustees; however, if that property, for example, consists of shares to which the beneficiary has become absolutely entitled then the trustees have a potential exposure to CGT on any deemed capital gain which arises (other then on a qualifying life tenant’s death).
Knowing an absolute entitlement to cash has arisen is of no value to HMRC in making a determination as to the quantum of capital gains of the trustees.
Maxine says disclosure “may help the beneficiary at some point should HMRC decide to enquire into their own personal affairs”. This may be so, but it is not a justification as to why the information should be provided.
In what way is HMRC prejudiced with respect to a determination of a trustee’s CGT liability if box 5.32 is not answered?
It is by no mean’s unusual for HMRC to request information on their various forms which is in fact irrelevant to the raison d’être of the form; this in my experience is particularly so when seeking to ascertain an individual’s domicile status.
I may have overlooked the relevance of box 5.32 to a trustees’ CGT liability in which case I stand to be corrected. Subject to this, I would argue that box 5.32 should not be completed.
There may be two views:
why not complete it if no harm is done even if it’s accepted as irrelevant for CGT purposes
OR
if it’s irrelevant for CGT purposes it shouldn’t as a matter of principle be completed.
I have wondered about this question in the past as it is asked on the Capital Gains Tax supplementary pages and in accordance with question 5 of the main tax return (SA900) trustees are asked whether they disposed of assets worth more than ÂŁ48,000 (2019/20) or if there is a taxable chargeable gain or they wish to make a claim or election. If the answer to these questions is no then the form does not need to be completed. It is possible to envisage a situation where there was no requirement to complete this form but there has been a capital payment due to a beneficiary becoming absolutely entitled so if HMRC really require this information then the question should be asked on the main form.
Thanks both.
Bad choice of word, 2 different views not answers…
I sit on the side with Jeremy and Malcolm, in that the question arises on the CGT pages, therefore only relates to chargeable assets, and cash does not have to be disclosed.
I have never found HMRC to question completing it for cash, and never found them to question it to be missing if cash is appointed out.
I wonder if it is a bad choice of wording by HMRC and should refer to chargeable assets not just assets, or they expect it to be read in context.
When I have an update from HMRC I will post in here.
Further to the above HMRC have replied to me on their forums and they state:
There is no requirement to report Pound Sterling (cash) assets at box 5.32 of page TC5. If a beneficiary became absolutely entitled to an asset other than cash during the tax year, but the trustees converted the asset into cash before passing the proceeds to the beneficiary, box 5.32 should be completed with details of the specific asset the beneficiary became absolutely entitled to.
Pretty clear to me that a pure cash appointment is non reportable.