A trust terminates and a property goes to 3 beneficiaries equally, subject to holdover. I assume there is no problem with one of those then putting there 1/3 share into a trust and holding over there 1/3 held over gain again, and this would have no adverse effect on the trustees of the original trust?
Also, presumably the held over gain into the second trust would be one third of the original held over gain and any further gain on the 1/3 share being gifted since the property was transferred out of the original trust?
Whilst I believe the gain may continue to be held over in these circumstances, assuming the (new) trustees are UK resident for CGT purposes, the trustees of the original trust may be uncomfortable as they will remain liable to be assessed on the amount of gain held over should the asset not continue to be owned by a UK taxpayer, whether trustees or an individual.
If the trustees have retained assets, or some other security, against the potential for an assessment being raised against them for the held over gain, this may need to remain in place until expiry of the liability period (6 years from the end of the tax year in which the gain held over by the trustees arose).
If the original trustees retain assets or have some other security in place, it will be in the interests of the original beneficiary to monitor what happens to the asset in question during the liability period as, if sold, they may be able to require the original trustees to release them from the arrangement.
Whilst I broadly agree with Paul and would not want to be seen as
deliberately contradicting an old and respected work colleague it seems to
me that the ‘risk liability period’ will be less than 6 years from the end
of the tax year in which the gain held over by the trustees of the
terminating trust arises.
Due to what I refer to as a legislative lacuna in an article I wrote for
Taxation Magazine [ 17 October 2013 edition ] the combined effect of
sections 165(7) & (8) of TCGA 1992 is that the ‘risk liability period’ will
be somewhat shorter.
Presumably the intended recipient trust will not fall foul of sections 169B
to G of TCGA 1992.
Andrew M Mortimer
A trading business is run by husband and wife and they are the only partners. They and their children also run another similar business which operates as a limited company and they all hold shares.
They set up Wills leaving their respective partnership/business interest in a discretionary trust, and it is expected that the children will carry on the businesses indefinitely. The survivor and the children are named as the trustees.
In order that the partnership does not cease on death of one of them they need to introduce an additional partner. One suggestion made is to introduce a corporate partner, setting up a limited company owned by the two of them only, so that they keep control of the partnership during their joint lives.
I would be grateful to hear other suggestions to allow the partnership to continue, or indeed whether it might be simpler to allow the partnership to cease on death of one of them and for a new partnership to commence at that stage.