A trust for grandchildren in a Will, income and capital at 25. Do members agree CGT holdover will apply if nothing is done and they take at 25? I ask, because on the 25th birthday they will be entitled to income. I assume hmrc do not argue that holdover does not apply, but would do the day before if advanced then, as there would have been no entitlement to income then.
Simon Northcott
If the trust in question is a relevant property trust, CGT holdover
relief would normally be available on a beneficiary attaining a vested
interest at age 25.
Unless s.144 IHTA 1984 applies to the creation of the life interest the
day before the beneficiary attains age 25, I am not sure why this should
take the trust outside of the relevant property regime, thus removing
the ability to claim holdover relief.
If, coincidentally, the beneficiary attains 25 within 3 months after a
10th anniversary of the testator’s death, holdover relief would not be
available in any event.
Paul Saunders
Gains that arise on the appointment of assets from a trust to a beneficiary can be deferred either under s165 TCGA 1992 (for qualifying business assets) or s260 TCGA 1992 if the transfer to the beneficiary is a chargeable transfer for inheritance tax purposes, irrespective of whether there is actually any tax due to HMRC on the transfer.
Where a trust is considered an 18-25 settlement, then holdover would apply on any appointment post 18. Where a trust is treated as a relevant property settlement, then holdover would apply on an appointment of trust assets to the beneficiaries at any point.
In your scenario, one assumes it is a full relevant property settlement. Holdover would apply at any time assets are appointed to a beneficiary to defer the gains so arising.
Duncan McGowan
Rawlinson & Hunter