Where someone becomes absolutely entitled against trustees, the trustees are deemed to dispose of the relevant assets at market value (TCGA s71)
I thought that there was an exception to this rule, when a life interest ends and an asset goes back to the settlor. Tolley’s Tax Guide (I am looking at the 2024/25 edition paragraph 41.21) says, “the trustees are only chargeable to tax to the extent that gains are held over…The settlor is treated as acquiring the property at its cost.” This was my understanding.
But I cannot find any reference to this exception in Tolley’s CGT, or in the CGT Manual or in TCGA itself.
Have I missed something? Does this exception no longer exist?. Or did it never exist?
On the death of a beneficiary with a QIIP the trustees are deemed to dispose of property and re-acquire it at market value but no CGT charge arises, simply a CGT uplift
[TCGA 1992 73(1)(a)].
However, the CGT exemption does not apply to any part of the gain which was held-over on creation of the trust. Also the charge does not apply where the property reverts on death of the life tenant to the settlor absolutely [TCGA 1992 s73(1)(b)]; the so-called “revertor to settlor” exception.
Replace “Also the charge does not apply where the property reverts on death of the life tenant to the settlor absolutely [TCGA 1992 s73(1)(b)]; the so-called “revertor to settlor” exception”
with
"“Also the exemption from charge does not apply where the property reverts on death of the life tenant to the settlor absolutely [TCGA 1992 s73(1)(b)]; the so-called “revertor to settlor” exception”