Help please: CGT on lifetime transfer to Trust


I hope someone can help here.

I have a client who transferred a piece of land into Trust in 2017. The land was bought at £10,000 in the 1970s, and when transferred to Trust in 2017 was valued at £233,000. The gain was heldover. In 2020, the land was sold (to an unconnected third party) for the same value as it went into the Trust at. After sale fees etc. the Trustees paid £37,000 in CGT a few months ago.

The previous advisor didn’t report the transfer to Trust at the time, and my client is wishing to put more assets into Trust. The question is whether the client’s initial chargeable transfer was £233,000 or £196,000 (i.e. £233,000 less the £37,000 (CGT)).

Can anyone help with whether the CGT that was ultimately payable can be deducted from the chargeable transfer? After all, the value of the gift is the diminution of the client’s estate which is effectively the land less the liability on it.

Thanks in advance

The chargeable transfer is not reduced by the potential CGT charge (or even an actual CGT charge).

Had the settlor not held over the gain, the CGT payable at the time of settlement would have been the settlor’s personal liability and does not affect the transfer of value for IHT purposes.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals