Hi,
I have a client who owns a number of rental properties that all have grown significantly in value since purchase. He wants to put some of these into a lifetime discretionary trust to reduce his IHT estate liability. Beneficiaries will be his adult sons and the trust would be settlor excluded. The properties have current loans on them. I’ve been advised that the equity of these properties can be put into trust through a deed of assignment and that when a restriction is placed on the property at the Land Registry this is when CGT will be triggered. Is there any reason why holdover relief would not be available in this situation?
Presumably only TCGA 1992, s. 260 is in principle capable of applying.
I can’t see why hold-over relief under the section should not apply.
Under the deed of assignment an equitable interest (an asset for CGT) is transferred which constitutes a chargeable transfer for IHT.
As to the timing for CGT purposes I would have thought that it would be the date of the deed of assignment not the date any restriction with LR is registered.
I agree with Malcolm. I see no reason why s.260 holdover will not apply. Likewise, the date for the disposal will be the transfer into trust not the date of the restriction.
I do not like this type of planning where there are mortgages as you are likely to be in breach of the terms of the mortgage by splitting the legal/beneficial interest. My preference would be to try and free up at least one property (up to the value of £325K or £650K if a married couple assuming the nil rate bands are available) and transfer the property into trust unencumbered.
You may also want to consider not holding over in view of the fact that CGT may be brought into line with income tax in the coming months and/or CGT holdover on death may eventually be scrapped…i.e pay CGT now at the more attractive rate and re-base.