PPR and CGT hold-over on appointment out of trust

Trusts Discussion
1

I realise this has been discussed elsewhere on the forum but I’m coming across conflicting opinions.

H&W self -settled their main residence into a RPT which specifically gave each the right to occupy during their lifetime. Both have now died and the trust is now a discretionary one. IHT is not in point.

The intention is to sell the property and give the funds outright to A&B, two of the beneficiaries.

At present, the majority of the gain should qualify for PPR but they don’t intend to sell for a while yet so that may change.

Hold over relief wasn’t available on the way in to the trust but should be on the way out. I understand that it’s not possible to claim PPR after claiming holdover however I’ve seen opinion that indicates that the trustees could appoint the fund to the two beneficiaries, claim PPR for the period where the life tenants occupied the property and hold-over that part of the gain not covered by PPR. Is this possible? On what basis?

2

The relevant provision is s.226A TCGA 1992.

This is anti-avoidance and can have a nasty disproportionate outcome.

If the trustees claim hold-over relief for their gain, however small, the gain on the appointee’s later disposal will NOT be entitled to any PPRR regardless of the size of it and how the gain accrued, even if overwhelmingly after the appointment. The appointee can in turn claim hold-over relief but their transferee would face the same issue. Of course if the appointee retained the asset until their death any gain would be wiped out under s.62(1). A sale during lifetime would however trigger the entire gain as taxable.

The disposal BY the trustees is not denied hold-over relief under s.169B despite the trust having been at any point self-interested under s.169F.

Jack Harper