Suppose a trust that was previously non resident has stockpiled gains of £2m. Its investment assets are in a wholly owned company worth say £3m. The trust is now UK resident.
If the shares are distributed equally between five beneficiaries who are members of the settlor’s family, it is clear that by virtue of TCGA 1992 s 19 the disposal value and acquisition value for each is £600,000 each (one fifth of £3m). But does the same value apply for the purposes of the capital payment under TCGA 1992 s87? S 97(4) says that the capital payment is the ‘value of the benefit conferred by it’ and on normal valuation principles that value you would be the asset value of the shares discounted by around 60%, ie £240,000.
The above assumes that the settlor is still alive. If he or she is not, presumably s19 no longer applies anyway.
Malcolm Gunn
M B Gunn & Co Ltd
In my view the function of s19 is to set the consideration for the actual disposal, of the company shares now and if relevant earlier disposals while non-resident, provided it does not occur at a time when the settlor is dead as the “connection” between trustees and beneficiaries would be severed per s286(3). The different function of s87 is to match gains calculated per the computational rules, stockpiled here due to prior change of residence per s89, with capital payments by reference to their “value” i.e. logically of what is received. Is this the same as “market value” as defined in s272 (1)? If so, the value of the capital payment is £240,000 or whatever is its market value in isolation from the other transfers. There are no rules for aggregating the values of asset transfers which are capital payments received and are made at the same time or as part of a series even if the settlor is alive.
CG38640 says:
“If the payment is the transfer of trust property the value will be the market value of the asset. If the payment is the conferring of a benefit the value will be the value of a similar benefit received from an unconnected third party.”
HMRC seems to agree that it is “market value” and of the asset transferred. They do not express a view on the aggregation point.
Jack Harper