A Will provides for the residuary estate to be held upon trust and to pay income to [a non-charitable institution] for a period of 21 years. If the institution is still in existence at the end of that 21 year period, they are entitled to the capital.
The assets held are pregnant with gains. The institution still exists.
What is the CGT position on the 21st anniversary of this trust? Is there a deemed disposal irrespective as to whether there has been a sale of assets? If not is there any mileage in the current institution applying for charitable status (which they may be entitled to) and there being a transfer of assets subject to a hold over relief claim?
I suggest the institution might consider applying for charitable status sooner rather than later.
Should the trust fund be shown to be “exclusively charitable”, it will benefit from the relevant IHT, income tax and CGT reliefs, including at the end of the 21 year trust period.
If the death was within the last 4 years, and IHT was payable in the estate, it might be possible to reclaim at least some of the tax once the institution is registered as a charity (as it should also have been a charitable institution at the time of death and, therefore entitled to benefit under s.23 IHTA 1984).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
When the “institution” becomes absolutely entitled after 21 years as against the trustees, the latter are deemed to have disposed of and re-acquired the trust assets at MV thus potentially precipitating a CGT charge on the trustees [TCGA 1992 s 71]…
Hold-over relief (under s 260 TCGA 1992) applies only where an individual or trustees of a settlement dispose of an asset and the asset is acquired by an individual or trustees of a settlement. Unless the “institution” qualifies as an individual or trustees of a settlement no H/O relief applies.
H/O relief under TCGA 1992 s 165 may apply if, inter alia, the asset qualifies as a “business asset” and the “institution” qualifies as a “person”.