CheckLists.Tax (beta)
i5. Disposals & operations affecting trust assets
INCOME TAX
Settlements legislation: attribution of income to settlor
- Offshore income gains treated as income of settlor's child if child would be absolutely entitled but for being a minor
Legislation: ITTOIA s.632;
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CAPITAL GAINS TAX
Reliefs
- Holdover relief on distribution of trading asset to beneficiary
Distribution by non-resident trustees can qualify
- "The transferor does not need to be resident in the UK. The relief is available for trustees of non-resident settlements, where the chargeable gain would, or might otherwise be, charged on UK residents." (HS295, §5).
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See also: HS295;
Attribution of non-resident trust gains to UK resident settlor (s.86)
Matching gains to benefits of non-resident trust (s.87)
- Gain arising to trustees matched to earlier capital payment/benefit
- A gain arising to a non-resident trust that has earlier unmatched capital payment/benefits will lead to matching under s.87.
- See i9. Benefits provided by trust.
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INHERITANCE TAX
Exit charge
- Disposition of trust assets by associated operations
General
- Disposition includes disposition effected by associated operations (s.272).
- On the meaning of associated operations see C1. Gifts (general).
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- Depreciatory transaction followed by distribution not benefitting from s.10 (arm's length exception)
- "If trustees in the circumstances envisaged in paragraph 6(3) took steps which devalued the settled property with the object of making subsequent distributions thereof why should the two events be considered as independent of one another? Neither law nor logic would suggest that they should." (Macpherson, 174)
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Cases:
IRC v. Macpherson [1989] AC 159 (HoL);
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Gift with reservation of benefit
- Apply tracing rules to identify new assets for GWR purposes
- The GWR rules apply by reference to the property treated as comprised in the gift at that time (Sch 20, para 6(2)).
- See C2. Gift by an individual.
Legislation: FA 1986, Sch 20.
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