CheckLists.Tax (beta)
i6. Acquisition of an asset by a trust
INCOME TAX
Transfer of assets abroad
- Person transferring asset to trust may be making a relevant transfer (even if for consideration)
General rule
- A relevant transfer is a transfer of assets as a result of which (alone or in combination with associated operations), income becomes payable to a person abroad (s.716).
- Accordingly a transfer of assets to a non-resident trust is a relevant transfer.
- See further i1. Creation and addition to trust.
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Settlements code: attribution of income to settlor
- Acquisition of asset from settlor/spouse for overvalue is capital sum triggering s.633
- Capital sum includes any sum which is not income and not paid for full consideration in money or money's worth (s.634).
Legislation: ITTOIA s.634;
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STAMP DUTY LAND TAX
Acquisition by corporate trustees
- Acquisition by connected company: deemed market value consideration (subject to exceptions)
General rule
- Where the vendor is connected with the purchaser, the chargeable consideration is not less than the market value of the subject-matter of the transaction at the effective date (FA 2003, s.53).
- Note: the vendor need not be a company.
- Rule applies subject to any other provision affording exemption or relief, e.g. group relief (s.53(4)).
Connected persons
- Apply the rules in CTA 2010, s.1122 (FA 2003, s.53(2)).
- In essence:
- A company is connected with another company if they are under the same control/controlled by connected persons.
- A company is connected with an individual if the individual controls the company alone or with connected persons.
- Persons acting together to control a company are connected with each other.
- Trustees are connected with, inter alia: settlor, persons connected with settlor, closely held companies in which they are participators (s.1122(6)).
Exception 1: Acquisition as trustee in course of trust management business
- General rule does not apply where the company holds the property as trustee in the course of a trust management business (s.54(2)).
Exception 2: Acquisition as trustee where only connected due to trustee connection rules
- General rule does not apply where company holds the property as trustee and is connected with the vendor only because of the rules relating to trustee connection, e.g. trustee connected with settlor (s.54(3)).
Exception 3: Vendor is company distributing assets
- See G4. Dividends and distributions.
Legislation: FA 2003, s.52, s.53, s.54; CTA 2010, s.1122;
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