CG66721 - Gifts and hold-over relief: Finance Act 2004 changes: gifts to certain settlements: outline

Finance Act 2004 inserted some new provisions in six new sections: TCGA92/S169B to TCGA92/S169G. These changes take effect for disposals made on or after 10 December 2003.

Gifts hold-over relief under TCGA92/S165 or TCGA92/S260 is not available for disposals on or after that date to the trustees of certain settlements (these are referred to below as "relevant disposals"), except in some cases where the settlement is for a disabled person or is a heritage maintenance fund. Subject to those exceptions -

• if the settlement is a settlor-interested settlement immediately after the relevant disposal, gifts hold-over relief is not available (see CG66918).
• if the settlement is not a settlor-interested settlement but gifts hold-over relief was obtained in relation to an earlier disposal (whenever made) by an individual who, immediately after the relevant disposal, has an interest in the settlement, gifts hold-over relief is not available in respect of the relevant disposal (see CG66918A).
• if gifts hold over relief was available in relation to the relevant disposal, but the settlement becomes a settlor-interested settlement before the relief is claimed, the relief may cease to be available (see CG66919).
• if gifts hold over relief was available in relation to the relevant disposal, the settlement is nota settlor-interested settlement, and gifts hold-over relief was obtained in relation to an earlier disposal (whenever made) by an individual who acquires an interest in the settlement after the relevant disposal was made (but before gifts hold-over relief is claimed in respect of the relevant disposal), relief in respect of the relevant disposal may cease to be available (see CG66919A).
• if gifts hold over relief was obtained in relation to the relevant disposal, and the settlement becomes a settlor-interested settlement after the relief was claimed, it may be possible to claw back the held-over gain (see CG66920).
• if the settlement is not a settlor-interested settlement but gifts hold-over relief was obtained in relation to an earlier disposal (whenever made) by an individual who acquires an interest in the settlement after gifts hold-over relief was claimed in respect of the relevant disposal, the relief obtained in respect of the later disposal may be clawed back (see CG66920A).

The paragraphs cited here explain that the same outcomes follow if any "arrangement" (see CG66921A) exists under which the settlement will or may become a settlor-interested settlement.

"Settlor-interested settlements" are not limited to those where the person who makes the relevant disposal is a settlor. They include trusts under which any settlor or settlor's spouse can benefit (see CG66921A). Certain situations where a settlor or a settlor's spouse can benefit are disregarded (see CG66924).

Officers of the Board are given powers to obtain information for the purposes of TCGA92/S169B to TCGA92/S169F. Penalty proceedings under TMA70/S98 can be taken against someone who fails to produce this information (see CG66925).