FAQs - Cessations

Q. When assets are distributed when a trust is wound up, is there a capital gain?

A. When a beneficiary becomes absolutely entitled to an asset, the trustees are treated as if they had disposed of the asset at market value on that occasion. So there may be a chargeable gain or loss, unless the asset is exempt. If the trustees continue to hold onto the asset it is then treated as belonging to the beneficiary. So there is no second charge on the later occasion when they formally transfer the asset. A more detailed explanation is in help sheet IR294.