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CGT on termination of settlement interest—overview

The CGT treatment when an interest in settled property terminates depends on whether the termination takes place on the death of the person entitled to the interest.

One set of rules applies to all trusts where an interest ends other than on death¹.

However, special rules apply where a trust with an interest in possession ends on the death of the beneficiary².

Termination other than on death—all trusts

Where an interest in settled property comes to an end other than on the death of the person entitled to it, and another person then becomes absolutely entitled to the property, the trustee is deemed to have disposed of the property, and immediately reacquired it as nominee for the beneficiary, at market value³ (see I5.1017).

A chargeable gain or allowable loss arises for the trustees although they can claim holdover relief (see further below) in the usual circumstances, for example where:

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   •ÌýÌýÌýÌý the disposal is a chargeable transfer