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Disposal of interest in settled property—general provisions

An actual disposal of a beneficial interest by a beneficiary takes place if they sell it for consideration. They are also treated as disposing of the interest if they give it away or release it, in which case, as the transaction is not at arm's length¹, market value is used as the proceeds figure.

If a released interest is either discretionary or defeasible (eg by the trustees exercising an overriding power of appointment), its market value is nil. In other cases where the interest has some value, ie the interest includes an annuity, life interest or reversionary interest², the beneficiary's base cost is usually nil as the creation of a settlement interest does not involve a corresponding disposal, so market value is not substituted³.

In addition, the holder of an interest in settled property is treated as disposing of the interest when they become absolutely entitled as against the trustees to settled property. A chargeable gain accrues if a chargeable