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If the trustees make a disposition as a result of which the value of relevant property in the settlement is diminished, tax is not charged on the disposition if it is such that the commercial transactions¹ (I3.141–I3.148) or grants of agricultural tenancies² (I3.159) provisions would prevent it from being a transfer of value. For these purposes, the legislation imagines that the trustees are beneficially entitled to the property³.

The burden of showing that this is so is on the trustees.

Apart from any inherent difficulties there may be in applying the commercial transactions rule to dispositions made by an individual, its application to the trustees of settled property (with no QIIP) presents the additional difficulty of deciding whether the assumed beneficial entitlement of the trustees requires any further facts. The discussion which follows is confined to considering the problems which are peculiar to applying the commercial transactions rule to trustees of settled property with no qualifying interest in possession; for the general problems which arise in its application, see I3.141–I3.148.

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