Is holdover relief available on property removed from a settlor interested trust

Is holdover relief available on property...

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In 2003, shortly before the changes made by FA 2006, a Discretionary Trust was created and an individual settled two non-commercial rental income properties into the trust. A claim for holdover relief was made on the gains arising. The trust was created with the settlor and his two adult children as the beneficiaries. The settlor is not a trustee but his two adult children are. The trust was created and the properties settled for non-tax reasons. The non-tax purpose of the trust appears now to have served its purpose and there is the possibility of one of the properties being sold. My question is can the properties be transferred out of the trust to the settlor, now as beneficiary, and the gains calculated using market value be held-over if the holdover elction is signed by both the trustees and this beneficiary. The advantage would appear to me to be the possibility that, on a subsequent disposal of the properties, some of the gain to the beneficiary would be at 18% (rather than the 28% trust rate) and also the full CGT annual exemption would be available rather than the trust Annual exemption. I should point out that the values of the properties, both at the date of settlement and now, are low enough not to result in an Inheritance Tax liability.

I should be grateful if you could confirm that the above is possible or hi-light problems with this and any other connected potential problems.

Any constructive comments would be grately appreciated

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By gbuckell
21st Sep 2011 14:05

Holdover relief should be available under TCGA 1992 s260. Changes introduced in 2004 (see s169B) prevented holdover going into a settlor interested trust but not coming out of it.

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By thelostboy
21st Sep 2011 14:26

PPR

I believe that a Holdover Claim stops any future claim to PPR by the beneficiary?  Just something to watch out for!

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By gbuckell
21st Sep 2011 14:32

PPR

Correct - the loss of PPR relief would apply to the settlor if he ever used one of the properties as his PPR.

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