s260 Holdover Relief query

Discretionary trust property disposal appointment to beneficiaries or simple sale

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A Discretionary Trust residential property ( UK) is being sold. If the Trust simply sells the property  a net gain will arise after PPR,  since a beneficiary lived there for some of the time, and the trust AE.

But if the trust appoints the property to the beneficiaries, and there will be an exit charge, could someone confirm that a s260 holdover claim will be valid, and that once appointed, the beneficiaries will sell the property as individuals and can utilize their respective annual exemptions to further reduce their respective capital gains?

The trust was set up on the death of the settlor.

Thanks in advance

Replies (4)

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By MJShone
09th Nov 2017 08:50

The only possible problem that springs to mind is that you need to watch if the property was settled into the trust and holdover under s260 was claimed on that occasion - you can't then claim PPR relief (see s226A).

As the trust was set up on the death of the settlor, this seems unlikely.

Thanks (1)
By gbuckell
09th Nov 2017 10:39

I wondered whether the PPR relief accruing to the trust would be lost on the transfer to the beneficiaries. I do not believe this to be the case as s260 refers to the held over gain being the chargeable gain that would otherwise accrue and s223 regards the part of the gain attributable to PPR as not being a chargeable gain.

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Replying to gbuckell:
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By Portia Nina Levin
09th Nov 2017 10:42

I agree. I don't know why the OP thinks that the situation differs, in relation to the application of PPR, between sale of the property and disposal otherwise than by sale.

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Replying to gbuckell:
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By MJShone
09th Nov 2017 13:43

An example of the specific mischief that s226A was introduced to deal with is: X has a holiday home (or some other residence) on which PPR relief can't be claimed (or can't be claimed in full). X settles property into (at that time) discretionary trust, holding over the gain under s260. Arrangements are made for beneficiary to live there as main residence (de facto or elected) and for trustees and beneficiary to claim PPR. Ba boom! No CGT on sale by trustees.

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