He wants to transfer a property from Trust A to Trust B. Can we use s260 to holdover the capital gains?
A.) I assume the trustees have the power to make such a transfer under the deed.
Holdover relief under s260 TCGA 1992 is only available where there is a disposal made otherwise than under a bargain at arm’s length and the transfer is one of the events for inheritance tax purposes listed in s260. See page 548-700 of the Croner-i Direct Tax Reporter.
Transfers between settlements are not chargeable events for inheritance tax purposes as s81 IHTA 1984 treats the capital transferred as still being in the original settlement for IHT purposes.
Consequently, the transfer will not meet the criteria for s260 to apply. Only if qualifying business assets were being transferred could the alternate Holdover Relief of s165 TCGA 1992 be considered.
Therefore, a transfer by the trustees of Trust A would give rise to a chargeable disposal which would be deemed to be for market value consideration under s18 TCGA 1992.
If a residential property is being transferred and a CGT liability arises, then the gain will need to be reported and the CGT paid under the 60 Day CGT Return provisions of Sch. 2 FA 2019.
As mentioned above, as the property would still be deemed to be in Trust A this will mean extra care will need to be taken over trust IHT calculations of Ten-Year Anniversry and Exit Charges.
