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TonyTax
TonyTax, Tax Consultant
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I am the trustee of 5 interest in possession trusts made by

Resolved Question:

I am the trustee of 5 interest in possession trusts made by the same Settlor(s) to 5 different beneficiaries. The annual CGT exemption is therefore £1,060. When a trust is wound up, there will obviously be fewer in existence. Does this mean that the annual CGT exemption increases for those trusts remaining?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question. You are quoting the 12/13 rates.

The Annual Exemption Allowance applies to the trust not to the individuals therein, the number of beneficiaries are an irrelevance. The amount is GBP 5.3K. If the beneficiary is mentally disabled or in receipt of Attendance Allowance or Disability Living Allowance the Trust gets the same allowance as an individual, ie GBP 10.6K. The rates for 13/14 are 5.54K and 10.9K respectively.

I do hope I have been able to assist.
Expert:  TonyTax replied 2 years ago.

Hi. I have a different answer.

 

Where one of a group of same settlor trusts which were created after 6 June 1978 comes to an end, the annual trust CGT exemption is divided between the number of the trusts in existence for all or part of the relevant tax year regardless of the fact that one of them ended in that tax year, subject to a minimum.

 

For the next tax year, as the number of trusts in existence is reduced, then the annual trust CGT exemption is divided by the reduced number of trusts in existence for all or part of that tax year, subject to a minimum. See box 5.8 on page TC2 of the trust tax return capital gains pages here. So, you are correct in thinking that the CGT exemption for each remaining trust should increase. The trust CG pages notes are here.

 

I hope this helps but let me know if you have any further questions.

Expert:  bigduckontax replied 2 years ago.
This intervention is only valid in certain circumstances which are not mentioned in the question.
Expert:  TonyTax replied 2 years ago.

I stand by my answer. The previous expert's answer contradicted what you already knew, ie that the CGT exemption is restricted where multiple trusts have been set up by the same settlor. You wanted to know the effect that one of those trusts ending may have on the CGT exemption for the remaining trusts.

 

I confirmed that for the tax year in which multiple trusts exist (5 in your case) the exemption is divided amongst them subject to a minimum and that where a trust is ended, the CGT exemption for the next tax year is divided between the remaining trusts (4 in your case assuming one trust ended in the previous tax year), subject to a minimum.

 

Let me know if you need further clarification.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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