Trusts and tax for ATX-UK - part 3: self-test

Test your understanding

(1). Baden intends to make a lifetime transfer of three rental properties to a trust. The beneficiaries will be Baden’s sister and his two brothers.

Explain the CGT implications of the transfer of the properties to the trust on the assumption that:

(i) The trust is an interest in possession trust.
(ii) The trust is a discretionary trust.

(2). Anthony owns 20,000 ordinary shares in Pow Ltd. He intends to make a lifetime transfer of 7,000 of the shares to an interest in possession trust for the benefit of his two nephews.

Pow Ltd is a trading company that also owns investments which are excepted assets for BPR purposes, representing 6% of the value of its total assets and 8% of the value of its chargeable assets. The shares to be transferred are worth £350,000 and cost Anthony £200,000 six years ago.

Explain the immediate IHT and CGT implications of the proposed transfer of shares by Anthony. It should be assumed that any available reliefs that will reduce the immediate liabilities will be claimed and that neither entrepreneurs’ relief nor investor’s relief will be available.