CG36480 | Death of person with interest in possession in part: special traetment

In some circumstances a strict construction of the words `corresponding part' also makes for complicated calculations of `cost' of a composite nature. Accordingly, where an interest in possession in a part of settled property ends in circumstances which give rise to a deemed disposal, the trustees may indicate that the 'corresponding part' consists of particular assets, provided that either

1. the part of the settled property in which the interest terminates can be identified with specific assets in the fund

or

1. they appropriate specific assets to give effect to the termination within a reasonable time of its happening

and

in either case the treatment is not inconsistent with that adopted for IHT purposes.

Where trustees wish to identify particular assets as 'the corresponding part', as described in the preceding three paragraphs, a list of the assets identified should be agreed with the trustees. Normally, the trustees' statement that certain assets have been released or appropriated should be accepted for this purpose unless there is clear evidence which is inconsistent with such a statement. It should be made clear that the identification of the assets is binding on both HMRC and the trustees. In the unlikely event of trustees attempting to put forward a different analysis on a later occasion, it should be strenuously resisted. It is also important to specify the assets concerned because of the possibility of a charge arising under TCGA92/S74 (1), where a chargeable gain has previously been held over, see CG36510.

For the purposes of CG36478 - CG36480, in deciding whether the trustees have taken their decision to appropriate within a reasonable time, the most important consideration is the time needed to prepare valuations for the purposes of the division and, if appropriate, Inheritance Tax. A period of three months or less from the death of the beneficiary should always be regarded as reasonable.