CGT implications of trusts

In this lesson

1. 0:00 CGT implications of trusts
2. 0:34 Gift relief and trustee acquisition
3. 1:41 Disposals while assets in trust
4. 2:11 Distribution to beneficiaries explained
5. 3:05 Worked example: lifetime trust setup
6. 4:20 Worked example: trust on death

About this lesson

This video walks you through each stage with worked examples, showing how gift relief applies at entry and exit points (due to inheritance tax charges), how the 50% annual exemption works for trustees, and the crucial difference between lifetime transfers and death transfers. Essential for understanding the interplay between CGT and IHT in trust planning, this concept appears across ACCA and CIMA qualifications and is vital for exam success in tax and business law papers. The first part covers the CGT treatment when a settlor creates a trust during their lifetime. Assets are treated as a deemed disposal at market value, triggering a chargeable gain, but special gift relief is available because an immediate inheritance tax charge also applies. The trustees then acquire the assets at market value less any gift relief claimed. If the trust is created on death instead, there's no CGT on death at all—the trustees simply acquire the assets at their probate value (market value on the date of death). While assets sit in the trust, any disposals by the trustees are subject to CGT at 24%, though trustees benefit from an annual exemption of £1,500 (50% of the standard individual exemption). They must file self-assessment returns showing these gains and calculations. When assets eventually leave the trust to beneficiaries, another deemed disposal occurs at market value. Again, gift relief is available because an exit charge for inheritance tax purposes applies, making it harsh to tax the same transfer twice. The video uses realistic scenarios involving discretionary trusts and share transfers to show how these three stages work in practice, distinguishing clearly between lifetime and death transfers so you can apply the rules confidently in exam questions.

Duration: 6m