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Although capital gains tax (CGT) is charged when there is a disposal of an asset, statute does not define disposal. It is declared that the receipt of a capital sum in relation to an asset may be treated as a disposal for the purpose of CGT (Taxation of Chargeable Gains Act 1992 s 22). When an asset is transferred to trustees, there is a disposal even if the settlor is the only person entitled to receive capital from the trust (Re Paradise Motor Company Ltd [1968] 1 WLR 1125 (CA). In contrast, there is not a CGT disposal when an asset is transferred to a nominee (Taxation of Chargeable Gains Act 1992 s 60). Similarly, the passing of an asset from personal representatives to the beneficiary under a will or intestacy is not a disposal for CGT purposes.

Certain events are treated as deemed disposals for CGT purposes, giving rise to a capital gain. These include the death of a life tenant of a trust and the vesting of a beneficial interest in property by a beneficiary reaching the age specified in the trust deed. A disposal under an unconditional contract takes place when the contract is made, and not on completion; a disposal under a conditional contract is made when the condition is satisfied.

There can be a difference between the person who makes the disposal and the person liable for the tax liability. In Jerome v Kelly [2004] UKHL 25, [2004] STC 887 the disposal was made by an individual, who then assigned his interest to trustees; the House of Lords held that the tax liability arose on the trustees, and not on the individual who made the disposal.

Subjects: Law.

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