Taxation of Chargeable Gains Act 1992 section 169B

Gifts to settlor-interested settlements

Section 169B prevents hold-over relief (under section 165 or section 260) from being claimed when assets are gifted to a trust in which the settlor retains or may acquire an interest, or where an earlier gift relief claim taints the transaction.

• Hold-over relief on gifts of business assets (section 165) or gifts subject to inheritance tax (section 260) is blocked when an asset is transferred to the trustees of a settlement and the settlor has, or may acquire, an interest in that settlement immediately after the transfer (Condition 1).
• Relief is also blocked where the transferor's allowable expenditure has already been reduced because of an earlier hold-over relief claim by an individual, and that individual has or may acquire an interest in the settlement immediately after the transfer (Condition 2). The individual concerned need not have any connection to the person making the current transfer.
• Where either condition is met, the full chargeable gain on the disposal to the trustees cannot be deferred — it crystallises at the point of transfer and is chargeable on the transferor.
• Exceptions exist under section 169D for transfers into maintenance funds for historic buildings and certain settlements established for the benefit of disabled persons.