Taxation of Chargeable Gains Act 1992 section 71

Person becoming absolutely entitled to settled property

Section 71 deals with the capital gains tax consequences when a beneficiary becomes absolutely entitled to trust property, including the deemed disposal by the trustee at market value and the treatment of any allowable losses that arise.

• When a beneficiary becomes absolutely entitled to settled property, the trustee is treated as having disposed of and immediately reacquired all the relevant assets at market value, triggering a potential chargeable gain or allowable loss.
• Any allowable loss arising on this deemed disposal is first set against the trustee's pre-entitlement gains; to the extent it cannot be, it passes to the beneficiary but can only be offset against gains from the same asset (or, for land, any asset derived from it).
• Specific ordering rules apply: trustee losses from the deemed disposal are deducted before other trustee losses for the year, and losses passed to the beneficiary take priority over the beneficiary's other losses and can be carried forward indefinitely until a qualifying gain arises.
• A person who would become absolutely entitled but for being an infant or otherwise under a disability is treated as having become absolutely entitled for the purposes of this section.