Taxation of Chargeable Gains Act 1992 section 72

Termination of life interest on death of person entitled

Section 72 deals with the capital gains tax consequences when a life interest (or other interest in possession) in settled property comes to an end on the death of the person entitled to it, providing for a tax-free uplift in the base cost of the trust assets.

• When a life interest ends on the death of the beneficiary, the trustees are treated as disposing of and immediately reacquiring the trust assets at market value, but no chargeable gain arises on this deemed disposal.
• For interests in possession first acquired on or after 22 March 2006, the tax-free uplift only applies to certain qualifying trust types, including immediate post-death interests, transitional serial interests, disabled person's interests, trusts for bereaved minors, and age 18-to-25 trusts.
• The same tax-free uplift applies where the person entitled to the interest dies but the interest itself does not terminate (for example, where someone holds an interest measured by another person's lifetime), and also where a person entitled to an annuity from settled property dies.
• Where trustees have ring-fenced specific trust assets to fund an annuity or where an interest relates to only part of the settled property with no recourse to the remainder, that portion is treated as a separate settlement for the purposes of this section.