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Where Taxpayers and Advisers Meet

CGT on investment held as bare trust

sharpener
Posts:70
Joined:Wed Aug 06, 2008 3:34 pm
CGT on investment held as bare trust

Postby sharpener » Thu Sep 23, 2021 1:00 pm

In 1997 C. bought £14k of units in an unit trust for his son X. then aged 11. The account was designated XYZ, with the intention that this constituted a bare trust for X. The units are accumulation units so there has been no income from them.

They are now worth £92k and C. wants to transfer them to X. outright (by way of a stock transfer). If X. subsequently sells them what is the CGT liability if any? Is the position different if C. sells the units first and simply gives X. the money?

Thanks

pawncob
Posts:4745
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on investment held as bare trust

Postby pawncob » Thu Sep 23, 2021 4:45 pm

What evidence is there that a trust was created?
With a pinch of salt take what I say, but don't exceed your RDA

sharpener
Posts:70
Joined:Wed Aug 06, 2008 3:34 pm

Re: CGT on investment held as bare trust

Postby sharpener » Thu Sep 23, 2021 4:54 pm

IIRC (it was 24 years ago) it was said at the time that investing on behalf of a minor by designating the account with their initials was sufficient. Can anyone confirm that this is/was the case?

pawncob
Posts:4745
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on investment held as bare trust

Postby pawncob » Thu Sep 23, 2021 4:59 pm

A name would have been better.
The trust matured when infant turned 18, so beneficiary can sell the units and pay the CGT.
With a pinch of salt take what I say, but don't exceed your RDA

sharpener
Posts:70
Joined:Wed Aug 06, 2008 3:34 pm

Re: CGT on investment held as bare trust

Postby sharpener » Thu Sep 23, 2021 6:17 pm

Thanks pawncob.

Does X. pay CGT on the gain from the start or from reaching age 18?

Is the CGT position different if C. sells the units first and simply gives X. the money?

TIA

pawncob
Posts:4745
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on investment held as bare trust

Postby pawncob » Thu Sep 23, 2021 7:36 pm

Gain is from base cost. Annual allowance available.
Sell over several tax years to minimise gain.
Assets belong to beneficiary.
With a pinch of salt take what I say, but don't exceed your RDA

strawn
Posts:61
Joined:Fri Jun 01, 2012 10:11 am

Re: CGT on investment held as bare trust

Postby strawn » Thu Sep 23, 2021 10:40 pm

"The units are accumulation units so there has been no income from them." But there has been income, it's just been rolled up in the purchase of more units. So there may well be income tax to pay.

sharpener
Posts:70
Joined:Wed Aug 06, 2008 3:34 pm

Re: CGT on investment held as bare trust

Postby sharpener » Fri Sep 24, 2021 5:57 pm

There has been income, it's just been rolled up in the purchase of more units. So there may well be income tax to pay.

According to the unit trust managers' half-yearly statement:

Accumulation Units ... do not pay out income distributions, any income remains within the fund and is reflected in the unit price. [And so the gain is eventually liable to CGT. If there was an income tax liability the managers would have to provide a statement of taxable income to declare to HMRC, which they have never done. So I do not believe there is anything that is subject to income tax]

Income units ... can pay out income to you or have income reinvested [which AFAIK is liable to tax either way]

AGoodman
Posts:1286
Joined:Fri May 16, 2014 3:47 pm

Re: CGT on investment held as bare trust

Postby AGoodman » Fri Sep 24, 2021 8:27 pm

It sounds as though the son has been the absolute beneficial owner throughout (and tax is almost always charged on absolute beneficial owners) so the liability will be that of the (now adult) son. It doesn't matter if they are first transferred to the son or not.

Keep records though, including statements showing the initialled account name, just in case the whizzy HMRC computers suck up data showing father as the seller and need to be corrected.

strawn
Posts:61
Joined:Fri Jun 01, 2012 10:11 am

Re: CGT on investment held as bare trust

Postby strawn » Fri Sep 24, 2021 11:14 pm


Accumulation Units ... do not pay out income distributions, any income remains within the fund and is reflected in the unit price. [And so the gain is eventually liable to CGT. If there was an income tax liability the managers would have to provide a statement of taxable income to declare to HMRC, which they have never done. So I do not believe there is anything that is subject to income tax]
Pig-headed and wrong.

"Income that’s ‘rolled up’ into your accumulation units is known as a ‘notional distribution’ and is taxable in the same way as the distributions from income units."

https://www.barclays.co.uk/smart-investor/investments-explained/funds-etfs-and-investment-trusts/funds-income-or-accumulation-units/


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