QIIP Trust and a TSI

[mark_1]

I have a QIIP Trust, which comprises of 3 assets:

> a residential property

> rental income derived from the residential property

> Investment portfolio



The husband (exiting life tenant) died in January 2020, left his entire share of trust assets in an equal 50/50 split. 50% of trust assets went to his daughter absolutely (who was entitled to the capital), whilst the remaining 50% went to his surviving spouse who can derive interest and assumes the position of life tenant. Upon the wife's death, the daughter will become absolutely entitled to the remaining 50% share, and therefore the entire trust property.

I understand that should the wife want to surrender her share and transfer it out of the trust to her daughter within her lifetime, that this would be treated as a deemed disposal on the trustees, and any gain calculated in accordance with ordinary CGT principles. But what would be the implication should the daughter want to transfer her share of absolute property (the capital) out of the trust and into her name personally in the mean time. Would this also constitute a disposal on the trustees?

[maths]

Father had a qualifying interest in possession. He can't as such leave his trust assets to anyone.

When the trust of which father possessed a qualifying interest in possession was set up, presumably on the death of father (as life tenant) the trust provided for 50% of the trust assets to be held for the daughter absolutely and the balancing 50% to be held by the trustees on interest in possession (non-qualifying) for the deceased father's spouse.

In principle the trustees could terminate the spouse's interest possession and appoint the 50% out to the daughter absolutely. For IHT an exit charge arises. For CGT the trustees are treated as having made a disposal (and reacquisition) and are subject to any capital gain arising.

You have a reference to "TSI". are you saying the circumstances you post give rise to a TSI?

[AGoodman]

If the daughter is absolutely entitled to 50% then those assets are effectively "out" of the trust already for tax purposes. It doesn't matter whose name they are in as she is the absolute beneficial owner. That 50% would have been rebased for CGT purposes on father's death.

The complexity is the apportionment. I imagine you would have to say there was a deemed disposal of 50% of every asset in 2020 and so actually selecting ("appropriating") assets and transferring them to the daughter might trigger a gain on the "other" 50% for those particular assets. There might also be some complexity around the property under Crowe v Appleby https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg37540