PPR, BTL, CGT and Trusts

[Hoppity]

Apologies if this is a silly question, but we have the following situation.

We still own our old PPR which we now let out on a BTL mortgage. Presently the PPR to BTL ratio is about 3:1 for CGT purposes, but that will become less in our favour as time goes on.
Considering the changes to the BTL tax landscape over the last few years, and more in April, we considering selling, but cannot do so before April unfortunately.
We are wondering therefore whether to continue to hold the property and use a trust at a future date to mitigate CGT? Basically, pay off the BTL mortgage in about 10 years, then transfer the BTL property into a trust for the children to live in (as it is in a good commuter and university area), but defer the CGT. Then the children sell it as their PPR and but are not liable for CGT as it is their PPR.
I feel that the CGT must become liable at some point and cannot be so easily avoided but cannot find confirmation on the internet that this approach cannot work.
Advice appreciated. Thank you.

[billypiper]

This would work before 10 December 2003 but HMRC have blocked PPR in these circumstances.

Nice try though!

[maths]

If the property were too be left by will then any CGT charge would be wiped out.

Billypiper is correct assuming the trust is "settlor interested". This would not be the case if at the date of settlement neither you nor spouse nor children under age 18 were beneficiaries under the trust.

In 10 years time who knows what the state of tax will be. By then, it's possible CGT hold-over relief may even have been abolished.

Depending upon figures may be better to transfer to children on bare trust now. All depends upon personal circumstances.

[billypiper]

I cant see that having the trust settlor interested is relevant.

The distinction is that if there is a holdover election made, the ppr is not available.

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017--2

[maths]

Perhaps I could have been a little clearer.

If a trust is settlor interested then hold-over relief is inapplicable on initial settlement. If not settlor interested, then hold-over relief is applicable.

What is not possible, however, is to claim hold-over relief on settlement (where not settlor interested) AND then claim private residence relief re any gain accruing whilst held by the trustees including any gain held-over. In essence it becomes an either or scenario.

However, hold-over relief is feasible where property is appointed out of trust whether the trust is, or is not, settlor interested.

Given private residence relief and lettings relief any gain on settlement may be not be all that significant and hence could be settled precipitating minimal CGT without the need for hold-over. Once in the trust private residence relief would be in point re any gain accruing (and if necessary a hold-over relief claim could be lodged on exit).

IHT would need to be considered.

[billypiper]

So only the increase in value whilst in the trust is available for PPR.

[maths]

Yes.