CG63591 - Investors’ Relief: qualifying disposals by trustees: example
The trustees of the TM Trust hold a number of assets on trust for Tanya, David, Barry and Kristin in equal shares. All four beneficiaries have an interest in possession in all of the settled property of the trust.
Among these assets are shares in XY Ltd. XY Ltd is a trading company which the trust invested in (subscribing for newly issued fully paid up ordinary shares) in August 2016. The company does very well, and in March 2025 the trustees decide they want to sell the shares they hold.
XY Ltd was a trading company throughout the period the TM Trust held shares in it, and it met the conditions for Investors’ Relief throughout.
Neither Tanya, Barry nor David have ever been employed by XY Limited and are not connected with anyone who has been. Kristin got a job with XY Ltd in January 2018 and continues to work there in the accounts department.
The trustees sell their shares in XY Ltd and make a gain of exactly £4 million on the trust’s holding.
David has not held or sold any shares as an individual, and has had no trust gains attributed to him up to March 2025. David therefore has his entire £1 million lifetime cap available.
Kristin has her entire £1 million lifetime cap available, but because she is a paid employee of XY Limited, she cannot be an eligible beneficiary because of the restriction in section 169VH(2)(c).
Tanya had made a number of investments which qualified for Investors’ Relief. In 2019 she sold a number of these investments at a gain, using up £600,000 of her Investors’ Relief lifetime allowance. Tanya therefore has £400,000 within her lifetime cap available.
Barry too had made several investments which qualified for Investors’ Relief. In 2022 he sold a number of these investments making a substantial gain, using up £5.5m of his Investors’ Relief lifetime allowance. At the time of those disposals, the lifetime cap was £10 million. As the disposal of XY Limited shares falls after 30 October 2024, the new lifetime cap applies and Barry has no further lifetime allowance available.
Each beneficiary has one quarter of the gain attributed to them for the purposes of Investors’ Relief. Taking each beneficiary in turn:
Tanya
Tanya is an eligible beneficiary. Her ‘share’ of the gain is £1 million. Of her £1 million gain, she and the trustees can jointly claim to have £400,000 of it subject to Investors’ Relief. The rest will be taxed on the trustees at the normal CGT rate.
David
David is an eligible beneficiary. His ‘share’ of the gain is £1 million. Of this £1 million gain, he and the trustees can jointly claim to have the entire £1 million gain subject to Investors’ Relief.
Barry
Barry is an eligible beneficiary. His ‘share’ of the gain is £1 million. As he has previously exhausted his lifetime allowance, the full gain will be taxed on the trustees at the normal CGT rate.
Kirstin
Kirstin is not an eligible beneficiary. Her ‘share’ of the gain is £1 million. No claim to Investors’ Relief can be made for this share of the gain.
When returning the gain, the trustees will include two claims to Investors’ Relief. One claim will be jointly made with Tanya (for £400,000 of the gain to be taxed at 10%), and the other jointly made with David (for £1 million of the gain to be taxed at 10%).
See CG63500 for a general description of the relief and the layout of the guidance.