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Trust connections

29 April 2014
Issue: 4449 / Categories: Forum & Feedback , VAT

A discretionary trust owns a property that is let out and on which the option to tax has been exercised. The trustees are considering whether to transfer the property to a beneficiary

The trustees of a discretionary trust are considering whether to distribute a property that it owns to a beneficiary. The property is commercially let and has been opted to tax for VAT purposes.

We believe that because there is a continuing tenant the transfer would amount to a transfer of going concern for VAT purposes. Accordingly if the beneficiary also opts to tax the property VAT can certainly be avoided on the distribution.

However what is the position if the beneficiary does not opt to tax the property? Would the transfer be caught under VATA 1994 Sch 6 (supplies between connected persons)? If so open market value would be treated as the consideration on which VAT would be chargeable.

If the beneficiary has been connected with the settlor say as father and son would Sch 6 apply now the settlor is...

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