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Readers’ forum: Vulnerable beneficiary?

14 January 2020
Issue: 4727 / Categories: Forum & Feedback
Treatment of capital gains tax exemption on trust tax return.

I am having trouble with HMRC with regards to the effects of a vulnerable beneficiary election on a trust’s capital gains tax liability.

The clear effect of FA 2005 s 31 is to allow the trustees a full capital gains tax annual exempt amount (rather than the usual 50%) and to allow the trust’s taxable gains to be charged at 10% or 18% to the extent that the beneficiary has unused basic rate band.

For the past three years I have made this calculation explaining it in the ‘white space’ and HMRC has amended the return to charge all the gains at the higher rate. For the past two years it has accepted my rejection of the amendment but I would prefer not to have to go through the extra step.

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