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Overview

This guidance note details the IHT and CGT consequences of winding up a trust. The termination of a trust will have IHT and CGT consequences which need to be carefully considered in advance. These will vary depending on the type of trust that is being terminated and the event by which the termination is effected ― for instance a termination on death of a QIIP will have different tax consequences to one which is terminated in lifetime. The legal, administrative and compliance aspects of winding up a trust are covered in the Winding up a trust ― legal, administrative and compliance issues guidance note.

This guidance note deals with the position in England and Wales only. See Simon’s Taxes, Division I5.8 for details of the provisions affecting Scotland and Northern Ireland.

Trusts with a qualifying interest in possession (QIIP)

Where a trust has a QIIP, the value of the trust is treated as being part of the estate of the life tenant.