disposal
n. Although capital gains tax (CGT) is charged when there is a disposal of an asset, statute does not define disposal. It is declared that the receipt of a capital sum in relation to an asset may be treated as a disposal for the purpose of CGT (Taxation of Chargeable Gains Act 1992 s 22). When an asset is transferred to trustees, there is a disposal even if the settlor is the only person entitled to receive capital from the trust (Re Paradise Motor Company Ltd [1968] 1 WLR 1125 (CA)). In contrast, there is not a CGT disposal when an asset is transferred to a nominee (Taxation of Chargeable Gains Act 1992 s 60). Death is not treated as a disposal of assets (even though there is revaluation), nor is the passing of an asset from personal representatives to the beneficiary under a will or intestacy.

A disposal under an unconditional contract takes place when the contract is made, and not on completion; a disposal under a conditional contract is made when the condition is satisfied.

There can be a difference between the person who makes the disposal and the person liable for the tax liability. In Jerome v Kelly [2004] UKHL 25, [2004] STC 887 the disposal was made by an individual, who then assigned his interest to trustees; the House of Lords held that the tax liability arose on the trustees, and not on the individual who made the disposal.

Certain events are treated as disposals for CGT purposes, giving rise to a capital gain. These include the death of a life tenant of a trust and the vesting of a beneficial interest in property by a beneficiary reaching the age specified in the trust deed.

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