Neither section 165(4) nor section 260(3) shall apply in relation to a disposal ("the relevant disposal")—
made by a person ("the transferor") to the trustees of a settlement, and
in respect of which Condition 1 or Condition 2 below is satisfied.
Condition 1 is that, immediately after the making of the relevant disposal,—
there is a settlor (see section 169E) who has an interest in the settlement (see section 169F), or
an arrangement (see section 169G) subsists under which such an interest will or may be acquired by a settlor.
Condition 2 is that—
a chargeable gain would (assuming that neither section 165(4) nor section 260(3) applied in relation to the relevant disposal) accrue to the transferor on that disposal,
in computing the gain, the allowable expenditure would to any extent fall to be reduced in consequence, directly or indirectly, of a claim under section 165 or 260 in respect of an earlier disposal made by an individual (whether or not to the transferor), and
immediately after the making of the relevant disposal,—
that individual has an interest in the settlement, or
an arrangement subsists under which such an interest will or may be acquired by him.
This section is subject to section 169D (exception for maintenance funds for historic buildings and certain settlements for disabled persons).