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HMRC internal manual

Capital Gains Manual

Transactions between connected persons: gifts into certain settlements

TCGA92/S18 (4)

A settlor is connected with a settlement by virtue of TCGA92/S286 (3), see CG14590+. This means that if the settlor disposes of an asset to the settlement, and a loss arises, that loss will be ‘clogged’ by virtue of TCGA92/S18 (3), see CG14561.

However, there is an exception to this rule. If all the following conditions are satisfied, the loss will not be ‘clogged’:

  • the asset, and any income arising from it, must be applied wholly or mainly for educational, cultural or recreational purposes;
  • the asset, and any income from it, must be applied for the benefit of members of an association; and
  • the majority of those members must not be connected with the settlor.