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HMRC internal manual

Capital Gains Manual

Connected persons: trustees

TCGA92/S286 (3)

A person, in the capacity of trustee of a settlement, is connected with

  • any individual who is a settlor of the settlement,
  • any person who is connected with such an individual, and
  • any body corporate which, under TCGA92/S286 (3) (A), which is identically worded to ICTA88/S839 (3) (A), is deemed to be connected with that settlement.

For the purpose of this particular provision, ‘settlement’ has the restricted meaning given by ICTA88/S660 (G), and not the general meaning adopted for Capital Gains Tax. See the judgement of Goulding J in Berry v Warnett, 55TC92, at page 105E. Therefore, for instance, a will trust cannot be a settlement for these purposes.

‘Settlor’ also bears the meaning given by ICTA88/S660 (G), which is the same as it has for the annual exempt amount. See CG33240. The trustees are no longer connected to the persons connected to the settlor after the settlor has died.

A settlor is considered to be connected with the trustee at the moment when property is put into the settlement.

For the purposes of determining whether a trustee is connected with an individual, the identity of the trustee is irrelevant. So, for example, if the trustee is the wife or civil partner of the individual, he or she is only connected in his or her capacity as trustee if the case is within one of the three cases in CG14590.

Although under the tests outlined an individual is not connected with particular trustees, this may not prevent him or her from being connected with a company controlled by the trustees. Under ICTA88/S417, a beneficiary of a trust can be attributed with the rights and powers of trustees. In such circumstances he or she may control the company through the tests in ICTA88/S416 and ICTA88/S417 and hence be connected under TCGA92/S286.