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HMRC internal manual

Capital Gains Manual

Annual exempt amount: trust exemption: subfunds


Where an election has been made under Schedule 4ZA TCGA, see CG33330+, the subfund isto be treated as a separate settlement. However instead of taking the fraction provided bythe table in CG18099, the annual exempt amount which would have been given to theprincipal settlement but for the election is divided equally between the principalsettlement and the subfund settlement(s).


S created a settlement S1 for his children in 1986 and another S2 for his grandchildren in1999. In 2007 the settled property of S2 has been divided and a subfund election is madein respect of the subfund S2A. On the basis of an annual exempt amount of £9,800 as inCG18099 the annual exempt amounts would be:

S1 £4,800
S2 (excluding S2A) £2,400
S2A £2,400

The reason for this treatment is to ensure that S1 is not prejudiced by the decision tomake an election.