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HMRC internal manual

Capital Gains Manual

Basic terms of trust law as applied to CGT: settlor: from 6 April 2006: anti-avoidance


A person is a settlor if he makes a settlement indirectly or if he provides property indirectly for the purposes of the settlement. The classic examples are Mills v CIR, 49TC367, and Crossland v Hawkins 39TC493. In both cases trustees of a settlement owned shares in a company which provided the services of an actor to a major film company. The dividends from the shares went to the trustees. In each case the actor was held to be indirectly providing property for the purposes of the settlement, because his actions generated income from the shares.

If A and B enter into ‘reciprocal arrangements’ under which A provides property for B’s settlement in return for B providing property for A’s settlement, then B, and not A, is the settlor of B’s settlement, and vice versa. The word ‘arrangements’ is widely defined in subsection (8).