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HMRC internal manual

Capital Gains Manual

Basic terms of trust law as applied to CGT: settlement

In general the word `settlement’ for Capital Gains Tax purposes does not bear the special extended definition which it has for certain Income Tax purposes under ITTOIA05/S620 (previously ICTA88/S660G). It refers to any case involving settled property within TCGA92/S68. See generally the speech of Lord Wilberforce in Roome v Edwards 54TC359. From 6 April 2006 by reason of ITTOIA05/S685A (1)(b) the same principle applies for the purposes of Income Tax other than the ‘Settlements Legislation’ in Part 5 Chapter 5 of ITTOIA05.

Exceptionally the ITTOIA05/S620 definition applies for the purposes of TCGA92/S286 (3) (connected persons, see CG14590) and TCGA92/S87 (non-resident settlements, charge on beneficiaries, see CG38570c).

Where a sub-fund election is in force under TCGA92/SCH4ZA/Para 1, see CG33330+, then the sub-fund is regarded as a separate settlement for all purposes, although the annual exempt amount has special treatment, see CG18115.