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HMRC internal manual

Capital Gains Manual

Separate settlements: example

Under a settlement made by X, A and B are each entitled to half the income. On A’s deathhis son P will get half absolutely. On B’s death her daughter Q will get half absolutely.The values of their respective interests are, say:

A’s life interest £60,000
P’s remainder £40,000
B’s life interest £75,000
Q’s remainder £25,000

Under the variation, executed when all the beneficiaries are adults, which is consideredto terminate the old settlement:

A takes 30 per cent of the property,

20 per cent goes to a new accumulation and maintenance settlement for P’s children,

B takes 25 per cent of the property,

the rest is held for Q for life with a remainder to Q’s son R.

P should be regarded as the settlor, for the purpose of the annual exempt amount, ofthe accumulation and maintenance settlement, because this is how his share has been dealtwith.

B and Q should be regarded as the settlors of the other settlement. Therefore one-third ofany gains will fall within TCGA92/S77 because Q is a beneficiary.