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HMRC internal manual

Capital Gains Manual

Gifts: Inheritance Tax: gifts to settlor-interested settlements: definitions: "settlor-interested settlement", "settlor", "interest in settlement", "arrangement" and "arrangements"

“Settlor-interested settlement”: this term does not actually appear in the legislation but is useful shorthand for a settlement where any person who is a “settlor” in relation to the settlement has an “interest in the settlement”. Note that the “settlor” concerned need not be the person making the “relevant disposal” (see CG67068C).

“Settlor”: a person is a settlor in relation to a settlement for the purposes of hold over relief if

  • the person is an individual, and
  • the settled property consists of, or includes, “property which originates from him” (see CG67068B).

[TCGA92/S169E (1)]

“Interest in a settlement”: an individual is regarded as having an interest in a settlement for the purposes of hold-over relief if

  • he or she, or
  • his or her spouse or civil partner, but not a spouse or civil partner

    • from whom the individual is separated, whether under a court order, a separation agreement, or in such circumstances where the separation is likely to become permanent, or
    • who is the widow or widower or surviving civil partner of the individual

[TCGA92/S169F (4)]

(but note that for the purposes of the provisions in TCGA92/S169D relating to disabled persons, references to an individual’s spouse or civil partner are disregarded for the purposes of determining whether the individual has an interest in a settlement.)

enjoys a benefit which is derived directly or indirectly from

  • any property which is comprised in the settlement, or
  • any “derived property” (see CG67068B)

[TCGA92/S169F (3)]

or if

  • any property which may at any time be comprised in the settlement, or
  • any “derived property” (see CG67068B)

is, or will or may become, payable to or applicable for the benefit of the individual or his or her spouse or civil partner in any circumstances, except in the event of

* in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage, or
* the death of the child of the individual where the child had become beneficially entitled to the property or any derived property at an age not exceeding 25.

[TCGA92/S169F (2)] [TCGA92/S169F (5)]

With effect from 6 April 2006 TCGA92/S169F(3A) extends the class of beneficiaries who will give an individual an “interest in the settlement” to include a dependent child of the individual. The definition of dependent child is in TCGA92/S169F(4A). It means a child who is:

  • Under the age of 18 years, and is
  • Unmarried or without a civil partner.

Child includes a stepchild. No account is taken of the term of a settlement which provides for dependent children of the individual at time when he or she has no such children, TCGA92/S169F(4B).

The extension to dependent children applies to all settlements whenever they were created for the purposes of determining if an individual has an interest in a settlement. But for the purposes of the restrictions and clawback in TCGA92/S169C it applies only to disposals made on or after 6 April 2006.

“Arrangement” and “Arrangements”: these include any scheme, agreement or understanding, whether or not legally enforceable.

[TCGA92/S169G (1)]