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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income and gains: the charge on trustees - which trustee is chargeable - periods from 6 April 2006

From 6 April 2006 ICTA88/S685E(1) brings the income tax treatment into line with the CGT treatment in TCGA92/S69 (1). Trustees of a trust or settlement for both income tax and CGT are treated as a single person and this deemed person is distinct from the actual person (individuals and/or companies) who act as the trustees.

If part of the property compromised in a single trust or settlement is vested in one trustee or one set of trustees and part in another, those trustees are treated as a single body of trustees. This means that from 6 April 2006 the earlier practice of allowing different funds within a trust or settlement to be set up as separate files with their own SA references for income tax purposes will no longer apply unless the trustees have made a sub-fund election (see TSEM3500).

Where such cases are identified and there is no sub-fund election a note should be made in SA Notes that the case is a fund together with the SA reference of the principal trust or settlement. The SA record of the fund should then be closed and the file papers merged into the principal settlement’s file.

Where the trustees of a fund, which has been treated as a separate settlement for income tax purposes, carry on a trade, there is no deemed cessation of that trade by the fund nor a deemed commencement of a new trade by the principal trust or settlement.