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HMRC internal manual

Trusts, Settlements and Estates Manual

Settlements legislation: effects of the settlements legislation

The settlements legislation is intended to prevent an individual from gaining a tax advantage by making arrangements which divert his or her income to another person who is liable at a lower rate of tax or is not liable to income tax. It applies only where the settlor has retained an interest in the settled property or income (see TSEM4200 onwards).

Where the anti-avoidance settlements legislation applies, all income transferred by a settlement (defined in TSEM4100 onwards) is treated as that of the settlor. For tax years up to and including 2007-08 there is legislation at TCGA/-S77 to treat chargeable gains of a settlor-interested trust as accruing to the settlor - see CG34700 onwards. External customers can see this guidance at