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HMRC internal manual

Trusts, Settlements and Estates Manual

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HM Revenue & Customs
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Settlements legislation: effects of the settlements legislation - corporate settlors

ITTOIA/Part 5, Chapter 5 applies a charge to income tax on individuals and is not considered to have any application to the charge to corporation tax on corporate bodies. That view is supported by the language of the chapter such as ‘during the life of the settlor’ and ‘income treated as highest part of a settlor’s total income’. With effect from 21 March 2012, ITTOIA/S627(4) ensures that income which originates from a settlor that is not an individual is not treated as the income of that settlor where the settlor retains an interest (TSEM4200).

In general- trusts set up by companies (e.g pension trusts and employee benefit trusts) tend to be commercial and devoid of bounty (TSEM4110). However, this is not always the case and it is not unknown for companies to be party to the setting up of trusts that are non-commercial and involve an element of bounty. In some such cases the trust may be part of a tax avoidance scheme.

The settlements legislation may however apply to arrangements involving companies - for example where the property settled into a trust is provided by a company but the funds have been provided indirectly by the shareholder/director of that company making that individual a settlor under the extended definition at section ITTOIA/S620(3)