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HMRC internal manual

Trusts, Settlements and Estates Manual

Settlements legislation: settlor retains an interest - exceptions - certain types of income


The rule that where the settlor has retained an interest in property in a settlement the income arising is treated as the settlor’s income for all tax purposes (TSEM4200) does not apply to the types of income covered below.

Marriage or civil partnership settlements

Income which arises

  • under a settlement made by one party to a marriage or civil partnership, where
  • the settlement is by way of provision for the other party in circumstances relating to the end of the marriage or civil partnership, and
  • the income is payable to or applicable for the benefit of that other party.

Other situations

Income which consists of

  • annual payments made by an individual for commercial reasons in connection with the individual’s trade, profession or vocation, or
  • qualifying donations by an individual for the purposes of gift aid, or
  • a benefit under a relevant pension scheme.

Income which originates from a settlor that is not an individual, but this exception applies only in relation to income arising on or after 21 March 2012. For these purposes income originates from an individual in the same circumstances as it originates from an individual who is not the only settlor (TSEM4555)