CG37800 - Separate settlements: introduction
Trustees absolutely entitled as against other
Transfer to a pre-existing settlement
Introduction
CG33280 is concerned with the question whether a deed or will gives rise to one settlement or several settlements. In particular the guidance explains why it is important to know whether there is one settlement or more.
If property was held upon the trusts of one settlement, and is now held upon the trusts of another settlement, then there must have been a disposal within TCGA92/S71 (1), even though the trustees of both are the same persons. This was made clear by Lord Wilberforce in Roome v Edwards, 54TC at page 390H.
There are many different ways of changing the trusts upon which property is held. In some cases the changes are such that the property is now held upon the trusts of a separate settlement. The purpose of this chapter is to set out the principles that apply in determining whether this has happened.
There are two separate groups of questions to be considered
- Does the form of the transaction mean that there must be or cannot be a new settlement?
- If (a) does not give the answer, what is the overall impression of the results of the transaction?
CG37830 sets out the simple approach to be adopted in cases of appointments or advances.
Trustees as body of persons
TCGA92/S69
The trustees of a settlement are a single and continuing body of persons distinct from the persons who are the trustees. It is possible for there to be several sets of trustees within one settlement, see TCGA92/S69 (3). By way of contrast the same individuals may be trustees of a number of different family settlements. The identity of the trustees has no bearing on the question whether there is one settlement or two.
Trustees absolutely entitled as against trustee
In Hoare Trustees v Gardner, 52TC53, the trustees argued that one set of trustees could not become absolutely entitled as against another set, because a trustee cannot properly be described as absolutely entitled to property, because of his, her or its duty as trustee and lack of any beneficial interest. Brightman J disagreed. The trustees of the new settlement were able to direct the trustees of the old settlement how to deal with the trusts assets. Absolutely entitled does not mean beneficially entitled.
Transfer to a pre-existing settlement
If an individual executes a deed of settlement under which trustees hold property, even if it is a nominal amount of cash, it is clear that a separate settlement has been created. Therefore if assets are transferred from an old settlement to this new one, it seems clear that assets have passed from one settlement to another. Therefore in this situation it should be maintained that the settlements are separate and there has been a disposal within TCGA92/S71 (1) even if the trusts of the new settlement are not exhaustive. If the trusts of the new settlement did fail then the property would be held by the trustees of the new settlement on the trusts of the old, unless the property were to be actually transferred back.
Changes of HMRC view
The Revenue’s view of what transactions give rise to a new settlement has changed over the years. For instance it was at one time considered that the exercise of a power of appointment (as opposed to a power of advancement) under a trust deed, other than a general power (that is to say one to appoint trust property to anyone the person exercising the power may choose), could never give rise to a new settlement. This was shown to be wrong by Hart v Briscoe, 52TC53. It was also at one time considered possible for property to pass to a separate settlement without there being a charge under Section 71(1). This was shown to be wrong by Lord Wilberforce in Roome v Edwards, 54TC359 at 390H. A Statement of Practice, SP9/81, was issued after Roome v Edwards, but this was replaced by SP7/84, see CG37830.