TSEM4125 - Settlements legislation: settlor - reciprocal arrangement

A person will be regarded as a settlor if he or she has made a reciprocal arrangement with any other person, for that person to make or enter into a settlement.

Give particular attention to settlements where minor beneficiaries are involved and which have not been made by the parents. This will not always be apparent from the information you hold. If there is any indication of a reciprocal arrangement, submit the case to HMRC Trusts Head Office Bootle. Include the files of the parent(s) and the person who executed the settlement.

Example 2 – reciprocal arrangement

Y Junior, who is 10 years old, owns shares in his parents’ company that cost £10,000. The investment is said to be a gift from his uncle, Mr. X. Enquiries reveal that Mr. X’s daughter, who is 15 years old, has £10,000 invested in a building society account. The source of the deposit is said to be a gift from her aunt, Mrs. Y. Under such a reciprocal arrangement, Mr. X would be the settlor in respect of the settlement to his daughter and Mrs. Y would be the settlor in respect of the settlement to her son.