TSEM4015 - 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.

There is legislation at Section 77 TCGA 1992 to treat chargeable gains of a settlor interested trust as accruing to the settlor – see CG34700 onwards.