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Separate settlements—introduction

Where, from 5 April 2006, trustees make a sub-fund election¹ (see I5.1020), each sub-fund is regarded as a separate settlement (although special treatment applies for the annual exempt amount — see I5.1018).

In other cases, it may be difficult to determine if a trust instrument, whether a deed or a Will, creates a single settlement or more than one separate settlement for CGT purposes. Generally, HMRC accepts the assumption that a single deed or Will gives rise to a single settlement², except in the case of a marriage settlement, based on the principles derived from Roome v Edwards³ where Lord Wilberforce stated:

'the mere existence of separate trusts applying to parts of settled property does not in itself give rise to a separate settlement.'

Confusion often arises where the trustees exercise a power of appointment or advancement which results in property still being held in trust (and where the beneficiary does not become absolutely entitled to the trust assets), regarding whether the property has remained in the original settlement or