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Sub-fund settlements—introduction

From 6 April 2006, trustees of a settlement (the 'principal settlement') can make an election (a sub-fund election) to treat a separate fund or other specified portion of settled property as a separate settlement (a sub-fund settlement) where certain conditions are satisfied¹.

The election also applies for income tax purposes².

Where trustees make a sub-fund election there is a deemed disposal³ by the trustees of the principal settlement and a deemed acquisition by the trustees of the sub-fund⁴. These provisions also apply where the deemed disposal arises due to the trustees becoming non-resident⁵.

Holdover relief is only available if it is available under the normal CGT rules⁶.

Where a sub-fund election has been made, the sub-fund is treated as a separate settlement for CGT and income tax purposes, although special treatment applies for the annual exempt amount⁷.

A principal settlement may have more than one sub-fund settlement but sub-fund settlements cannot themselves split into further sub-fund settlements⁸.

Sub-fund election—conditions

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