Finance Act 1998

Pre-6th April 1999 gains and losses where there is a transfer to another settlement

2(1)This paragraph applies, subject to sub-paragraph (5) below, to any chargeable gain or loss accruing on the disposal of any asset by the trustees of a settlement (“the transferor settlement”) if—

(a)that settlement was created before 19th March 1991;

(b)the disposal on which the gain or loss accrues is one made—

(i)on or after 17th March 1998 and before 6th April 1999; and

(ii)in a year of assessment in which the trustees of the transferor settlement fulfil the condition as to residence but the settlement is not a qualifying settlement;

(c)a person who is a settlor in relation to the transferor settlement (“the chargeable settlor”)—

(i)is domiciled in the United Kingdom at some time in the year 1999-00 and in the year of assessment in which the disposal is made;

(ii)is either resident in the United Kingdom during any part of each of those years or ordinarily resident in the United Kingdom during each of those years; and

(iii)is alive at the end of the year 1999-00;

(d)the asset disposed of is property originating from the chargeable settlor;

(e)the property comprised in another settlement (“the transferee settlement”) at any time after the disposal and before 6th April 1999 is or includes (whether in consequence of the disposal or otherwise) the asset disposed of or any relevant property;

(f)the transferor settlement has a relevant connection with the transferee settlement; and

(g)the gain or loss in question is not one treated under paragraph 1 above as accruing on 6th April 1999 to the trustees of the transferor settlement.

(2)If, in the case of the chargeable settlor, section 86 of the 1992 Act applies (apart from this paragraph) for the year 1999-00 in relation to the transferee settlement, that section shall apply for that year in relation to that settlement as if any chargeable gain or loss to which this paragraph applies—

(a)were a gain or loss accruing on 6th April 1999 to the trustees of the transferee settlement; and

(b)so accrued on the disposal by those trustees of any asset that was property originating from the chargeable settlor.

(3)Where sub-paragraph (2) above does not apply, section 86 of the 1992 Act shall have effect in relation to the chargeable settlor as if—

(a)in the year 1999-00 the conditions specified in paragraphs (a) to (d) and (f) of subsection (1) of that section were fulfilled in his case in relation to the transferee settlement;

(b)any gain or loss to which this paragraph applies—

(i)were a gain or loss accruing on 6th April 1999 to the trustees of the transferee settlement; and

(ii)so accrued on the disposal by them of an asset that was property originating from the chargeable settlor;

and

(c)any chargeable gains and losses accruing to the trustees of the transferee settlement which are not gains or losses to which this paragraph applies were to be disregarded for the purposes of that section.

(4)Where (but for this sub-paragraph) the same gain or loss would fall to be treated by virtue of sub-paragraph (2) or (3) above as a gain or loss accruing to the trustees of more than one settlement—

(a)that gain or loss shall be apportioned between those settlements in such manner as may be just and reasonable; and

(b)only such part of the gain or loss as on that apportionment is attributable to a particular settlement shall be treated in accordance with that sub-paragraph as accruing to that settlement.

(5)This paragraph does not apply to any chargeable gain or loss accruing on any disposal if, for the year of assessment in which that disposal is made, section 86 of the 1992 Act would, on the relevant assumption, have been prevented by virtue of paragraph 3, 4 or 5 of Schedule 5 to that Act—

(a)from applying in the case of the chargeable settlor in relation to the transferor settlement; or

(b)from applying in his case in relation to the transferee settlement.

(6)The relevant assumption for the purposes of sub-paragraph (5) above is that section 86 of the 1992 Act would have applied in the case of the chargeable settlor apart from paragraphs 3 to 5 of Schedule 5 to that Act.

(7)In this paragraph “relevant property”, in relation to any disposal made by the trustees of the transferor settlement, means any property (not being the asset disposed of) which—

(a)is or represents property or income originating from the chargeable settlor;

(b)has been comprised in, or has arisen to, the transferor settlement at any time after the time of that disposal; and

(c)is property or income of the trustees of the transferee settlement acquired or otherwise deriving, directly or indirectly, from the trustees of the transferor settlement.

(8)For the purposes of this paragraph the transferor settlement has, in relation to a disposal by its trustees, a relevant connection with the transferee settlement if—

(a)immediately before the time of the disposal, the beneficiaries of the transferor settlement are or include persons who are defined persons in relation to that settlement at that time;

(b)the transferor settlement is not a protected settlement at that time in relation to the chargeable settlor;

(c)at the beginning of 6th April 1999, the beneficiaries of the transferee settlement are or include persons who—

(i)have attained the age of eighteen; and

(ii)have been defined persons in relation to the transferor settlement;

and

(d)the property comprised in the transferee settlement in respect of which some or all of the persons mentioned in paragraph (c) above are beneficiaries of that settlement at the beginning of 6th April 1999 is or includes anything which, in relation to either that settlement or the transferor settlement, is property or income originating from the chargeable settlor.

(9)For the purposes of this paragraph a person is a defined person in relation to a settlement at a time if he would fall at that time to be treated, by reference to the chargeable settlor, as a defined person in relation to that settlement for the purposes of paragraph 2 of Schedule 5 to the 1992 Act.

(10)Sub-paragraph (3)(c) above is without prejudice to any charge imposed otherwise than by virtue of this paragraph.