Finance Act 2006

Sub-fund settlementsU.K.

42U.K.After section 73(1) of TCGA 1992 (death of life tenant: exclusion of chargeable gain) insert—

“(1A)Subsection (1)(b) above shall be treated as having effect in relation to a sub-fund settlement if the property does not revert to the trustees of the principal settlement in relation to that sub-fund settlement by reason only that—

(a)a sub-fund election is or has been made in respect of another sub-fund of the principal settlement, and

(b)the property becomes comprised in that other sub-fund settlement on the death of the person entitled to the interest in possession.”

43U.K.In section 286(3) of TCGA 1992 (connected persons: trustees)—

(a)omit “and” at the end of paragraph (b), and

(b)after paragraph (c) insert—

“(d)if the settlement is the principal settlement in relation to one or more sub-fund settlements, the trustees of the sub-fund settlements, and

(e)if the settlement is a sub-fund settlement in relation to a principal settlement, the trustees of any other sub-fund settlements in relation to the principal settlement.”

44(1)At the beginning of Schedule 1 to TCGA 1992 (trustees: exempt amount, etc) insert—U.K.

“A1(1)In determining the exempt amount available to the trustees of a settlement in relation to a year of assessment—

(a)a principal settlement and its sub-fund settlements shall be treated, for the purposes of paragraphs 1 and 2 below, as if no sub-fund elections had been made, and

(b)paragraph 3 below shall apply for the purposes of determining the exempt amount available to each member of the class consisting of a principal settlement and its sub-fund settlements.

(2)The reference in sub-paragraph (1) above to a principal settlement and its sub-fund settlements means a principal settlement in respect of which one or more sub-fund elections are treated as having taken effect.”

(2)After paragraph 2 of Schedule 1 to TCGA 1992 insert—

“3(1)The exempt amount available in relation to a year of assessment to the trustees of each settlement in the class consisting of a principal settlement and its sub-fund settlements shall be the exempt amount available to the trustees of the principal settlement in relation to the year, determined in accordance with paragraph 1 or 2 above as if no sub-fund elections had been made.

(2)But if there are two or more non-excluded settlements in the class consisting of a principal settlement and its sub-fund settlements, the exempt amount available to the trustees of each settlement in the class in relation to the year shall be the amount specified in sub-paragraph (1) above divided by the number of non-excluded settlements in the class.

(3)In this paragraph—

• “excluded settlement” has the meaning given by paragraph 2(7) above, and

• references to a settlement having sub-fund settlements, and similar expressions, are references to a settlement being the principal settlement in respect of which one or more sub-fund elections are treated as having taken effect.”

45U.K.Paragraphs 42 to 44 shall have effect in relation to years of assessment beginning on or after 6th April 2006.