CG18091 - Annual exempt amount: trust exemption: before 6 April 2019

Before 6 April 2019, the following rules applied when a settlement comprised one of two or more ‘qualifying settlements’ in a group.  

A qualifying settlement was a settlement (other than an excluded settlement) made after 6 June 1978 in a group. Qualifying settlements with the same person as settlor formed a group. A principal settlement and its sub-fund settlements were treated as one notional qualifying settlement.  

The annual exempt amount (“AEA”) for a tax year for each qualifying settlement was determined by dividing the amount of the trust AEA by the number of settlements in the group, subject to the proviso that if there were ten or more settlements, then the AEA for each settlement was one-tenth of the main AEA. 

The AEA for a notional qualifying settlement was shared equally between the settlements, provided that they were not ‘excluded settlements’.  

The definition of ‘excluded settlement’ has been amended over the years so it is important to ensure that you are referring to the relevant legislation for the tax year in question. 

The fact that any chargeable gains of a particular settlement would be assessed under s77 on the settlor (CG34700), or the beneficiary (CG35501) did not prevent that settlement from being a qualifying settlement. Nor did the fact that the trustees may have only held assets, such as life policies, which would be exempt from Capital Gains Tax.