CG33200 - Basic terms of trust law as applied to CGT: Introduction

Trust law uses a number of distinct terms of its own. There is a comprehensive glossary in the Appendices to the Trust Estates and Settlements Manual. That manual also contains a general outline of trust law. The purpose of this chapter is to draw attention to some of the particular uses of these terms in the field of Capital Gains Tax.

The terms used in the legislation are to be given their ordinary legal meaning except where there is a specific definition in the legislation itself.

The word `settlement’ does not have the special extended meaning used for Income Tax. It describes any situation where there is settled property, see CG33280.

The sections of TCGA 1992 dealing with trusts often refer to the `trustees of the settlement’. The settlement is the basic taxable unit for Capital Gains Tax. Tax is charged on the trustees of the settlement. There is a disposal for Capital Gains Tax purposes if assets are transferred from one settlement to another. If a new settlement is created out of an old one, see CG37800+, there is a disposal by the trustees of the original settlement of the assets which are now held in the new settlement.

CG33280 explains why it is important to decide whether there is one settlement or more and covers the principles on which you can decide whether there is one settlement or more.

There may be several trusts or funds in existence within one settlement. These may even have different trustees in exceptional circumstances, see CG33340.

Confusion is caused because terms are used in different ways. In discussing the question whether there are several settlements or not, you should always use the word settlement' and avoid the word trust’ although it is commonly used to describe the basic unit.