IHTM42232 - The settlement: one or more trust?

  • Where trusts are made at the same time by a single deed or will, they are likely to be separate, but related trusts. (IHTM42230)
  • Alternatively, transfers between settlements may remain treated as the original settlement under IHTA84/S81. (IHTM42229)
  • Associated operations may mean that a series of transactions should be treated as one. (IHTM14836)

General law

Sometimes the distinction is not clear, and the question of how many/what trusts are in operation must be answered by the general law. You might expect to find  

  • separate and defined property 

  • separate trusts 

  • separate trustees 

  • separate disposition bringing the separate settlement into existence. 

Considering each case 

Lord Wilberforce in Roome v Edwards [1982] AC 279, a Capital Gains Tax (CGT) case, set out the indicators as above, which may help to show whether a settlement, or a settlement separate from another settlement, exists. This is strong authority on the subject, but some cases will not easily fit into neat categories. As Lord Wilberforce continued 

  • “these indicators may be helpful, but they are not decisive. For example, a will with a single set of trustees may create what are clearly separate settlements, relating to different properties, in favour of different beneficiaries. 

  • Conversely, separate trusts may arise in what is clearly a single settlement, for example where the settled property is divided into shares. There are so many possible combinations of fact that even where these indicators or some of them are present, the answer may be doubtful, and may depend upon an appreciation of the facts as a whole.” 

Bond v Pickford [1983] STC 517, another CGT case, might offer some guidance. In this case it was held that the exercise of powers of appointment did not create separate settlements (on the facts).  ‘Powers in the wider form’ and ‘powers in the narrower form’ were explained and considered. 

Following these two cases the Board issued SP9/81 and SP7/84 which offer some advice relating to CGT. 

If, having obtained all the relevant facts, you find that the position is still doubtful, you should discuss with your manager whether to refer the issue to Technical.