Capital Taxation of Related Settlements

[David Yates]

Related settlements have to share an annual (trust-rate) Capital Gains Tax exemption. Would they also share a Nil Rate Band (NRB) exemption at 10-year anniversary charges to IHT or does each trust enjoy the full NRB, notwithstanding they are deemed to be "related"? Many thanks.

[Anthony Nixon]

It depends what you mean by "related settlements.

The CGT rule is that settlements created by the same settlor share the CGT allowance. But these settlements are not necesarily related for IHT. Each may have its own NRB on the 10 year charge (although various other factors may also come into play).

On the other hand if your two related settlements both originate from the same settlement which has been split into two, then they will probably be treated as the same settlement for IHT and so share the NRB.

If you will let me have some more details I will happily expand on this further.

Anthony Nixon
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner
Partner, Lester Aldridge Solicitors
Southampton

Tel: 023 8082 7442
Email: anthony.nixon@la-law.com
Website:www.lester-aldridge.com

[David Yates]

Thank you. The circumstances are that a friend's elderly mother-in-law recently made two separate discretionary settlements (one for each of her 2 children). They may be the same date, or if not, very close. Each trust has £1 of assets now; each will take 50% of her residual estate on death.