Ramnik and Kingmaker
I know that this sort of thing happens all the time and the Revenue rarely gets to find out about it but it seems to me that, strictly, the settlement provisions apply in these circumstances whether there is a gift or a loan.
Firstly, it seems to me that there is an arrangement or agreement within section 620(1) ITTOIA 2005. In my opinion, there is certainly the element of bounty (which needs to be present before section 620 can apply) whichever way you look at it; either because there is a gift or because there is an interest-free loan. Accordingly, I would suggest that there is a settlement for the purposes of section 620.
Secondly, there is also clearly an understanding that the brother will return the funds in due course, whether there is a loan or gift, so it seems to me that Adam has retained an interest within the meaning of section 625(1) ITTOIA 2005:
"625 Settlor's retained interest
(1) A settlor is treated for the purposes of section 624 as having an interest in property if there are any circumstances in which the property or any related property-
(a) is payable to the settlor or the settlor's spouse,
(b) is applicable for the benefit of the settlor or the settlor's spouse, or
(c) will, or may, become so payable or applicable."
None of the exemptions apply with the consequence that the income arising under the settlement is treated as that of the settlor, i.e. Adam.
I would be interested in alternative analyses!
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