From 6 April 2006, trustees of a settlement (the 'principal settlement') can make an election (a sub-fund election) to treat a separate fund or other specified portion of settled property as a separate settlement (a sub-fund settlement) where certain conditions are satisfied1.
The election also applies for income tax purposes2.
Where trustees make a sub-fund election there is a deemed disposal3 by the trustees of the principal settlement and a deemed acquisition by the trustees of the sub-fund4. These provisions also apply where the deemed disposal arises due to the trustees becoming non-resident5.
Holdover relief is only available if it is available under the normal CGT rules6.
The sub-fund is treated as a separate settlement for all tax purposes, although special treatment applies for the annual exempt amount7.
A principal settlement may have more than one sub-fund settlement but sub-fund settlements cannot themselves split into further sub-fund settlements8.