I5.1109 Settlements legislation—HMRC examples

IHT, trusts and estates

I5.1109 Settlements legislation—HMRC examples

I5.1109 Settlements legislation—HMRC examples

As indicated in I5.1107, the examples set out in this article derive from HMRC's publication of 18 November 2004, 'A guide to the settlements legislation for small business advisers'1 as updated in certain cases in HMRC Trusts Settlements and Estates Manual.

Only the examples which still appear in the Trusts Settlements and Estates Manual have been reproduced. The Manual contains additional examples which should also be referred to. With effect from 5 December 2005 the references in the guide to a spouse, or a husband or wife, should be regarded as including references to a civil partner2.

The examples incorporate some of the views of the professional bodies and HMRC's subsequent responses.

Identifying the settlor

Example 1—Identifying who is the settlor3

Mr X is the director and owns all the 150 issued ordinary £1 shares of X Ltd. X Ltd issues 100 new ordinary £1 shares which are acquired for £100 by the X Family Trust. The trust has been established for the benefit of Mr X's family by his father, Mr X Senior, who created the trust by settling cash of £100. Shortly after the issue of the new shares, a dividend of £100 per share is declared and paid and the trust receives dividends of £10,000. Mr X controlled the arrangement for the issue of the shares at par followed by the dividend. Mr X is therefore the true settlor of the settlement from which income of £10,000 arose. The original settlement of £100 to create the

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