Taxation of Chargeable Gains Act 1992 Schedule 4ZA paragraphs 1–9

Making a sub-fund election

Schedule 4ZA paragraphs 1 to 9 set out the rules for trustees who wish to elect that a specified portion of settled property be treated as a separate settlement (a sub-fund election), including the conditions that must be met before such an election can be made.

• Trustees of a settlement may elect for a specified fund or portion of settled property (the sub-fund) to be treated as a separate settlement for capital gains tax purposes, with the original settlement known as the principal settlement.
• The election must specify an effective date no later than the date it is made, and takes effect at the beginning of that date or, where a deemed disposal arises, immediately after the deemed disposal.
• Four conditions must be satisfied: the principal settlement must not itself be a sub-fund settlement; the sub-fund must not comprise all of the principal settlement's property; the sub-fund must not share a co-ownership interest in an asset with the principal settlement; and no person may be a beneficiary of both the sub-fund settlement and the principal settlement.
• A person is a beneficiary if they receive, or may receive, property or income from the settlement or any derived property, but certain contingent interests — such as those arising only on marriage, civil partnership, death of a beneficiary, exercise of statutory advancement powers, or failure of protective trusts — are disregarded.