Taxation of Chargeable Gains Act 1992 Schedule 1C paragraph 8

Special rules for principal settlements and sub-funds

Paragraph 8 of Schedule 1C deals with how the annual exempt amount is shared when trustees of a principal settlement have elected to create one or more sub-fund settlements under the sub-fund election rules.

• Where trustees of a principal settlement make a sub-fund election, one or more sub-fund settlements are treated as having been created, and all of these settlements (including the principal settlement) are referred to as affected settlements.
• The starting point for calculating each affected settlement's annual exempt amount is the "assumed annual amount" — this is the annual exempt amount the principal settlement would have had if no sub-fund election had ever been made.
• If there is only one qualifying UK settlement among the affected settlements, each affected settlement receives the full assumed annual amount as its annual exempt amount.
• If there are two or more qualifying UK settlements among the affected settlements, the assumed annual amount is divided equally by the number of those qualifying UK settlements, and that divided figure becomes the annual exempt amount for each affected settlement.