CGT allowance for multiple trusts

We know that the trust CGT annual exemption of £6,150 is shared if the settlor has created more than one trust. If more than five trusts have been set up, each trust will receive 1/5th of maximum trust annual exemption.
What if Mr A has set up two trusts as sole settlor, and 3 trusts jointly with Mrs A? Do the first two trusts get 50% annual exemption and the remainder get 33% annual exemption? Or do all 5 trusts get 20% annual exemption as Mr A is a settlor on each?

Schedule 1C of TCGA sets out the rules in this respect. NB

In your example (and assuming none of the trusts are charitable, pension or offshore trusts), each of the five trusts will divide the usual annual exemption which would otherwise be applicable to the trust by five.

If Mr A had settled two alone and two jointly with Mrs A, then for the two joint trusts, you would divide by four, unless Mrs A also has three or more other trusts of which she is a settlor, in which case you would divide the two sole trusts’ exemption by four and the two joint trusts’ by five - see para 6(6) Sch 1C.

If any of the trusts is a disabled person’s trusts - see Sch 1C for what exactly this means here - one starts with the full annual exemption, not the half exemption.

Curiously, the counting rules are different for the income tax standard rate band - see s492 Income Tax Act 2007, where all trusts are counted, regardless of type.

Paul Davidoff
New Quadrant

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TCGA 1992 Sch 1C para 6 deals with the issue of same settlor settlements.
Mr A is a sole settlor of 2 trusts and a joint settlor of 3 trusts with Mrs A.

One “group” consists of Mr A’s 2 sole settlors plus the 3 joint settlors with Mrs A ie 5 settlements in the group.

Another “group” consists of 3 settlements of Mrs A as joint settlor assuming Mrs A is not a settlor of any other settlements.

Under para 6(6) the largest group therefore consists of 5 settlements. Hence, the annual exempt amount is the same for all 5 trusts, namely, under para 6(3) the greater of [10% x £12,300] and [[50% x £12,300]/5] ie greater of £1,230 and £1,230 ie £1,230.

Malcolm Finney

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