Mea Culpa, I stand corrected.
As Paul correctly says as part of he modernisation
of trusts effective from 6 April 2006 section 68C TCGA 1992 became effective
for the identification of a settlor for CGT purposes on a post death variation within
For reasons I am now at a loss to
understand (old age!?), I was clearly incorrect in saying section 685D ICTA
1988, which was in place prior to the 2006 modernisation of trusts, dealt with
CGT settlor identification and was not relevant for income tax purposes.
Malcolm is correct in saying section 472
ITA 2007 deals with the situation where, provided section 62(6) TCGA 1992
applies, if on death there is no settled property but following the variation a
settled property trust comes into being. In these circumstances the person
making the variation is the settlor
Section 473 ITA 2007 covers situations,
provided section 62(6) TCGA 1992 applies, where settled property comes into
being on death. Where in accordance with
a variation that settled property enters another settlement the deceased is
treated as the settlor of the other settlement.
Paul also correctly raises the question of
whether the identity of the post death Will trust beneficiaries and their
capacity will allow a variation to create another settlement that comes within
section 62(6) TCGA 1992 and section 473 ITA 2007.
If not then whether an income assignment
(redirection) via a deed of variation, which it seems to me could only be pur autre
vie i.e. only during the life of the original spouse, can come within section 62(6) TCGA 1992 and
section 473 ITA 2007 so as to allow the deceased (rather than the original life
tenant spouse) to be treated as the settlor of that income. I also doubt that it can.
In my younger days I recall the Inland
Revenue Claims Branch taking the that view persons redirecting trust income via
deeds of variation executed within 2 years of death were settlors of that
income redirection and could fall foul of the income tax settlor assessable
If a deed of variation can be executed within
2 years of death and validly create another settlement with a different life tenant so as to fall within
section 62(6) TCGA 1992 and includes confirmation that section is intended to
apply then section 473 ITA 2007 will apply and the settlor retained interest legislation will not
apply. Section 626 ITTOIA 2005 need not then be considered.
Depending upon the likely amount of trust
income and potential income tax saving it may well be worth seeking an Opinion
However, It should also be remembered that a
deed cannot have retrospective effect for income tax purposes. If my memory has not failed me this time the
relevant case law being the decision in Waddington v O’Callaghan
Andrew M Mortimer