A settlor-interested trust is one where the person who created the trust, the settlor, benefits from the property which he has given away. This document discusses the charge on income where the settlor retains an interest and when paid to children of the settlor. It also covers income tax charge on capital payments to the settlor and Capital Gains Tax and Inheritance Tax implications on the settlor.

Points discussed within this guidance note:

> What is a settlor-interested trust?

The term 'settlor-interested' arises in connection with income tax and capital gains tax. For inheritance tax,  the creation of a settlement from which the settlor may benefit is categorised as a 'gift  with reservation'. This guidance note describes the primary provisions relating to income tax and capital gains tax, and provides links to other guidance notes dealing with more specialised  provisions.

> Income tax - the settlements code

The effect of these provisions is, broadly, to treat the income arising from settled  property as belonging to  the settlor, rather than the trustees or other beneficiaries, thus countering any potential income tax advantage of placing the assets with a different legal  owner.

> The charge on income where the settlor retains an interest

> Settlor’s retained interest

> Settlor’s spouse

> The charge on income paid to children of the settlor

> The income tax charge on capital payments to the settlor

> Capital gains tax - settlor interested trusts

> Hold-over relief

> Inheritance tax - reservation of benefit


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