TSEM4305 - Settlement for minor child who is not married or in a civil partnership - extension of Settlements legislation

Finance Act 1999 extended the scope of the legislation now in section 629 ITTOIA for settlements made or entered into on or after 9 March 1999. In addition to any payments made to or for the benefit of the child which were previously caught, any income from such settlements which would otherwise have been treated as the income of the child is assessable on the parent.

Example 17 – bare trust for a minor child

A parent creates a bare trust (see TSEM1030) for a minor unmarried child. The child is entitled to both the income and the capital of the trust but does not make any claim. The trustees retain all the income.

For settlements made before 9 March 1999, as no income is paid to or for the benefit of the child, the Settlements legislation does not apply and the income is treated as the child’s.

For settlements made on or after 9 March 1999, including funds added after that date to pre-existing settlements, we would treat the income as that of the parent, subject to the £100 limit explained in TSEM4310.