TSEM4105 | Settlements legislation: interpretation of statutory definition of settlement

Settlement includes any disposition, trust, covenant, arrangement or transfer of assets. Settlement may include a series of transactions which taken together are regarded as an arrangement. The courts have limited the scope of when an arrangement is classed as a settlement to where there is some element of bounty, see CIR v Plummer ([1979] STC 793 or 54 TC 1).

Arrangement

The expression ‘settlement’ includes any arrangement. ‘Arrangement’ covers a wide range of transactions or series of transactions. It can be taken to mean not only an arrangement embodied in a deed, but also an arrangement where there are associated transactions only some of which may be expressed in a deed or deeds. It can include a single transaction or a series of associated transactions where there is no formal deed at all.

It follows that it is necessary to consider any series of transactions globally. They could ultimately lead to a transfer of income, or of assets upon which income arises, from a settlor, who may or may not be named or identified in the deed or other documents. They could go to another person or persons who enjoy that income or receive that income in a fiduciary capacity for the enjoyment of others, either now or in the future.

‘Arrangement’ is a term of great flexibility. In Crossland v Hawkins (39TC493) the arrangement was a series of transactions. In Jones v Garnett (78 TC 597) the arrangement was the simple issue of a share in a company where the ‘bounty’ was provided by the expectation of the settlor’s subsequent behaviour.

Transfer of assets

The expression ‘settlement’ applies to any transfer of assets. This includes a simple gift without any deed.