ÀÏ˾»úÎçÒ¹¸£Àû

Overview of the settlement provisions

A popular tax planning approach is to transfer income-producing assets between spouses or civil partners. This may be done where one pays income tax at a lower marginal rate than the other, or to ensure that personal allowances are used in full. Such arrangements are also known as ‘income splitting’ or ‘income shifting’. They have long been the subject of HMRC scrutiny.

The scope for tax saving is potentially greater with the introduction of the additional tax rate from 6 April 2010.

Inter-spousal / civil partner tax planning is assisted by the fact that for capital gains tax purposes, the transfer of income-producing assets should be a no-gain no-loss transfer. See the Inter-spouse transfer guidance note.

One aspect which has come under the spotlight is that such transfers may constitute a settlement. The settlement rules, as discussed below, are complex but they can result in income being taxed on the donor despite the transfer