When an asset is placed within a trust it is termed as being ‘settled’. However, the tax legislation defines the word ‘settlement’ widely as including ‘any disposition, trust, covenant, agreement, arrangement or transfer of assets’. Therefore a ‘settlement’ situation may present itself within owner managed companies when a shareholder (or associate of a shareholder) enters into an ‘arrangement’ of diverting income one to another, resulting in a tax advantage.
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