1(1)Section 25(4) of the [1965 c. 25.] Finance Act 1965 (notional disposal of settled property when a life interest in any part of the settled property terminates) shall not apply on the occasion of the termination of the trusts of the settlement as respects any part of the settled property by the exercise of a power for that purpose contained in the settlement or of a statutory power of advancement or by the surrender of a life interest in such a part for the purpose of advancement, if all the property as respects which the life interest terminates thereby ceases to be settled property under the settlement.
(2)The said section 25(4), and section 26(9)(a) of the said Act (which defines references to capital gains tax chargeable in consequence of a death), shall apply where after 3rd May 1966 the person entitled to a life interest in possession in all or any part of settled property dies (although the life interest does not then terminate) as they apply on the termination of such a life interest.
(3)In subsection (10)(a) of the said section 25 (which defines " life interest" as including certain limited interests) for the words from "for the life of another" to the end of the paragraph there shall be substituted the words " for the life of a person other than the person entitled to the right, or for lives " , but not so as to apply the said section 25(4) on any occasion on or before 4th May 1966.
(4)In the said section 25 the expression " life interest" shall, notwithstanding subsection (10)(c) of that section (which excludes annuities) include entitlement to an annuity created by the settlement if—
(a)some or all of the settled property is appropriated by the trustees as a fund out of which the annuity is payable, and
(b)there is no right of recourse to settled property not so appropriated, or to the income of settled property not so appropriated,
and, without prejudice to subsection (12) of the said section 25, the settled property so appropriated shall, while the annuity is payable, and on the occasion of the death of the annuitant, be treated for the purposes of subsections (4), (5), (6) and (7) of the said section 25 as being settled property under a separate settlement.