Finance Act 1995

Part II U.K. Minor and consequential amendments of the Taxes Act 1988

2 U.K. In section 125(3)(a) of the Taxes Act 1988, for the words from “subsection (1)(a)” to the end substitute “ section 660A(8) or (9)(a) ”.

3 U.K. In section 339(1)(a) of the Taxes Act 1988, for “section 660(3)” substitute “ section 347A(7) ”.

4 (1) Section 347A of the Taxes Act 1988 (annual payments not a charge on the income of the payer) applies to a payment which is treated by virtue of Chapter IA of Part XV of the Taxes Act 1988 as income of the payer notwithstanding that it is made in pursuance of an obligation which is an existing obligation within the meaning of section 36(3) of the M1 Finance Act 1988.

(2) In section 347A of the Taxes Act 1988, after subsection (6) add—

“(7) In subsection (2)(b) above “a covenanted payment to charity” means a payment made under a covenant made otherwise than for consideration in money or money’s worth in favour of a body of persons or trust established for charitable purposes only whereby the like annual payments (of which the payment in question is one) become payable for a period which may exceed three years and is not capable of earlier termination under any power exercisable without the consent of the persons for the time being entitled to the payments.

(8) For the purposes of subsection (7) above the bodies mentioned in section 507 shall each be treated as a body of persons established for charitable purposes only.”

Marginal Citations

M1 1988 c. 39.

5 U.K. In section 360A(2)(b) of the Taxes Act 1988, for “section 681(4)” substitute “ Chapter IA of Part XV (see section 660G(1) and (2)) ”.

6 U.K. In section 417(3)(b) of the Taxes Act 1988, for “section 681(4)” substitute “ Chapter IA of Part XV (see section 660G(1) and (2)) ”.

7 U.K. In section 505(6) of the Taxes Act 1988, for “section 660(3)” substitute “ section 347A(7) ”.

8 U.K. Before section 677 of the Taxes Act 1988 insert the heading—

“Chapter IB U.K. Provisions as to capital sums paid to settlor”.

9 (1) Section 677 of the Taxes Act 1988 is amended as follows. U.K.

(2) In subsection (2)(b) after “the amount of” insert “ that income taken into account under that subsection in relation to ”.

(3) After subsection (2)(f) insert—

“(fa) any income arising under the settlement in that year or any previous year which has been treated as income of the settlor by virtue of section 660A or 660B; and”.

(4) In subsection (9) after “one of the events specified in section 673(3)” insert “ or, in the case of a sum paid on or after 6th April 1995, in one of the events specified in section 660A(4) or on the death under the age of 25 of any such person as is mentioned in section 660A(5) ”.

10 U.K. In section 678 of the Taxes Act 1988, omit subsection (7).

11 U.K. After section 682 of the Taxes Act 1988 insert—

“682A Supplementary provisions.

(1) The provisions of sections 660E to 660G apply for the purposes of this Chapter as they apply for the purposes of Chapter IA.

(2) For the purposes of this Chapter, a body corporate shall be deemed to be connected with a settlement in any year of assessment if at any time in that year—

(a) it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators then include the trustees of the settlement; or

(b) it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above.”

12 U.K. For the heading before section 686 of the Taxes Act 1988 substitute—

“Chapter IC U.K. Liability of trustees”.

13 U.K. In section 686 of the Taxes Act 1988 (liability to income tax at rate applicable to trusts), in subsection (2) (income to which the section applies) for paragraph (b) substitute—

“(b) is not, before being distributed, either—

(i) the income of any person other than the trustees, or

(ii) treated for any of the purposes of the Income Tax Acts as the income of a settlor; and”.

14 (1) Section 687 of the Taxes Act 1988 (payments under discretionary trusts) is amended as follows. U.K.

(2) For subsection (1) (cases in which the section applies) substitute—

“(1) Where in any year of assessment trustees make a payment to any person in the exercise of a discretion, whether a discretion exercisable by them or by any other person, then if the payment—

(a) is for all the purposes of the Income Tax Acts income of the person to whom it is made (but would not be his income if it were not made to him), or

(b) is treated for those purposes as the income of the settlor by virtue of section 660B,

the following provisions of this section apply with respect to the payment in lieu of section 348 or 349(1).”.

(3) In subsection (2)(a) (person credited with having paid tax) after “to whom the payment is made” insert “ or, as the case may be, the settlor ”.

(4) After subsection (4) add—

“(5) References in this section to payments include payments in money or money’s worth.”.

15 U.K. Omit section 689 of the Taxes Act 1988 (recovery from trustees of discretionary trusts of higher rate tax due from beneficiaries).

16 U.K. In section 694(3) of the Taxes Act 1988, for “Chapters I to IV” substitute “ Chapter IA ”.

17 (1) Section 720 of the Taxes Act 1988 is amended as follows. U.K.

(2) In subsection (6)—

(a) for “Chapters II to IV” substitute “ Chapters IA, IB and IC ”; and

(b) for the words from “(within Chapter II)” to the end substitute “ arising under the settlement ”.

(3) In subsection (7) for “Chapters II to IV” substitute “ Chapters IA, IB and IC ”.

(4) In subsection (8)(a) for “Chapter II, III or IV of Part XV (as the case may be)” substitute “ Chapter IA of Part XV (see section 660G(1) and (2)) ”.

18 U.K. In section 745(6) of the Taxes Act 1988, for “section 681(4)” substitute “ section 660G(1) and (2) ”.

19 U.K. In section 783(10)(b) of the Taxes Act 1988, for “section 670(2)” substitute “ section 660G(1) and (2) ”.

20 U.K. In section 839(3) of the Taxes Act 1988, for subsection (3) substitute—

“(3) A person, in his capacity as trustee of a settlement, is connected with—

(a) any individual who in relation to the settlement is a settlor,

(b) any person who is connected with such an individual, and

(c) any body corporate which is connected with that settlement.

In this subsection “settlement” and “settlor” have the same meaning as in Chapter IA of Part XV (see section 660G(1) and (2)).

(3A) For the purpose of subsection (3) above a body corporate is connected with a settlement if—

(a) it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

(b) it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above.”.