Part III

Individuals, partnerships, trusts and collective investment schemes etc
Chapter II

Settlements

Migration of settlements, non-resident settlements and dual resident settlements

Supplementary provisions.
97
1
In sections 86A to 96 and Schedule 4C and this section “capital payment”—
a
means any payment which is neither—
i
chargeable to income tax on the recipient, nor
ii
chargeable to income tax on another person under
Chapter 5 of Part 5 of ITTOIA 2005 (settlements) or Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad)
,
or, in the case of a recipient who is not resident in the United Kingdom, any payment received otherwise than as income, but
b
does not include a payment under a transaction entered into at arm’s length if it is received on or after 19th March 1991.
2
In subsection (1) above references to a payment include references to the transfer of an asset and the conferring of any other benefit, and to any occasion on which settled property becomes property to which section 60 applies.
3
The fact that the whole or part of a benefit is by virtue of Chapter 5 of Part 5 of ITTOIA 2005 (settlements) or Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad), treated as an individual's income for a year of assessment after that in which it is received—
a
shall not prevent the benefit or that part of it being treated for the purposes of sections 86A to 96 and Schedule 4C as a capital payment in relation to any year of assessment earlier than that in which it is treated as his income; but
b
shall preclude its being treated for those purposes as a capital payment in relation to that or any later year of assessment.
4
For the purposes of sections 86A to 96 and Schedule 4C the amount of a capital payment made by way of loan, and of any other capital payment which is not an outright payment of money, shall be taken to be equal to the value of the benefit conferred by it (see sections 97A to 97C for the value of benefits conferred by a capital payment made by way of loan or by way of making movable property or land available).
5
For the purposes of sections 86A to 90 and Schedule 4C a capital payment shall be regarded as received by a beneficiary from the trustees of a settlement if—
a
he receives it from them directly or indirectly, or
b
it is directly or indirectly applied by them in payment of any debt of his or is otherwise paid or applied for his benefit, or
c
it is received by a third person at the beneficiary’s direction.
6
Section 16(3) shall not prevent losses accruing to trustees in a year of assessment for which section 87 of this Act or section 17 of the 1979 Act applied to the settlement from being allowed as a deduction from chargeable gains accruing in any later year (so far as they have not previously been set against gains for the purposes of a computation under either of those sections or otherwise).
7
In sections 86A to 96 and Schedule 4C and in ... this section—
- “
settlement
” has the meaning given by section 620 of ITTOIA 2005, and
- “settled property” and references (however expressed) to property comprised in a settlement shall be construed accordingly.
7A
In this section, sections 86A to 96 and Schedule 4C “
trustee
”, in relation to a settlement in relation to which there would be no trustees apart from this subsection, means any person in whom the settled property or its management is for the time being vested (and a person who is treated as a trustee of the settlement by virtue of this subsection shall be treated as a trustee of the settlement for the purposes of section 69).
8
In a case where—
a
at any time on or after 19th March 1991 a capital payment is received from the trustees of a settlement or is treated as so received by virtue of section 96(1),
b
it is received by a person, or treated as received by a person by virtue of section 96(2) to (5),
c
at the time it is received or treated as received, the person is not (apart from this subsection) a beneficiary of the settlement, and
d
subsection (9) or (10) below does not prevent this subsection applying,
for the purposes of sections 86A to 90 and Schedule 4C the person shall be treated as a beneficiary of the settlement as regards events occurring at or after that time.
9
Subsection (8) above shall not apply where a payment mentioned in paragraph (a) is made in circumstances where it is treated (otherwise than by subsection (8) above) as received by a beneficiary.
10
Subsection (8) above shall not apply so as to treat—
a
the trustees of the settlement referred to in that subsection, or
b
the trustees of any other settlement,
as beneficiaries of the settlement referred to in that subsection.
Words in s. 97(1) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(a), Sch. 26 para. 4(a)
Ss. 96-98 applied (with modifications) (with effect in accordance with art. 1(2)(3), Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 20(3)
Words in s. 97(5) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(b), Sch. 26 para. 4(b)
Ss. 96-98 applied (with modifications) by Income and Corporation Taxes Act 1988 (c. 1), s. 762(3) (as substituted (with effect in accordance with Sch. 7 para. 98 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 93(3))
Words in s. 97(1)(a) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 95
Words in s. 97(4) inserted (with effect in accordance with Sch. 9 para. 3 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 9 para. 1(1)
Words in s. 97(1)-(5) substituted (with effect in accordance with s. 129(3) of the amending Act) by Finance Act 1998 (c. 36), s. 129(2)
Words in s. 97(1)(a) substituted (15.3.2018) by Finance Act 2018 (c. 3), Sch. 10 para. 20(2) (with Sch. 10 para. 20(5))
S. 97(7A) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 15(2)(3)
Words in s. 97(7) repealed (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 15(1)(a)(3), Sch. 26 Pt. 3(15)
Word in Pt. 3 heading inserted (with effect in accordance with Sch. 22 para. 12 of the amending Act) by Finance Act 2009 (c. 10), Sch. 22 para. 9; S.I. 2010/670, art. 2
Words in s. 97(7) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 15(1)(b)(3)
Words in s. 97(8) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(b), Sch. 26 para. 4(b)
Words in s. 97(4) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(a), Sch. 26 para. 4(a)
Words in s. 97(7)(8) substituted (with effect in accordance with s. 129(3) of the amending Act) by Finance Act 1998 (c. 36), s. 129(2)
Words in s. 97(3) substituted (15.3.2018) by Finance Act 2018 (c. 3), Sch. 10 para. 20(3) (with Sch. 10 para. 20(5))
Words in s. 97(7) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(a), Sch. 26 para. 4(a)
Words in s. 97(3)(a) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2000 (c. 17), s. 92(4)(a), Sch. 26 para. 4(a)
S. 97(1) modified (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 10 para. 10(3)(9)
Words in s. 97(3) substituted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 12 paras. 64(b), 70(1)
Words in s. 97(1)(a)(ii) substituted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 12 paras. 64(a), 70(1)