Finance Act 2013

Inheritance Tax Act 1984 U.K.

1 U.K. IHTA 1984 is amended as follows.

2 (1) Section 71A (trusts for bereaved minors) is amended as follows. U.K.

(2) For subsection (3)(c)(ii) substitute—

“(ii) if any of the income arising from any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of the bereaved minor.”

(3) In subsection (4), before paragraph (a) insert—

“(za) the trustees' having powers that enable them to apply otherwise than for the benefit of the bereaved minor amounts (whether consisting of income or capital, or both) not exceeding the annual limit,”.

(4) After subsection (4) insert—

“(4A) For the purposes of this section and section 71B, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(4B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(4C) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (4)(za) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (4A).

(4D) An order under subsection (4C) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(4E) A statutory instrument containing an order under subsection (4C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

3 (1) Section 71B (charge to tax on property to which section 71A applies) is amended as follows. U.K.

(2) In subsection (1), after “(2)” insert “ , (2B) ”.

(3) After subsection (2) insert—

“(2A) Subsection (2B) applies in a case in which—

(a) an amount is paid or applied otherwise than for the benefit of the bereaved minor, and

(b) the exemptions provided by subsection (2) of this section and subsections (3) and (4) of section 70 do not apply.

(2B) In such a case, tax is not charged under this section in respect of whichever is the lower of the following amounts—

(a) the amount paid or applied, and

(b) the annual limit.”

4 (1) Section 71D (age 18-to-25 trusts) is amended as follows. U.K.

(2) For subsection (6)(c)(ii) substitute—

“(ii) if any of the income arising from any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of B.”

(3) After that subsection insert—

“(6A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), paragraphs (b) and (c) of subsection (6) have effect as if for “living and under the age of 25,” there were substituted “under the age of 25 and the income arising from the settled property is held on trust for B,”.

(4) In subsection (7), before paragraph (a) insert—

“(za) the trustees' having powers that enable them to apply otherwise than for the benefit of B amounts (whether consisting of income or capital, or both) not exceeding the annual limit,”.

(5) After that subsection insert—

“(7A) For the purposes of this section and section 71E, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(7B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(7C) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (7)(za) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (7A).

(7D) An order under subsection (7C) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(7E) A statutory instrument containing an order under subsection (7C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

5 (1) Section 71E (charge to tax on property to which section 71D applies) is amended as follows. U.K.

(2) In subsection (1), for “(4)” substitute “ (4A) ”.

(3) After subsection (4) insert—

“(4A) If an amount is paid or applied otherwise than for the benefit of B and the exemptions provided by subsections (2) to (4) do not apply, tax is not charged under this section in respect of whichever is the lower of the following amounts—

(a) the amount paid or applied, and

(b) the annual limit.”

6 (1) Section 89 (trusts for disabled persons) is amended as follows. U.K.

(2) For subsection (1)(b) substitute—

“(b) which secure that, if any of the settled property or income arising from it is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person.”

(3) For subsection (3) substitute—

“(3) The trusts on which the settled property is held are not to be treated as falling outside subsection (1) by reason only of—

(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,

(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).

(3A) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(3B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(3C) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (3)(a) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (3A).

(3D) An order under subsection (3C) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(3E) A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

(4) In subsection (4), for the words following “into settlement,” substitute “ was a disabled person ”.

(5) For subsections (5) and (6) substitute—

“(4A) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.”

7 (1) Section 89A (self-settlement by person with condition expected to lead to disability) is amended as follows. U.K.

(2) In subsection (1)(b), for the words following “A becoming” substitute “ a person falling within any paragraph of the definition of “disabled person” in paragraph 1 of Schedule 1A to the Finance Act 2005 ”.

(3) In subsection (2), after “settled property” insert “ or income arising from it ”.

(4) For subsections (5) and (6) substitute—

“(5) For the purposes of subsection (1)(b), assume—

(a) that A will meet any conditions as to residence or presence that are required to establish entitlement to the allowance, payment or increased pension in question,

(b) that there will be no provision made by regulations under any of the following—

(i) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCBA 1992,

(ii) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCB(NI)A 1992, and

(iii) sections 85 and 86 of WRA 2012 and the corresponding provision having effect in Northern Ireland, and

(c) that A will not be prevented from receiving the allowance, payment or increased pension in question by any of the following—

(i) section 113(1) of SSCBA 1992,

(ii) section 113(1) of SSCB(NI)A 1992,

(iii) section 87 of WRA 2012 and the corresponding provision having effect in Northern Ireland,

(iv) articles 61 and 64 of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),

(v) article 53 of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606), and

(vi) article 42 of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011 (S.I. 2011/517).”

(5) Before subsection (7) insert—

“(6A) The trusts on which the settled property is held are not to be treated as falling outside subsection (2) by reason only of—

(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,

(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).

(6B) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(6C) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(6D) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (6A)(a) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (6B).

(6E) An order under subsection (6D) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(6F) A statutory instrument containing an order under subsection (6D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

(6) For subsection (8) substitute—

“(8) In this section—

• “SSCBA 1992” means the Social Security Contributions and Benefits Act 1992,

• “SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992, and

• “WRA 2012” means the Welfare Reform Act 2012.”

(7) In the heading, for the words following “person” substitute “ expected to fall within the definition of “disabled person” ”.

8 (1) Section 89B (meaning of “disabled person's interest”) is amended as follows. U.K.

(2) For subsection (2) substitute—

“(2) In subsection (1)(c) “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.”

(3) After that subsection insert—

“(2A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (1)(d)(v) has effect as if for “A's life” there were substituted “ the period during which the income from the property is held on trust for A ”.”

9 (1) The amendments made by paragraphs 2 to 8 have effect in relation to property transferred into settlement on or after 8 April 2013. U.K.

(2) Nothing in paragraphs 6 to 8 is to be read as preventing property transferred into a relevant settlement on or after 8 April 2013 from being property to which section 89 or 89A of IHTA 1984 applies.

10 (1) In section 89B (meaning of “disabled person's interest”), in subsection (1)(c) after “2006” insert “ if the trusts on which the settled property is held secure that, if any of the settled property is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person ”. U.K.

(2) After that section insert—

“89C Disabled person's interest: powers of advancement etc

(1) The trusts on which settled property is held are not to be treated for the purposes of section 89B(1)(c) or (d) (meaning of “disabled person's interest”: cases involving an interest in possession) as failing to secure that the settled property is applied for the benefit of a beneficiary by reason only of—

(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the beneficiary amounts (whether consisting of income or capital, or both) not exceeding the annual limit,

(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),

(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,

(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),

(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or

(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).

(2) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—

(a) £3,000, and

(b) 3% of the amount that is the maximum value of the settled property during the period in question.

(3) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.

(4) The Treasury may by order made by statutory instrument—

(a) specify circumstances in which subsection (1)(a) is, or is not, to apply in relation to a trust, and

(b) amend the definition of “the annual limit” in subsection (2).

(5) An order under subsection (4) may—

(a) make different provision for different cases, and

(b) contain transitional and saving provision.

(6) A statutory instrument containing an order under subsection (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

(3) The amendments made by this paragraph have effect in relation to property transferred into settlement on or after the day on which this Act is passed.

(4) Nothing in this paragraph is to be read as preventing property transferred into a settlement to which sub-paragraph (5) applies from being settled property for the purposes of section 89B(1)(c) or (d) of IHTA 1984.

(5) This sub-paragraph applies to a settlement—

(a) created before the day on which this Act is passed the trusts of which have not been altered on or after that day, or

(b) arising on or after the day on which this Act is passed under the will of a testator, if—

(i) the will was executed before the day on which this Act is passed and its provisions, so far as relating to the settlement, have not been altered on or after that day, or

(ii) the will was executed or confirmed on or after the day on which this Act is passed and its provisions, so far as relating to the settlement, are in the same terms as those contained in a will executed by the same testator before that day.