Finance Act 1976

Section 112.

SCHEDULE 14 Settled Property

Interpretation

1 References in the following provisions of this Schedule to sections or Schedules are, except where otherwise indicated, references to sections of or Schedules to the [1975 c. 7.] Finance Act 1975.

Capital distributions

2 In section 51(1), after the definition of " the Board " there shall be inserted—

• “" capital distribution " has the same meaning as in Schedule 5 to this Act, and includes a capital distribution treated as made by virtue of any provision of that Schedule ;”.

3 After subsection (2) of section 51 there shall be inserted—

“(2A) Subsection (2) above shall not have effect in relation to capital distributions ; but, except where the context otherwise requires, references in this Part of this Act to chargeable transfers or to the values transferred by them shall be construed as including references to capital distributions or to the amounts on which tax is chargeable in respect of them.”

4 In paragraph 2(1) of Schedule 4, after paragraph (b) there shall be inserted the words “or

(c) is liable as trustee of a settlement for tax on a capital distribution, or would be so liable if tax were chargeable on it;”.

5 At the end of paragraph 6 of Schedule 4 there shall be added—

“(6) References in this paragraph to transfers of value or to the values transferred by them shall be construed as including references to capital distributions or to the amounts on which tax is chargeable in respect of them.”

6 (1) Paragraph 16 of Schedule 4 shall be amended as follows.

(2) In sub-paragraph (5), for the words " transfer of value " there shall be substituted the words " chargeable transfer ".

(3) For sub-paragraph (6) there shall be substituted—

“(6) The reference in sub-paragraph (5) above to any previous chargeable transfer made by the same transferor means, in relation to a chargeable transfer which is a capital distribution, any previous capital distribution made out of property comprised in the same settlement other than a capital distribution treated as made under paragraph 12 of Schedule 5 to this Act.”

(4) In sub-paragraph (7), after die word "day" there shall be inserted the words " and capital distributions made out of property comprised in the same settlement on the same day ".

7 At the end of paragraph 25 of Schedule 4 there shall be added—

“(5) References in this paragraph to a transfer of value, or to the value transferred by a transfer of value, shall be construed as including references to a capital distribution or to the amount on which tax is chargeable in respect of a capital distribution.”

8 (1) In paragraph 12(3) of Schedule 5, for the words "next capital distribution " onwards there shall be substituted the words " next capital distribution made out of the property or, as the case may be, out of the part concerned, not being a capital distribution treated as made under that sub-paragraph. "

(2) At the end of paragraph 13(1) of Schedule 5 there shall be added the words " not being a capital distribution treated as made under paragraph 12 above ".

9 At the end of paragraph 11 of Schedule 10, there shall be added—

“(5) References in this paragraph to a transfer of value shall be construed as including references to a capital distribution.”

Interests in possession in Scotland

10 In paragraph 1(9) of Schedule 5, for the word " Schedule " there shall be substituted the words " Part of this Act " and for the words from " actually " to " that interest" there shall be substituted the words " by virtue of which the person in right of that interest is entitled to the enjoyment of the property or would be so entitled if the property were capable of enjoyment ".

Charge on capital distributions

11 In paragraph 6(5) of Schedule 5, for the words " ; and in relation " onwards there shall be substituted the words " or, in the case of a capital distribution treated as made under sub-paragraph (2) above or paragraph 15(3) below, any tax which is payable out of the property whose value is taken as the amount of the capital distribution ; and in relation to a capital distribution treated as made under sub-paragraph (3) above or paragraph 12 or 24(2) below, sub-paragraph (4)(a) above shall have effect as if the words " less the tax payable on it" were omitted ".

Settlor etc. becoming entitled to interest in possession

12 (1) Paragraph 6 of Schedule 5 shall have effect, and shall be deemed always to have had effect, as if after sub-paragraph (6) there were inserted—

“(6A) Where the person referred to in sub-paragraph (2) above is the settlor, the settlor's spouse or, if the settlor has died less than two years before the time there referred to, the settlor's widow or widower, and is domiciled in the United Kingdom at that time, that sub-paragraph shall have effect as if the reference in it to a capital distribution were a reference to a distribution payment to the settlor or, as the case may be, the settlor's spouse, widow or widower”.

(2) Paragraph 11(8) of Schedule 5 shall have effect, and shall be deemed always to have had effect, as if after the words " this sub-paragraph " in each place where they occur there were inserted the words " or paragraph 6(6A) above ".

Non-resident beneficiaries

13 The following provisions shall cease to have effect—

(a) in section 22(3)(a), the words from "and resident" to " occurred " ;

(b) in paragraph 4(6) of Schedule 5, the words from "and resident" to " end " ;

(c) in paragraph 6(6) of Schedule 5, the words from " and resident " to the end ;

(d) in paragraph 14(5) of Schedule 5, the words from "and resident" to the end.

Distribution payments made on same day

14 (1) After paragraph 10 of Schedule 5 there shall be inserted—

“10A Where a capital distribution is made on the same day and out of property comprised in the same settlement as a distribution payment that is not a capital distribution, the capital distribution shall for the purpose of paragraphs 7 to 9 above be treated as made before the distribution payment.”.

(2) This paragraph has effect in relation to distribution payments made after 15th April 1976.

Settlements of excluded property

15 (1) In determining for the purposes of any provision of Schedule 5 whether there has been a transfer of value which satisfies the conditions stated in sub-paragraph (2) of paragraph 11 of that Schedule or what is the relevant transfer within the meaning of that sub-paragraph in relation to any settlement, the fact that any property is excluded property shall be ignored.

(2) This paragraph shall be deemed to have come into force on 16th April 1976.

Partially exempt transfers into settlement

16 In paragraph 11(2) of Schedule 5, after the words "where it was not a chargeable transfer" there shall be inserted the words " (or was a chargeable transfer of some only of the value transferred by it) ".

Periodic charge to tax

17 For paragraph 12(7) of Schedule 5 there shall be substituted—

“(7) Paragraph 11 above shall apply for the interpretation of this paragraph as it applies for the interpretation of paragraphs 6 to 10, except that paragraph 11(4) shall be disregarded in determining in relation to any settled property whether the trustees are resident in the United Kingdom.”

Superannuation schemes

18 Paragraph 16(1) of Schedule 5 shall have effect, and shall be deemed always to have had effect, as if after the words "that Act applies " there were inserted the words " to any scheme approved under section 226 or 226A of that Act ".

Protective trusts

19 (1) In paragraph 18 of Schedule 5, for paragraph (a) of sub-paragraph (2) there shall be substituted—

“(a) tax shall not be charged under paragraph 4(2) above on the coming to an end of the principal beneficiary's interest in the property if the property is then held on discretionary trusts to the like effect as those specified in paragraph (ii) of the said section 33(1)”.

(2) This paragraph shall be deemed to have come into force on 16th April 1976.

Liability of settlor

20 Section 25(3)(d) (which imposes liability for tax on the settlor where the trustees are non-resident) shall not apply, and shall be deemed never to have applied, in relation to a settlement made before 11th December 1974 if—

(a) the trustees were resident in the United Kingdom when the settlement was made, and

(b) in the case of a chargeable transfer made after 10th December 1974, the trustees have not been resident in the United Kingdom at any time during the period between that date and the time of the transfer.