Textual Amendments
F1Heading substituted by Finance Act 1982 (c. 39, SIF 63:2), s. 80(3) for 1982–83 et seq.
5(1)For any year of assessment during the whole or part of which settled property is held on trusts which secure that, during the lifetime of a mentally disabled person or a person in receipt of attendance allowance,
[F2(a)not less than half of the property which is applied is applied for the benefit of that person, and
(b)that person is entitled to not less than half of the income arising from the property, or no such income may be applied for the benefit of any other person]
[F3subsections (1), (4) and (5)] shall apply to the trustees of the settlement as they apply to an individual.
[F4(1A)The trusts on which settled property is held shall not be treated as falling outside sub-paragraph (1) above by reason only of the powers conferred on the trustees by section 32 of the Trustee Act 1925 or section 33 of the Trustee Act (Northern Ireland) 1958 (powers of advancement); and the reference in that sub-paragraph to the life-time of a person shall, where the income from the settled property is held for his benefit on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), be construed as a reference to the period during which the income is held on trust for him.
(1B)In relation to a settlement which is one of two or more qualifying settlements comprised in a group, this paragraph shall have effect as if for the references in section 5 of this Act to [F5the exempt amount for the year] there were substituted references to [F5one tenth of that exempt amount] or, if it is more, to such amount as results from dividing [F5the exempt amount for the year] by the number of settlements in the group.
(1C)For the purposes of sub-paragraph (1B) above—
(a)a qualifying settlement is any settlement (other than an excluded settlement) which is made on or after 10th March 1981 and to the trustees of which this paragraph applies for the year of assessment; and
(b)all qualifying settlements in relation to which the same person is the settlor constitute a group.
(1D)If, in consequence of two or more persons being settlors in relation to it, a settlement is comprised in two or more groups comprising different numbers of settlements, sub-paragraph (1B) above shall apply to it as if the number by which [F6the exempt amount for the year] is to be divided were the number of settlements in the largest group.]
(2)In this paragraph “mentally disabled person” means a person who by reason of mental disorder within the meaning of the [F7Mental Health Act 1983] is incapable of administering his property or managing his affairs and “attendance allowance” means an allowance under section 35 of the M1Social Security Act 1975 or the M2Social Security (Northern Ireland) Act 1975 [F8; and “settlor” and “excluded settlement” have the same meanings as in paragraph 6 below].
[F9(3)An inspector may by notice in writing require any person, being a party to a settlement, to furnish him within such time as he may direct (not being less than twenty-eight days) with such particulars as he thinks necessary for the purposes of this paragraph.]
Textual Amendments
F2Sch. 1 para. 5(1)(a)(b) substituted for words by Finance Act 1981 (c. 35, SIF 63:2), s. 89(2) for 1981–82 et seq.
F3Words substituted by Finance Act 1980 (c. 48, SIF 63:1), s. 77(4)(c) for 1980–81 et seq.
F4Sch. 1 para. 5(1A)–(1D) inserted by Finance Act 1981 (c. 35, SIF 63:2), s. 89(3) for 1981–82 et seq.
F5Words substituted by Finance Act 1982 (c. 39, SIF 63:2), s. 80(3)(b)(c) for 1982–83 et seq.
F6Words substituted by Finance Act 1982 (c. 39, SIF 63:2), s. 80(3) for 1982–83 et seq.
F7Words substituted by Mental Health Act 1983 (c. 20), Sch. 4 para. 49
F8Words added by Finance Act 1981 (c. 35, SIF 63:2), s. 89(4) for 1981–82 et seq.
F9Sch. 1 para. 5(3) added by Finance Act 1981 (c. 35, SIF 63:2), s. 89(5) for 1981–82 et seq.
Modifications etc. (not altering text)
Marginal Citations
6(1)For any year of assessment during the whole or part of which any property is settled property, not being a year of assessment for which paragraph 5(1) above applies, [F10subsections (1), (4) and (5)] shall apply to the trustees of a settlement as they apply to an individual but with the following modifications.
[F11(2)In subsections (1) and (4) for [F12“the exempt amount for the year”] there shall be substituted [F12“one half of the exempt amount for the year”].
(3)Subsection (5) shall apply only to the trustees of a settlement made before 7th June 1978 and, in relation to such trustees, shall have effect with the substitution for [F12“the exempt amount for the year”] and [F12“twice the exempt amount for the year” of “one half of the exempt amount for the year” and “the exempt amount for the year” respectively].
(4)In relation to a settlement which is one of two or more qualifying settlements comprised in a group, sub-paragraph (2) above shall have effect as if for the reference to [F12“one half of the exempt amount for the year”] there were substituted a reference to [F12“one tenth of that exempt amount”] or, if it is more, to such amount as results from dividing [F12one half of the exempt amount for the year] by the number of settlements in the group.
(5)For the purposes of sub-paragraph (4) above—
(a)a qualifying settlement is any settlement (other than an excluded settlement) which is made after 6th June 1978 and to the trustees of which this paragraph applies for the year of assessment; and
(b)all qualifying settlements in relation to which the same person is the settlor constitute a group.
(6)If, in consequence of two or more persons being settlors in relation to it, a settlement is comprised in two or more groups comprising different numbers of settlements, sub-paragraph (4) above shall apply to it as if the number by which [F12one half of the exempt amount for the year] is to be divided were the number of settlements in the largest group.
(7)In this paragraph “settlor” has the meaning given by section [F13681(4)] of [F13the Taxes Act 1988] and includes, in the case of a settlement arising under a will or intestacy, the testator or intestate and “excluded settlement” means—
(a)any settlement the trustees of which are not for the whole or any part of the year of assessment treated under section 52(1) of this Act as resident and ordinarily resident in the United Kingdom; and
(b)any settlement the property comprised in which—
(i)is held for charitable purposes only and cannot become applicable for other purposes; or
(ii)is held for the purposes of any such scheme or fund as is mentioned in sub-paragraph (8) below (retirement benefits and compensation funds).
[F14(8)The schemes and funds referred to in sub-paragraph (7)(b)(ii) above are funds to which section 615(3) of the Taxes Act 1988 applies, schemes and funds approved under section 620 or 621 of that Act, sponsored superannuation schemes as defined in section 624 of that Act and exempt approved schemes and statutory schemes as defined in Chapter I of Part XIV of that Act].
(9)An inspector may by notice in writing require any person, being a party to a settlement, to furnish him within such time as he may direct (not being less than twenty-eight days) with such particulars as he thinks necessary for the purposes of this paragraph].
Textual Amendments
F10Words substituted by Finance Act 1980 (c. 48, SIF 63:1), s. 78(2) for 1980–81 et seq.
F11Sch. 1 para. 6(2)–(9) substituted for para. 6(2)–(5) by Finance Act 1980 (c. 48, SIF 63:1), s. 78(3) for 1980–81 et seq.
F12Words substituted by Finance Act 1982 (c. 39, SIF 63:2), s. 80(3) for 1982–83 et seq.
F13Words substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 paras. 15 and 32
F14Sch. 1 para. 6(8) substituted by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 29 paras. 15 and 32