Finance Act 1980

56 Income under charitable covenant not settlor's for excess tax purposes

(1) In paragraph (b) of subsection (1) of section 457 of the Taxes Act (income under a settlement not treated as the settlor's income for the purposes of his excess liability if excluded by subsection (2) of that section) after the word “subsection” there shall be inserted the words “(1A) or ”.

(2) After that subsection there shall be inserted—

“(1A) Subsection (1) above shall not apply to so much of an individual's income as consists of covenanted payments to charity and does not exceed £3,000 in any year of assessment”.

(3) At the end of subsection (5) of that subsection (interpretation) there shall be inserted—

“(c) ' covenanted payments to charity ' shall be construed in accordance with section 434 (2) above.”

(4) In paragraph 3(1) of Schedule 16 to the [1972 c. 41.] Finance Act 1972 (apportionment of amounts which have been deducted by close companies in arriving at their distributable income and which in the case of an individual would have been treated as his income in computing his total income), for the words “would have been treated ” there shall be substituted the words “would (apart from section 457(1A) of the Taxes Act) have been treated ”.

(5) In paragraph 5 of that Schedule (consequences of apportionment: income tax) after sub-paragraph (5) there shall be inserted:

“(5A) Where as a result of a company or companies making covenanted payments to charity a sum or sums are apportioned by virtue of paragraph 3 above and form part of the total income of an individual for any year of assessment, his total income for that year and the total amount assessable for that year in respect of that sum or those sums shall be reduced by whichever is the lesser of—

(a) the amount of that sum or those sums, and

(b) the amount by which the total amount of all covenanted payments to charity which form part of his income for that year by virtue of section 457 of the Taxes Act, or which would form part of it if subsection (1A) of that section were omitted, falls short of £3,000;

and in this sub-paragraph “covenanted payments to charity ” has the same meaning as in the said section 457.”

(6) This section has effect for the year 1981-82 and subsequent years of assessment in relation to payments made after 5th April 1981.