Part 8: Miscellaneous income
Paragraph 132: Income treated as income of settlor: exception for pension income
3673.Section 627 excludes benefits from relevant pension schemes from being treated as the settlor’s income under section 624. The exclusion for “relevant pension scheme” in subsection (3) of that section apply for the tax year 2006-07 onwards. This paragraph gives the rules that apply for the tax year 2005-06 and represents a rewrite of section 660A(11) of ICTA as it stands before the amendments made by FA 2004.
3674.Subsection (3)(g) of section 627 refers to regulations made under the Welfare Reform and Pensions Act 1999 and its Northern Ireland equivalent although section 660A(11)(g) of ICTA simply refers to regulations made by the Secretary of State. See Change 105 in Annex 1.
3675.Subparagraph (4) attracts the consequential and transitional powers for pensions in FA 2004 to the rewrite of those provisions in this Act.
Paragraph 133: Amounts treated as income of settlor: income paid to unmarried minor child of settlor
3676.Section 64 of FA 1999 amended section 660B of ICTA principally to enable a charge on the settlor to be made where a settlor’s minor child benefited from a bare trust arrangement. The income arising in the trust did not have to be paid to or for the benefit of the child for a charge on the settlor to arise. It was simply sufficient for the income to be treated as the child’s income. The new provision applied only where the settlement was made or entered into after 8 March 1999 or, if it was not, to income that arose from funds provided after that date. This paragraph enables the pre-amendment legislation to apply to pre-March 1999 settlements.
3677.Sub-paragraph (3) applies instead of sub-paragraph (2) where the income paid to the minor child is partly from pre-March 1999 funds and partly other funds, such as where there has been an injection of funds into the settlement after 9 March 1999.
Paragraph 134: Amounts treated as income of settlor: capital sums paid to settlor by trustees of settlement
3678.This paragraph applies where it is necessary to consider years before 1995-96 in applying the charge under section 633.
3679.Section 677(2) of ICTA excludes from income available to cover capital payments made to a settlor income within the settlement that has already been treated as the settlor’s. Section 677(2) of ICTA is rewritten in section 635. Sub-paragraphs (2) and (3) rewrite the categories in section 677(2) of ICTA that only apply in respect of income arising under a settlement before the tax year 1995-96 but which may still have effect when calculating the income available up to the end of a tax year for the purposes of section 633.
3680.Sub-paragraph (5). This saving may still have application where the direction or assignment precedes by some years the capital payment. (Capital payments are no longer charged after 11 years or 16 years if made through a company associated with the settlement. See sections 633 and 643).
