5(1)Where there is a disposal by way of gift and the property comprised in the gift becomes settled property by virtue of the gift, paragraphs 2 to 4 above shall not apply but, subject to the following provisions of this paragraph, the principal section and the following provisions of this Schedule shall apply as if the property comprised in the gift consisted of the property comprised in the settlement on the material date, except in so far as that property neither is, not represents, nor is derived from, property originally comprised in the gift.U.K.
(2)If the settlement comes to an end at some time before the material date as respects all or any of the property which, if the donor had dies immediately before that time, would be treated as comprised in the gift,—
(a)the property in question other than property to which the donor then becomes absolutely and beneficially entitled in possession, and
(b)any consideration (not consisting of rights under the settlement) given by the donor for any purposes of the property to which he so becomes entitled,
shall be treated as comprised in the gift (in addition to any other property so comprised).
(3)Where property comprised in a gift does not become settled property by virtue of the gift, but is before the material date settled by the donee, sub-paragraphs (1) and (2) above shall apply in relation to property comprised in the settlement as if the settlement had been made by the gift; and for this purpose property which becomes settled property under any testamentary disposition of the donee or on his intestacy (or partial intestacy) shall be treated as settled by him.
(4)Where property comprised in a gift becomes settled property either by virtue of the gift or as mentioned in sub-paragraph (3) above, any property which—
(a)on the material date is comprised in the settlement, and
(b)is derived, directly or indirectly, from a loan made by the donor to the trustees of the settlement,
shall be treated for the purposes of sub-paragraph (1) above as derived from property originally comprised in the gift.
(5)Where, under any trust or power relating to settled property, income arising from that property after the material date is accumulated, the accumulations shall not be treated for the purposes of sub-paragraph (1) above as derived from that property.