CHAPTER VU.K. MAINTENANCE FUNDS FOR HISTORIC BUILDINGS
690 Schedule 4 directions.U.K.
In this Chapter “a Schedule 4 direction” means a direction under paragraph 1 of Schedule 4 to the M1Inheritance Tax Act 1984 (maintenance funds for historic buildings); and any reference in this Chapter to paragraph 1 or Schedule 4 is a reference to that paragraph or that Schedule, as the case may be.
691 Certain income not to be income of settlor etc.U.K.
(1)M2This section applies to any settlement in relation to which a Schedule 4 direction has effect.
(2)M3The trustees of the settlement may elect that this subsection shall have effect in relation to any year of assessment, and if they do so—
(a)any income arising in that year from the property comprised in the settlement which, apart from this subsection, would be treated by virtue of this Part as income of the settlor shall not be so treated; and
(b)no sum applied in that year out of the property for the purposes mentioned in paragraph 3(1)(a)(i) of Schedule 4 (maintenance etc. of qualifying property) shall be treated for any purposes of the Income Tax Acts as the income of any person—
(i)by virtue of any interest of that person in, or his occupation of, the qualifying property in question; or
(ii)by virtue of [F1section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement)].
(3)M4Where income arising from the property comprised in the settlement in a year of assessment for which no election is made under subsection (2) above is treated by virtue of this Part as income of the settlor, paragraph (b) of that subsection shall have effect in relation to any sums in excess of that income which are applied in that year as mentioned in that paragraph.
(4)Any election under subsection (2) above shall be by notice to the Board in such form as the Board may require and shall be made [F2on or before the first anniversary of the 31st January next following] the year of assessment to which it relates.
(5)M5Where—
(a)for part of a year of assessment a Schedule 4 direction has effect and circumstances obtain by virtue of which income arising from property comprised in the settlement is treated as income of a settlor under this Part; and
(b)for the remainder of that year either no such direction has effect, or no such circumstances obtain, or both,
subsections (1) to (4) above shall apply as if each of those parts were a separate year of assessment and separate elections may be made accordingly.
Textual Amendments
F1Words in s. 691(2)(b)(ii) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 281 (with Sch. 2)
F2Words in s. 691(4) substituted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 19
Marginal Citations
M2Source-1977 s.38(1); 1982 Sch.10 1; ITA Sch.8 8
M3Source-1977 s.38(2); 1980 s.88(7); 1987 Sch.15 10
M4Source-1977 s.38(3), (4)
M5Source-1977 s.38(5); 1982 Sch.10 1(3); ITA Sch.8 8
692 Reimbursement of settlor.U.K.
(1)M6This section applies to income arising from settled property in respect of which a Schedule 4 direction has effect if the income—
(a)is treated by virtue of this Part as income of the settlor, and
(b)is applied in reimbursing the settlor for expenditure incurred by him for a purpose within paragraph 3(1)(a)(i) of Schedule 4,
and if that expenditure is (or would apart from the reimbursement be) deductible in computing [F3either the profits of a trade carried on by the settlor or the profits of a [F4UK property business] so carried on].
(2)Income to which this section applies shall not be treated as reducing the expenditure deductible in computing the profits referred to in subsection (1) above, and shall not be regarded as income of the settlor otherwise than by virtue of this Part.
Textual Amendments
F3Words in s. 692(1) substituted (with effect in accordance with s. 39(4)(5) of the amending Act) by Finance Act 1995 (c. 4), Sch. 6 para. 26
F4Words in s. 692(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 282 (with Sch. 2)
Marginal Citations
M6Source-1982 s.61; ITA Sch.8 21
693 Severance of settled property for certain purposes.U.K.
M7Where settled property in respect of which a Schedule 4 direction has effect constitutes part only of the property comprised in a settlement, it and the other property shall be treated as comprised in separate settlements for the purposes of sections 27 and 380 to 387 and this Part.
Marginal Citations
M7Source-1982 s.62(1), (2); ITA Sch.8 22
694[F5Trustees chargeable to income tax in certain cases at higher rate reduced by rate applicable to trusts]U.K.
(1)M8If in the case of a settlement in respect of which a Schedule 4 direction has effect—
(a)any of the property comprised in the settlement (whether capital or income) is applied otherwise than as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4; or
(b)any of that property on ceasing to be comprised in the settlement devolves otherwise than on any such body or charity as is mentioned in paragraph 3(1)(a)(ii) of that Schedule; or
(c)the direction ceases to have effect;
then, unless subsection (6) below applies, income tax shall be charged under this section in respect of the settlement.
(2)Subject to subsection (3) below, tax chargeable under this section shall be charged at the rate of 30per cent.F6 on the whole of the income which has arisen in the relevant period from the property comprised in the settlement and has not been applied (or accumulated and then applied) as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4.
In this subsection “the relevant period” means, if tax has become chargeable under this section in respect of the settlement on a previous occasion, the period since the last occasion and, in any other case, the period since the settlement took effect.
[F7(2A)The rate at which tax is charged under this section shall be equivalent to the higher rate of income tax for the year of assessment during which the charge arises, reduced by the [F8amount of the rate applicable to trusts] for that year.]
(3)M9Tax shall not be chargeable under this section in respect of income which by virtue of [F9section 624 or 629 of ITTOIA 2005 (income where settlor retains an interest in settlement or income paid to unmarried minor children of settlor)] is treated as income of the settlor; but where income arising in any year of assessment is exempted by this subsection any sums applied in that year as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4 shall be treated as paid primarily out of that income and only as to the excess, if any, out of income not so exempted.
(4)Tax charged under this section shall be in addition to any tax chargeable apart from this section and—
(a)the persons assessable and chargeable with tax under this section shall be the trustees of the settlement; and
(b)all the provisions of the Income Tax Acts relating to assessments and to the collection and recovery of income tax shall, so far as applicable, apply to the charge, assessment, collection and recovery of tax under this section.
(5)Tax shall also be chargeable in accordance with subsections (1) to (4) above if—
(a)any of the property comprised in a settlement to which subsection (1) above applies, on ceasing at any time to be comprised in the settlement, devolves on any such body or charity as is referred to in paragraph (b) of that subsection, and
(b)at or before that time an interest under the settlement is or has been acquired for a consideration in money or money’s worth by that or another such body or charity;
but for the purposes of this subsection any acquisition from another such body or charity shall be disregarded.
(6)Tax shall not be chargeable under this section in respect of a settlement on an occasion when the whole of the property comprised in it is transferred tax-free into another settlement; but on the first occasion on which tax becomes chargeable under this section in respect of a settlement (“the current settlement”) comprising property which was previously comprised in another settlement or settlements and has become comprised in the current settlement as a result of, or of a series of, tax-free transfers, the relevant period for the purposes of subsection (2) above shall, as respects that property, be treated as having begun—
(a)on the last occasion on which tax became chargeable under this section in respect of the other settlement or any of the other settlements; or
(b)if there has been no such occasion, when the other settlement or the first of the other settlements took effect.
(7)M10 For the purposes of subsection (6) above, property is transferred tax-free from one settlement into another if either—
(a)it ceases to be comprised in the first-mentioned settlement and becomes comprised in the other settlement in circumstances such that by virtue of paragraph 9(1) of Schedule 4 there is (or, but for paragraph 9(4), there would be) no charge to capital transfer tax or inheritance tax in respect of the property; or
(b)both immediately before and immediately after the transfer it is property in respect of which a Schedule 4 direction has effect.
Textual Amendments
F5S. 694 sidenote substituted (22.7.2004) by Finance Act 2004 (c. 12), Sch. 4 para. 2
F6 Repealed by 1988(F) s.24(3)for 1988-89and subsequent years.
F71988(F) s.24(3).
F8Words in s. 694(2A) substituted (27.7.1993 with effect for the year 1993-1994 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras.10, 25(1)
F9Words in s. 694(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 283 (with Sch. 2)
Marginal Citations
M8Source-1980 s.52(1), (2); 1982 Sch.10 2(2) (3); ITA Sch.8 17
M9Source-1980 s.52(3)-(6); ITA Sch.8 17
M10Source-1980 s.52(7); 1982 Sch.10 2(4); ITA Sch.8 17