Finance Act 1989

Settlements etc. U.K.

108 Outright gifts etc. between husband and wife. U.K.

(1) Section 685 of the Taxes Act 1988 (provisions supplementary to sectionscharging settlor to tax in excess of basic rate on certain settlement income)shall be amended as follows.

(2) In subsection (3), after the word “above” there shall be inserted thewords “and subsection (4B) below”.

(3) At the end of subsection (4) there shall be added the words “, butsubject to subsections (4A) and (4C) below”.

(4) After subsection (4) there shall be inserted—

“(4A) References in section 683 to a settlement do not include references to anoutright gift by one spouse to the other of property from which income arisesunless—

(a) the gift does not carry a right to the whole of that income, or

(b) the property given is wholly or substantially a right to income.

(4B) For the purposes of subsection (4A) above a gift is not an outright giftif it is subject to conditions, or if the property given or any derivedproperty is or will or may become, in any circumstances whatsoever, payableto or applicable for the benefit of the donor.

(4C) References in section 683 to a settlement do not include references to theirrevocable allocation of pension rights by one spouse to the other inaccordance with the terms of a relevant statutory scheme (within the meaningof Chapter I of Part XIV).”

(5) This section shall have effect for the year 1990-91 and subsequent yearsof assessment.

109 Settlements where settlor retains interest in settled property. U.K.

(1) After section 674 of the Taxes Act 1988 there shall be inserted—

“674A Other settlements where settlor retains interest in settled property.

(1) Where, during the life of the settlor, income arising under a settlementis, under the settlement and in the events that occur, payable to orapplicable for the benefit of any person other than the settlor, then, unless,under the settlement and in those events, the income—

(a) consists of annual payments made under a partnership agreement to or forthe benefit of a former member, or the widow or dependants of a deceasedformer member, of the partnership, being payments made under a liabilityincurred for full consideration; or

(b) is of a kind excluded from subsection (1) of section 683 by subsection (6)or (9) of that section; or

(c) is income arising under a settlement made by one party to a marriage byway of provision for the other after the dissolution or annulment of themarriage, or while they are separated under an order of a court or under aseparation agreement or in such circumstances that the separation is likelyto be permanent, being income payable to or applicable for the benefit of thatother party; or

(d) is income from property of which the settlor has divested himselfabsolutely by the settlement; or

(e) consists of covenanted payments to charity (as defined by section 660(3));or

(f) is income which, by virtue of any provision of the Income Tax Acts otherthan this section, is to be treated for all the purposes of those Acts asincome of the settlor;

the income shall be treated for all the purposes of the Income Tax Actsas the income of the settlor and not as the income of any other person.

(2) Subsections (6) to (10) of section 683 shall apply in relation tosubsection (1) above as they apply in relation to subsection (1) of thatsection.

(3) Subsections (1), (2), (3) and (for the year 1990-91 and subsequent yearsof assessment) (4A) to (4C) of section 685 shall have effect for the purposesof this section as they have effect for the purposes of section 683, but withthe omission from subsections (1) and (2) of the words “in the case of asettlement made after 6th April 1965”.

(4) For the year 1990-91 and subsequent years of assessment subsection (1)(a)above shall have effect with the insertion after the word “widow” of theword “widower”.

(5) This section applies in relation to income—

(a) which arises on or after 14th March 1989 under a settlement made on orafter that day, or

(b) which arises on or after 6th April 1990 under a settlement made before14th March 1989, so far as it is payable to or applicable for the benefit ofthe settlor’s husband or wife,

except income consisting of annual payments made under an obligationwhich is an existing obligation for the purposes of section 36(3) of theFinance Act 1988.”

(2) In section 125(3) of the Taxes Act 1988, in paragraph (a), for the words “section 683(1)(a) or (c) or (6)” there shall be substituted the words “subsection (1)(a) or (c) of section 674A or 683 or subsection (6) ofsection 683 (including that subsection as it applies in relation to section674A(1))”.

(3) In sections 675(1), (4) and (5) and 676(1)(a) of that Act, for the words “or 674” there shall be substituted the words “674 or 674A”.

(4) In section 677(2)(c) of that Act, after “674” there shall be inserted “674A”.

110 Residence of trustees. U.K.

(1) Where the trustees of a settlement include at least one who is notresident in the United Kingdom as well as at least one who is, then for allthe purposes of the Income Tax Acts—

(a) if the condition in subsection (2) below is satisfied, the trustee ortrustees not resident in the United Kingdom shall be treated as residentthere, and

(b) otherwise, the trustee or trustees resident in the United Kingdom shallbe treated as not resident there (but as resident outside the United Kingdom).

(2) The condition referred to in subsection (1) above is that the settlor or,where there is more than one, any of them is at any relevant time—

(a) resident in the United Kingdom,

(b) ordinarily resident there, or

(c) domiciled there.

(3) For the purposes of subsection (2) above the following are relevant timesin relation to a settlor—

(a) in the case of a settlement arising under a testamentary disposition ofthe settlor or on his intestacy, the time of his death, and

(b) in the case of any other settlement, the time or, where there is more thanone, each of the times when he has provided funds directly or indirectly forthe purposes of the settlement.

(4) For the purposes of this section “settlor”, in relationto a settlement, includes any person who has provided or undertaken to providefunds directly or indirectly for the purposes of the settlement.

(5) In section 824(9) of the Taxes Act 1988 (repayment supplements), for thewords “or a United Kingdom trust (as defined in section 231),” thereshall be substituted the words “the trustees of a settlement”.

(6) Subject to subsections (7) to (9) below, this section shall apply for theyear 1989-90 and subsequent years of assessment.

(7) For the purpose of determining the residence of trustees at any timeduring the year 1989-90, the condition in subsection (2) above shall beregarded as not having been satisfied if none of the trustees of thesettlement is resident in the United Kingdom at any time during the periodbeginning with 1st October 1989 and ending with 5th April 1990.

(8) This section shall not apply for any of the purposes of section 739 of theTaxes Act 1988 in relation to income payable before 15th June 1989, or for thepurposes of subsection (3) of that section in relation to income payable onor after that date if—

(a) the capital sum there referred to is received, or the right to receive itis acquired, before that date, and

(b) that sum is wholly repaid, or the right to it waived, before 1st October1989.

(9) This section shall not apply for any of the purposes of section 740 of theTaxes Act 1988 in relation to benefits received before 15th June 1989; and,in relation to benefits received on or after that date, “relevant income”for those purposes shall include income arising to trustees before 6th April1989 notwithstanding that one or more of them was not resident outside theUnited Kingdom, unless they have been charged to tax in respect of it.

111 Residence of personal representatives. U.K.

(1) Where the personal representatives of a deceased person include at leastone who is not resident in the United Kingdom as well as at least one who is,then for all the purposes of the Income Tax Acts—

(a) if the condition in subsection (2) below is satisfied, the personalrepresentative or representatives not resident in the United Kingdom shall betreated as resident there, and

(b) otherwise, the personal representative or representatives resident in theUnited Kingdom shall be treated as not resident there (but as resident outsidethe United Kingdom).

(2) The condition referred to in subsection (1) above is that the deceasedperson is at his death—

(a) resident in the United Kingdom,

(b) ordinarily resident there, or

(c) domiciled there.

(3) In this section “personal representatives” means—

(a) in relation to England and Wales, the deceased person’s personalrepresentatives as defined by section 55 of the M1 Administration of Estates Act 1925;

(b) in relation to Scotland, his executor or the judicial factor on hisestate;

(c) in relation to Northern Ireland, his personal representatives as definedby section 45(1) of the M2 Administration of EstatesAct (Northern Ireland) 1955; and

(d) in relation to another country or territory, the persons having inrelation to him under its law any functions corresponding to the functions foradministration purposes of personal representatives under the law of Englandand Wales.

(4) In section 824(9) of the Taxes Act 1988 (repayment supplements), for thewords from “or, in” to “section 701)” there shall be substituted thewords “or personal representatives (within the meaning of section 111 of theFinance Act 1989)”.

(5) Subject to subsections (6) to (8) below, this section shall apply for theyear 1989-90 and subsequent years of assessment.

(6) For the purpose of determining the residence of personal representativesat any time during the year 1989-90, the condition in subsection (2) aboveshall be regarded as not having been satisfied if none of the personalrepresentatives is resident in the United Kingdom at any time during theperiod beginning with 1st October 1989 and ending with 5th April 1990.

(7) This section shall not apply for any of the purposes of section 739 of theTaxes Act 1988 in relation to income payable before 15th June 1989, or for thepurposes of subsection (3) of that section in relation to income payable onor after that date if—

(a) the capital sum there referred to is received, or the right to receive itis acquired, before that date, and

(b) that sum is wholly repaid, or the right to it waived, before 1st October1989.

(8) This section shall not apply for any of the purposes of section 740 of theTaxes Act 1988 in relation to benefits received before 15th June 1989 and, inrelation to benefits received on or after that date, “relevant income”for those purposes shall include income arising to personal representativesbefore 6th April 1989 notwithstanding that one or more of them was notresident outside the United Kingdom, unless they have been charged to tax inrespect of it.

Marginal Citations

M1 1925 c.23.

M2 1955 c. 24 (N.I.).