(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.