Section 3.
SCHEDULE 1U.K. Application of exempt amount [F1and reporting limits] in cases involving settled property
Textual Amendments
F1Words in Sch. 1 heading inserted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 2(1)
1(1)For any year of assessment during the whole or part of which settled property is held on trusts which secure that, during the lifetime of a mentally disabled person or a person in receipt of attendance allowance or of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate—U.K.
(a)not less than half of the property which is applied is applied for the benefit of that person, and
(b)that person is entitled to not less than half of the income arising from the property, or no such income may be applied for the benefit of any other person,
[F2sections 3(1) to (5C) and 3A] shall apply to the trustees of the settlement as they apply to an individual[F3, but with the modifications specified in this paragraph].
(2)The trusts on which settled property is held shall not be treated as falling outside sub-paragraph (1) above by reason only of the powers conferred on the trustees by section 32 of the M1Trustee Act 1925 or section 33 of the M2Trustee Act (Northern Ireland) 1958 (powers of advancement); and the reference in that sub-paragraph to the lifetime of a person shall, where the income from the settled property is held for his benefit on trusts of the kind described in section 33 of the M3Trustee Act 1925 (protective trusts), be construed as a reference to the period during which the income is held on trust for him.
[F4(2A)As they apply by virtue of sub-paragraph (1) above—
(a)section 3(5A) has effect with the omission of paragraph (b), and
(b)section 3(5B) has effect with the omission of the words “or (b)”.]
(3)In relation to a settlement which is one of 2 or more qualifying settlements comprised in a group, this paragraph shall have effect as if for the references in [F5sections 3 and 3A(1)(a)] to the exempt amount for the year [F6(except the one in section 3(2))] there were substituted references to one-tenth of that exempt amount or, if it is more, to such amount as results from dividing the exempt amount for the year by the number of settlements in the group.
(4)For the purposes of sub-paragraph (3) above—
(a)a qualifying settlement is any settlement (other than an excluded settlement) which is made on or after 10th March 1981 and to the trustees of which this paragraph applies for the year of assessment; and
(b)all qualifying settlements in relation to which the same person is the settlor constitute a group.
(5)If, in consequence of 2 or more persons being settlors in relation to it, a settlement is comprised in 2 or more groups comprising different numbers of settlements, sub-paragraph (3) above shall apply to it as if the number by which the exempt amount for the year is to be divided were the number of settlements in the largest group.
[F7(5A)In its application to the trustees of a settlement, section 3A(1) has effect with the substitution for the reference to section 8 of the Management Act of a reference to section 8A of that Act.]
(6)In this paragraph—
“mentally disabled person” means a person who by reason of mental disorder within the meaning of the M4Mental Health Act 1983 is incapable of administering his property or managing his affairs;
“attendance allowance” means an allowance under section 64 of the M5Social Security Contributions and Benefits Act 1992 or section 64 of the M6Social Security Contributions and Benefits (Northern Ireland) Act 1992;
“disability living allowance” means a disability living allowance under section 71 of the M7Social Security Contributions and Benefits Act 1992 or section 71 of the M8Social Security Contributions and Benefits (Northern Ireland) Act 1992; and
“settlor” and “excluded settlement” have the same meanings as in paragraph 2 below.
(7)[F8An officer of the Board] may by notice require any person, being a party to a settlement, to furnish him within such time as he may direct (not being less than 28 days) with such particulars as he thinks necessary for the purposes of this paragraph.
Textual Amendments
F2Words in Sch. 1 para. 1(1) substituted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 4(2)(a)
F3Words in Sch. 1 para. 1(1) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(2)(b), 8
F4Sch. 1 para. 1(2A) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(3), 8
F5Words in Sch. 1 para. 1(3) substituted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 4(4)(a)
F6Words in Sch. 1 para. 1(3) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(4)(b), 8
F7Sch. 1 para. 1(5A) inserted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 2(2)
F8Words in Sch. 1 para. 1(7) substituted (with effect in accordance with Sch. 28 para. 9 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 4(5)
Marginal Citations
2(1)For any year of assessment during the whole or part of which any property is settled property, not being a year of assessment for which paragraph 1(1) above applies, [F9sections 3(1) to (5C) and 3A] shall apply to the trustees of a settlement as they apply to an individual but with the following modifications.U.K.
(2)In [F10section 3(1), (5A), (5B) and (5C)] [F11and section 3A(1)(a)] for “the exempt amount for the year" there shall be substituted “ one-half of the exempt amount for the year ”.
[F12(2A)As they apply by virtue of sub-paragraph (1) above—
(a)section 3(5A) has effect with the omission of paragraph (b), and
(b)section 3(5B) has effect with the omission of the words “or (b)”.]
F13(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)In relation to a settlement which is one of 2 or more qualifying settlements comprised in a group, sub-paragraph (2) above shall have effect as if for the reference to one-half of the exempt amount for the year there were substituted a reference to one-tenth of that exempt amount or, if it is more, to such amount as results from dividing one-half of the exempt amount for the year by the number of settlements in the group.
(5)For the purposes of sub-paragraph (4) above—
(a)a qualifying settlement is any settlement (other than an excluded settlement) which is made after 6th June 1978 and to the trustees of which this paragraph applies for the year of assessment; and
(b)all qualifying settlements in relation to which the same person is the settlor constitute a group.
(6)If, in consequence of 2 or more persons being settlors in relation to it, a settlement is comprised in 2 or more groups comprising different numbers of settlements, sub-paragraph (4) above shall apply to it as if the number by which one-half of the exempt amount for the year is to be divided were the number of settlements in the largest group.
[F14(6A)In its application to the trustees of a settlement, section 3A(1) has effect with the substitution for the reference to section 8 of the Management Act of a reference to section 8A of that Act.]
(7)In this paragraph “settlor” has the meaning given by [F15section 620 of ITTOIA 2005] and includes, in the case of a settlement arising under a will or intestacy, the testator or intestate and “excluded settlement” means—
(a)any settlement the trustees of which are not for the whole or any part of the year of assessment treated under section 69(1) as resident and ordinarily resident in the United Kingdom; and
(b)any settlement the property comprised in which—
(i)is held for charitable purposes only and cannot become applicable for other purposes; or
(ii)is held for the purposes of [F16a registered pension scheme, a superannuation fund to which section 615(3) of the Taxes Act applies or an occupational pension scheme (within the meaning of section 150(5) of the Finance Act 2004) that is not a registered pension scheme].
F17(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9)[F18An officer of the Board] may by notice require any person, being a party to a settlement, to furnish him within such time as he may direct (not being less than 28 days) with such particulars as he thinks necessary for the purposes of this paragraph.
Textual Amendments
F9Words in Sch. 1 para. 2(1) substituted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 5(2)
F10Words in Sch. 1 para. 2(2) substituted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 5(3)(a), 8
F11Words in Sch. 1 para. 2(2) inserted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 5(3)(b)
F12Sch. 1 para. 2(2A) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 5(4), 8
F13Sch. 1 para. 2(3) repealed (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 5(5), Sch. 43 Pt. 3(7)
F14Sch. 1 para. 2(6A) inserted (with application in accordance with Sch. 28 para. 7 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 2(3)
F15Words in Sch. 1 para. 2(7) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 449 (with Sch. 2)
F16Words in Sch. 1 para. 2(7)(b)(ii) substituted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 35 para. 42(2) (with Sch. 36)
F17Sch. 1 para. 2(8) repealed (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 35 para. 42(3), Sch. 42 Pt. 3 (with Sch. 36)
F18Words in Sch. 1 para. 2(9) substituted (with effect in accordance with Sch. 28 para. 9 of the amending Act) by Finance Act 2003 (c. 14), Sch. 28 para. 5(6)