Section 3.
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)
[F2A1(1)In determining the exempt amount available to the trustees of a settlement in relation to a year of assessment—U.K.
(a)a principal settlement and its sub-fund settlements shall be treated, for the purposes of paragraphs 1 and 2 below, as if no sub-fund elections had been made, and
(b)paragraph 3 below shall apply for the purposes of determining the exempt amount available to each member of the class consisting of a principal settlement and its sub-fund settlements.
(2)The reference in sub-paragraph (1) above to a principal settlement and its sub-fund settlements means a principal settlement in respect of which one or more sub-fund elections are treated as having taken effect.]
Textual Amendments
F2Sch. 1 para. A1 inserted (with effect in accordance with Sch. 12 para. 45 of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 44(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 [F3disabled person]—U.K.
[F4(a)if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and
(b)either—
(i)the disabled person is entitled to all of the income (if there is any) arising from any of the property, or
(ii)if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit,]
[F5sections 3(1) to (5C) and 3A] shall apply to the trustees of the settlement as they apply to an individual[F6, but with the modifications specified in this paragraph].
[F7(1A)The trusts on which settled property is held are not to be treated as falling outside sub-paragraph (1) by reason only of—
(a)the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b)the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d)the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e)the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f)the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(1B)For the purposes of this paragraph, the “annual limit” for a tax year is whichever is the lower of the following amounts—
(a)£3,000, and
(b)3% of the amount that is the maximum value of the settled property during the tax year in question.
(1C)The Treasury may by order—
(a)specify circumstances in which sub-paragraph (1A)(a) is, or is not, to apply in relation to a trust, and
(b)amend the definition of “the annual limit” in sub-paragraph (1B).
(1D)An order under sub-paragraph (1C) may—
(a)make different provision for different cases, and
(b)contain transitional and saving provision.
(1E)A statutory instrument containing an order under sub-paragraph (1C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.]
(2)[F8The reference in sub-paragraph (1)] 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 M1Trustee Act 1925 (protective trusts), be construed as a reference to the period during which the income is held on trust for him.
[F9(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 [F10sections 3 and 3A(1)(a)] to the exempt amount for the year [F11(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.
[F12(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—
[F13“disabled person” has the meaning given by Schedule 1A to the Finance Act 2005; and]
[F14“excluded settlement” has the same meaning] as in paragraph 2 below.
F15(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F3Words in Sch. 1 para. 1(1) substituted (with effect in accordance with Sch. 44 para. 13(6)(7) of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 13(2)(a)
F4Sch. 1 para. 1(1)(a)(b) substituted (with effect in accordance with Sch. 44 para. 13(6)(7) of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 13(2)(b)
F5Words 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)
F6Words in Sch. 1 para. 1(1) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(2)(b), 8
F7Sch. 1 para. 1(1A)-(1E) inserted (with effect in accordance with Sch. 44 para. 13(6)(7) of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 13(3)
F8Words in Sch. 1 para. 1(2) substituted (with effect in accordance with Sch. 44 para. 13(6)(7) of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 13(4)
F9Sch. 1 para. 1(2A) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(3), 8
F10Words 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)
F11Words in Sch. 1 para. 1(3) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 4(4)(b), 8
F12Sch. 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)
F13Words in Sch. 1 para. 1(6) substituted (with effect in accordance with Sch. 44 para. 13(6)(7) of the amending Act) by Finance Act 2013 (c. 29), Sch. 44 para. 13(5)
F14Words in Sch. 1 para. 1(6) substituted (with effect in accordance with Sch. 12 para. 28(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 28(1)
F15Sch. 1 para. 1(7) omitted (13.8.2009) by virtue of The Finance Act 2009, Schedule 47 (Consequential Amendments) Order 2009 (S.I. 2009/2035), art. 1, Sch. para. 33
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, [F16sections 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 [F17section 3(1), (5A), (5B) and (5C)] [F18and section 3A(1)(a)] for “the exempt amount for the year" there shall be substituted “ one-half of the exempt amount for the year ”.
[F19(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)”.]
F20(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.
[F21(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 F22... “excluded settlement” means—
(a)any settlement the trustees of which are not for the whole or any part of the year of assessment F23... resident F24... 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 [F25a 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].
F26(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F27(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F16Words 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)
F17Words in Sch. 1 para. 2(2) substituted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 5(3)(a), 8
F18Words 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)
F19Sch. 1 para. 2(2A) inserted (retrospectively) by Finance Act 2003 (c. 14), Sch. 28 paras. 5(4), 8
F20Sch. 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)
F21Sch. 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)
F22Words in Sch. 1 para. 2(7) repealed (with effect in accordance with Sch. 12 para. 28(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 28(2), Sch. 26 Pt. 3(15)
F23Words in Sch. 1 para. 2(7)(a) repealed (6.4.2007) by Finance Act 2006 (c. 25), Sch. 12 paras. 38, 41, Sch. 26 Pt. 3(15)
F24Words in Sch. 1 para. 2(7)(a) omitted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 105
F25Words 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)
F26Sch. 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)
F27Sch. 1 para. 2(9) omitted (13.8.2009) by virtue of The Finance Act 2009, Schedule 47 (Consequential Amendments) Order 2009 (S.I. 2009/2035), art. 1, Sch. para. 33
[F283(1)The exempt amount available in relation to a year of assessment to the trustees of each settlement in the class consisting of a principal settlement and its sub-fund settlements shall be the exempt amount available to the trustees of the principal settlement in relation to the year, determined in accordance with paragraph 1 or 2 above as if no sub-fund elections had been made.U.K.
(2)But if there are two or more non-excluded settlements in the class consisting of a principal settlement and its sub-fund settlements, the exempt amount available to the trustees of each settlement in the class in relation to the year shall be the amount specified in sub-paragraph (1) above divided by the number of non-excluded settlements in the class.
(3)In this paragraph—
“excluded settlement” has the meaning given by paragraph 2(7) above, and
references to a settlement having sub-fund settlements, and similar expressions, are references to a settlement being the principal settlement in respect of which one or more sub-fund elections are treated as having taken effect.]
Textual Amendments
F28Sch. 1 para. 3 inserted (with effect in accordance with Sch. 12 para. 45 of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 44(2)