Part V U.K. Transfer of business assets

Chapter II U.K. Gifts of business assets

[F1 169D Exceptions to sections 169B and 169C U.K.

(1) Sections 169B and 169C shall not apply in relation to a disposal to the trustees of a settlement in a year of assessment if the trustees have elected that section [F2 508 of ITA 2007 (trustees’ election in respect of income arising from heritage maintenance property)] shall have effect in the case of—

(a) the settlement, or

(b) any part of the settlement,

in relation to that year of assessment.

(2) Sections 169B and 169C shall not apply in relation to a disposal to the trustees of a settlement if the following conditions are satisfied.

(3) The first condition is that, immediately after the making of the disposal,—

(a) the settled property is held on trusts which secure that, during the lifetime of a disabled person, not less than half of the property which is applied is applied for the benefit of that person, and

(b) the settled property is held on trusts—

(i) which secure that, during his lifetime, he is entitled to not less than half of the income arising from the property,

(ii) which secure that, during his lifetime, no such income may be applied for the benefit of any other person, or

(iii) under which, during his lifetime, no interest in possession in the settled property subsists.

(4) The second condition is that if, immediately after the making of the disposal, one or more settlors is an interested settlor, each such settlor must at that time be a disabled beneficiary.

(5) For the purposes of subsection (4) above a settlor is an “interested settlor” in relation to a settlement if—

(a) he has an interest in the settlement, or

(b) an arrangement subsists under which such an interest will or may be acquired by him;

and for this purpose, the references to an individual’s spouse [F3 or civil partner] in section 169F(2) and (3) [F4 and to an individual's dependent child in section 169F(2A)] shall be disregarded.

(6) In subsection (4) above “disabled beneficiary”, in relation to a settlement, means a disabled person who—

(a) is a beneficiary under the settlement, or

(b) would be such a beneficiary if he had the interest in the settlement by virtue of which subsection (5)(b) above applies in relation to him.

(7) In this section “disabled person” means—

(a) a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of administering his property or managing his affairs; or

(b) 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.

(8) In this section “attendance allowance” means an allowance under—

(a) section 64 of the Social Security Contributions and Benefits Act 1992, or

(b) section 64 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(9) In this section “disability living allowance” means a disability living allowance under—

(a) section 71 of the Social Security Contributions and Benefits Act 1992, or

(b) section 71 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(10) The trusts on which settled property is held shall not be treated as falling outside subsection (3) above by reason only of the powers conferred on the trustees by—

(a) section 32 of the Trustee Act 1925, or

(b) section 33 of the Trustee Act (Northern Ireland) 1958 (powers of advancement).

(11) The references in subsection (3) above 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 Trustee Act 1925 (protective trusts), be construed as references to the period during which the income is held on trust for him.]

Textual Amendments

F1 Ss. 169B-169G inserted (with effect in accordance with Sch. 21 para. 10(4) of the amending Act) by Finance Act 2004 (c. 12), Sch. 21 para. 4

F2 Words in s. 169D(1) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 322 (with Sch. 2)

F3 Words in s. 169D(5) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 113

F4 Words in s. 169D(5) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 19(1)(2)