Income Tax Act 2007

Chapter 1 U.K. Introduction

462 Overview of Part U.K.

(1) This Part sets out special rules about settlements and trustees.

(2) Chapter 2 contains general provision about settlements and trustees, for example, definitions of expressions relating to settlements.

(3) Chapter 3 provides for income tax to be charged at the dividend trust rate or at the trust rate on certain amounts included in the net income of the trustees of a settlement.

(4) Chapter 4 provides—

(a) for expenses of the trustees of a settlement to be set against the trustees' trust rate income (see section 463(2)), and

(b) consequentially, for the amount of the trust rate income to be reduced.

(5) Chapter 5 qualifies section 479 (which is in Chapter 3) in the case of the trustees of [F1 a Schedule 2] share incentive plan.

(6) Chapter 6 provides that the first slice of the trust rate income of the trustees of a settlement is not to be charged at the dividend trust rate or at the trust rate.

(7) Chapter 7 deals with the treatment of payments made by the trustees of a settlement in the exercise of a discretion.

This affects the way the trustees and the recipients of such payments are taxed.

(8) Chapter 8 deals with the treatment of expenses of the trustees of a settlement where income arising to the trustees is, before being distributed, the income of a person other than the trustees themselves.

This affects the way that other person is taxed on that income.

F2 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) Chapter 10 deals with heritage maintenance settlements.

(11) See also Part 10 for special rules about charitable trusts [F3 and section 838A for special provision about asbestos compensation settlements] .

(12) See also Chapter 4 of Part 2 of FA 2005 for provision about trusts with vulnerable beneficiaries.

Textual Amendments

F1 Words in s. 462(5) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 69, 89 (with Sch. 8 paras. 90-96)

F2 S. 462(9) omitted (6.4.2014) by virtue of The Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819), regs. 1(3), 37(5) (with reg. 32)

F3 Words in s. 462(11) inserted (16.12.2010 with effect in accordance with Sch. 14 para. 3(4) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 14 para. 3(2)

463 Interpretation of Part U.K.

(1) In this Part—

• “other income” means income which is neither dividend income nor savings income, and

• “the trustees of a settlement” does not include personal representatives.

(2) References in this Part to the trust rate income for a tax year of the trustees of a settlement are references to the trustees' net income for the tax year so far as it includes amounts on which income tax is charged at the dividend trust rate or at the trust rate (ignoring Chapters 4 and 6).

464 Scottish trusts U.K.

(1) This section applies if—

(a) income arises to trustees under a trust having effect under the law of Scotland,

(b) the trustees are UK resident, and

(c) a beneficiary under the trust (“B”) would have an equitable right in possession to the income if the trust had effect under the law of England and Wales.

(2) B is treated for income tax purposes as having an equitable right in possession to the income (even though B has no such right under the law of Scotland).