Part 9Special rules about settlements and trustees
Chapter 7Discretionary payments
F1Payments constituting employment income of beneficiary
496ADiscretionary payments by trustees: employment income
1
Section 496B applies if—
a
in a tax year the trustees of a settlement make a discretionary employment income payment, and
b
the trustees are UK resident for the tax year.
2
In this section and section 496B, “discretionary employment income payment” means a payment to a person (“the beneficiary”) that—
a
is made in the exercise of a discretion (whether exercisable by the trustees or any other person),
b
is made out of income, and
c
meets conditions A and B.
3
Condition A is that what is paid to the beneficiary—
a
is, only because of the payment, employment income of the beneficiary, but
b
is not exempt income (as defined in section 8 of ITEPA 2003).
4
Condition B is that the payment is made at a time when the settlement is an employee benefit settlement.
5
A settlement is an employee benefit settlement if the trusts on which the settled property is held do not permit the settled property to be applied otherwise than—
a
for the benefit of persons of one or more relevant classes, or
b
for the benefit of such persons and for charitable purposes.
6
“Relevant class” means a class defined by reference to one or more of the following—
a
employment in a particular trade or profession,
b
employment by, or holding office with, a body carrying on a trade, profession or undertaking, or
c
marriage to or civil partnership with, or relationship to, or dependence on, persons of a class mentioned in paragraph (a) or (b).
7
Where the trusts on which the settled property is held do not permit the settled property to be applied otherwise than as described in subsection (5) during a period (however defined), the settlement is an employee benefit settlement during (and only during) that period.
Ss. 496A , 496B and cross-heading inserted (with effect in accordance with art. 3(7) of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2010 (S.I. 2010/157), arts. 1, 3(3) (with art. 3(10))