Part 9Special rules about settlements and trustees

Chapter 7Discretionary payments

F1Payments constituting employment income of beneficiary

Annotations:
Amendments (Textual)
F1

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))

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.