Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 42 — Trusts with vulnerable beneficiary
490

(3B)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(3C)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (3)(a) is, or is not,
to apply in relation to a trust, and
5
(b)
amend the definition of “the annual limit” in subsection (3A).
(3D)
An order under subsection (3C) may—
(a)
make different provision for different cases, and
(b)
contain transitional and saving provision.
(3E)
A statutory instrument containing an order under subsection (3C)
10
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
      (4)
In subsection (4), for the words following “into settlement,” substitute “was
a disabled person”.
      (5)
For subsections (5) and (6) substitute—
15
“(4A)
In this section “disabled person” has the meaning given by Schedule
1A to the Finance Act 2005.”
7     (1)
Section 89A (self-settlement by person with condition expected to lead to
disability) is amended as follows.
      (2)
In subsection (1)(b), for the words following “A becoming” substitute “a
20
person falling within any paragraph of the definition of “disabled person” in
paragraph 1 of Schedule 1A to the Finance Act 2005”.
      (3)
In subsection (2), after “settled property” insert “or income arising from it”.
      (4)
For subsections (5) and (6) substitute—
“(5)
For the purposes of subsection (1)(b), assume—
25
(a)
that A will meet any conditions as to residence or presence
that are required to establish entitlement to the allowance,
payment or increased pension in question,
(b)
that there will be no provision made by regulations under
any of the following—
30
(i)
sections 67(1) and (2), 72(8), 104(3) and 113(2) of
SSCBA 1992,
(ii)
sections 67(1) and (2), 72(8), 104(3) and 113(2) of
SSCB(NI)A 1992, and
(iii)
sections 85 and 86 of WRA 2012 and the
35
corresponding provision having effect in Northern
Ireland, and
(c)
that A will not be prevented from receiving the allowance,
payment or increased pension in question by any of the
following—
40
(i)
section 113(1) of SSCBA 1992,
(ii)
section 113(1) of SSCB(NI)A 1992,
(iii)
section 87 of WRA 2012 and the corresponding
provision having effect in Northern Ireland,

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Schedule 42 — Trusts with vulnerable beneficiary
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(iv)
articles 61 and 64 of the Personal Injuries (Civilians)
Scheme 1983 (S.I. 1983/686),
(v)
article 53 of the Naval, Military and Air Forces etc.
(Disablement and Death) Service Pensions Order
2006 (S.I. 2006/606), and
5
(vi)
article 42 of the Armed Forces and Reserve Forces
(Compensation Scheme) Order 2011 (S.I. 2011/517).”
      (5)
Before subsection (7) insert—
“(6A)
The trusts on which the settled property is held are not to be treated
as falling outside subsection (2) by reason only of—
10
(a)
the trustees’ having powers that enable them to apply
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
15
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
20
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
25
(f)
the trustees’ having powers to the like effect as the powers
mentioned in any of paragraphs (b) to (e).
(6B)
For the purposes of this section, the “annual limit” is whichever is the
lower of the following amounts—
(a)
£3,000, and
30
(b)
3% of the amount that is the maximum value of the settled
property during the period in question.
(6C)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(6D)
The Treasury may by order made by statutory instrument—
35
(a)
specify circumstances in which subsection (6A)(a) is, or is
not, to apply in relation to a trust, and
(b)
amend the definition of “the annual limit” in subsection (6B).
(6E)
An order under subsection (6D) may—
(a)
make different provision for different cases, and
40
(b)
contain transitional and saving provision.
(6F)
A statutory instrument containing an order under subsection (6D)
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
      (6)
For subsection (8) substitute—
45
“(8)
In this section—

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Schedule 42 — Trusts with vulnerable beneficiary
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“SSCBA 1992” means the Social Security Contributions and
Benefits Act 1992,
“SSCB(NI)A 1992” means the Social Security Contributions and
Benefits (Northern Ireland) Act 1992, and
“WRA 2012” means the Welfare Reform Act 2012.”
5
      (7)
In the heading, for the words following “person” substitute “expected to fall
within the definition of “disabled person””.
8     (1)
Section 89B (meaning of “disabled person’s interest”) is amended as follows.
      (2)
For subsection (2) substitute—
“(2)
In subsection (1)(c) “disabled person” has the meaning given by
10
Schedule 1A to the Finance Act 2005.”
      (3)
After that subsection insert—
“(2A)
Where the income arising from the settled property is held on trusts
of the kind described in section 33 of the Trustee Act 1925 (protective
trusts), subsection (1)(d)(v) has effect as if for “A’s life” there were
15
substituted “the period during which the income from the property
is held on trust for A”.”
9     (1)
The amendments made by paragraphs 2 to 8 have effect in relation to
property transferred into settlement on or after 8 April 2013.
      (2)
Nothing in paragraphs 6 to 8 is to be read as preventing property transferred
20
into a relevant settlement on or after 8 April 2013 from being property to
which section 89 or 89A of IHTA 1984 applies.
10    (1)
In section 89B (meaning of “disabled person’s interest”), in subsection (1)(c)
after “2006” insert “if the trusts on which the settled property is held secure
that, if any of the settled property is applied during the disabled person’s life
25
for the benefit of a beneficiary, it is applied for the benefit of the disabled
person”.
      (2)
After that section insert—
“89C
Disabled person’s interest: powers of advancement etc
(1)
The trusts on which settled property is held are not to be treated for
30
the purposes of section 89B(1)(c) or (d) (meaning of “disabled
person’s interest”: cases involving an interest in possession) as
failing to secure that the settled property is applied for the benefit of
a beneficiary by reason only of—
(a)
the trustees’ having powers that enable them to apply
35
otherwise than for the benefit of the beneficiary 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),
40
(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
45
provision for Northern Ireland),

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Schedule 42 — Trusts with vulnerable beneficiary
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(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).
5
(2)
For the purposes of this section, the “annual limit” 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 period in question.
10
(3)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(4)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (1)(a) is, or is not,
to apply in relation to a trust, and
15
(b)
amend the definition of “the annual limit” in subsection (2).
(5)
An order under subsection (4) may—
(a)
make different provision for different cases, and
(b)
contain transitional and saving provision.
(6)
A statutory instrument containing an order under subsection (4) may
20
not be made unless a draft of the instrument has been laid before,
and approved by a resolution of, the House of Commons.”
      (3)
The amendments made by this paragraph have effect in relation to property
transferred into settlement on or after the day on which this Act is passed.
      (4)
Nothing in this paragraph is to be read as preventing property transferred
25
into a settlement to which sub-paragraph (5) applies from being settled
property for the purposes of section 89B(1)(c) or (d) of IHTA 1984.
      (5)
This sub-paragraph applies to a settlement—
(a)
created before the day on which this Act is passed the trusts of which
have not been altered on or after that day, or
30
(b)
arising on or after the day on which this Act is passed under the will
of a testator, if—
(i)
the will was executed before the day on which this Act is
passed and its provisions, so far as relating to the settlement,
have not been altered on or after that day, or
35
(ii)
the will was executed or confirmed on or after the day on
which this Act is passed and its provisions, so far as relating
to the settlement, are in the same terms as those contained in
a will executed by the same testator before that day.
Taxation of Chargeable Gains Act 1992
40
11
TCGA 1992 is amended as follows.
12    (1)
Section 169D (exceptions to rules on gifts to settlor-interested settlements
etc) is amended as follows.

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Schedule 42 — Trusts with vulnerable beneficiary
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      (2)
For subsection (3) substitute—
“(3)
The first condition is that, immediately after the making of the
disposal, the settled property is held on trusts which secure that,
during the lifetime of a disabled person—
(a)
if any of the property is applied for the benefit of a
5
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
10
beneficiary, it is applied for the disabled person’s
benefit.”
      (3)
After subsection (4) insert—
“(4A)
Where the income arising from the settled property is held on trusts
of the kind described in section 33 of the Trustee Act 1925 (protective
15
trusts), subsection (3) has effect as if the reference to the lifetime of a
disabled person were a reference to the period during which the
income is held on trust for the disabled person.
(4B)
The trusts on which the settled property is held are not to be treated
as falling outside subsection (3) by reason only of—
20
(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
25
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
30
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
35
(f)
the trustees’ having powers to the like effect as the powers
mentioned in any of paragraphs (b) to (e).
(4C)
For the purposes of this section, the “annual limit” for a tax year is
whichever is the lower of the following amounts—
(a)
£3,000, and
40
(b)
3% of the amount that is the maximum value of the settled
property during the tax year in question.
(4D)
The Treasury may by order—
(a)
specify circumstances in which subsection (4B)(a) is, or is not,
to apply in relation to a trust, and
45
(b)
amend the definition of “the annual limit” in subsection (4C).
(4E)
An order under subsection (4D) may—
(a)
make different provision for different cases, and

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Schedule 42 — Trusts with vulnerable beneficiary
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(b)
contain transitional and saving provision.
(4F)
A statutory instrument containing an order under subsection (4D)
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
      (4)
For subsections (7) to (9) substitute—
5
“(7)
In this section “disabled person” has the meaning given by Schedule
1A to the Finance Act 2005.”
      (5)
Omit subsection (10).
      (6)
The amendments made by this paragraph have effect in relation to disposals
to the trustees of a settlement on or after 8 April 2013.
10
      (7)
But if the settlement is a relevant settlement, nothing in this paragraph is to
be read as preventing section 169D(2) of TCGA 1992 from applying in
relation to the disposal.
13    (1)
Paragraph 1 of Schedule 1 (application of exempt amount and reporting
limits in cases involving settled property) is amended as follows.
15
      (2)
In sub-paragraph (1)—
(a)
for “mentally disabled person or 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” substitute
“disabled person”, and
20
(b)
for paragraphs (a) and (b) substitute—
“(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—
25
(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
30
disabled person’s benefit,”.
      (3)
After that sub-paragraph insert—
   “(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
35
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),
40
(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
45
provision for Northern Ireland),

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Schedule 42 — Trusts with vulnerable beneficiary
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(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).
5
     (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.
10
     (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).
15
     (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
20
laid before, and approved by a resolution of, the House of
Commons.”
      (4)
In sub-paragraph (2), for the words from the beginning to “that sub-
paragraph” substitute “The reference in sub-paragraph (1)”.
      (5)
In sub-paragraph (6), for the definitions of “mentally disabled person”,
25
“attendance allowance” and “disability living allowance” substitute—
““disabled person” has the meaning given by Schedule 1A to
the Finance Act 2005; and”.
      (6)
The amendments made by this paragraph have effect in relation to the tax
year 2013-14 and subsequent tax years.
30
      (7)
But if the settlement is a relevant settlement, nothing in this paragraph is to
be read as preventing sections 3(1) to (5C) and 3A of TCGA 1992 from
applying in relation to the settlement as provided by paragraph 1(1) of
Schedule 1 to that Act.
Finance Act 2005
35
14
FA 2005 is amended as follows.
15    (1)
Section 34 (disabled persons) is amended as follows.
      (2)
In subsection (2), for paragraph (b) substitute—
“(b)
either—
(i)
that the disabled person is entitled to all the income (if
40
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 benefit of the disabled
person.”