Finance (No. 2) Bill - continued        House of Commons
SCHEDULE 23, TRANSITIONAL PROVISION IN CONNECTION WITH SECTION 130 - continued

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      (4) This paragraph does not apply to any chargeable gain or loss accruing on any disposal if, for the year of assessment in which that disposal is made, section 86 of the 1992 Act would, on the relevant assumption, have been prevented by virtue of paragraph 3, 4 of 5 of Schedule 5 to that Act from applying in the case of the chargeable settlor in relation to the transferor settlement.
 
      (5) The relevant assumption for the purposes of sub-paragraph (4) above is that section 86 of the 1992 Act would have applied in the case of the chargeable settlor apart from paragraphs 3 to 5 of Schedule 5 to that Act.
 
      (6) This paragraph does not apply to any chargeable gain or loss accruing on any disposal if the chargeable settlor stands in such a relationship to the foreign institution that if-
 
 
    (a) that institution were a settlement,
 
    (b) property of the institution were property comprised in the settlement, and
 
    (c) income arising to the institution were income arising under the settlement,
  paragraph 4 or 5 of Schedule 5 to the 1992 Act would (assuming that nothing else did) prevent section 86 of that Act from applying in the case of the chargeable settlor in relation to that settlement for the year of assessment in which that disposal is made.
 
      (7) In this paragraph "relevant property", in relation to any disposal made by the trustees of the transferor settlement, means any property which-
 
 
    (a) is or represents property or income originating from the chargeable settlor;
 
    (b) has been comprised in, or has arisen to, the transferor settlement at any time after the time of that disposal; and
 
    (c) is property or income of the transferee institution acquired or otherwise deriving, directly or indirectly, from the trustees of the transferor settlement.
      (8) For the purposes of this paragraph the transferor settlement has, in relation to a disposal by its trustees, a relevant connection with the transferee institution if-
 
 
    (a) immediately before the time of the disposal, the beneficiaries of the transferor settlement are or include persons who are defined persons in relation to that settlement at that time;
 
    (b) the transferor settlement is not a protected settlement at that time in relation to the chargeable settlor; and
 
    (c) the transferee institution is-
 
      (i) one in which a relevant defined person is a participator at the beginning of 6th April 1999;
 
      (ii) one which is under the control of a company in which, or two or more companies in any of which, a relevant defined person is a participator at that time; or
 
      (iii) one whose relevant property or relevant income includes property or income in which a relevant defined person has an interest at that time.
      (9) For the purposes of this paragraph a person is a relevant defined person at any time if he-
 
 
    (a) has attained the age of eighteen; and
 
    (b) has been, by reference to the chargeable settlor, a defined person in relation to the transferor settlement.
      (10) For the purposes of this paragraph a person has an interest in any property or income of a foreign institution at any time if-
 
 
    (a) there are any circumstances whatever in which that property or income is or will or may become applicable for his benefit or payable to him;
 
    (b) there are any circumstances whatever in which income which is or may arise from that property or income is or will or may become applicable for his benefit or payable to him;
 
    (c) he enjoys a benefit directly or indirectly from that property or income or from any income arising from that property or income.
      (11) For the purposes of this paragraph a person is a defined person in relation to a settlement at a time if he would fall at that time to be treated, by reference to the chargeable settlor, as a defined person in relation to that settlement for the purposes of paragraph 2 of Schedule 5 to the 1992 Act.
 
      (12) In this paragraph-
 
 
    "foreign institution" means any company or other institution resident outside the United Kingdom;
 
    "participator" has the meaning given (for the purposes of Part XI of the Taxes Act 1988 (close companies)) by section 417(1) of that Act;
 
    "relevant income", in relation to a foreign institution, means any income of that institution which, if that institution were a settlement, would be treated for the purposes of Schedule 5 to the 1992 Act as originating from the chargeable settlor;
 
    "relevant property", in relation to a foreign institution, means any property of that institution which, if that institution were a settlement, would be treated for the purposes of Schedule 5 to the 1992 Act as originating from the chargeable settlor.
      (13) Sub-paragraph (3)(d) above is without prejudice to any charge imposed otherwise than by virtue of this paragraph.
 
 
Rule to prevent a double charge
     4. - (1) This paragraph applies, in the case of a person who is a settlor in relation to any settlement ("the relevant settlement"), to so much (if any) of the amount falling in his case within section 86(1)(e) of the 1992 Act for the year 1999-00 as (apart from this paragraph) would be treated by virtue only of the preceding provisions of this Schedule, as gains accruing to him in that year.
 
      (2) Where there is an excess of the relevant chargeable amounts for the transitional period over the amount of the section 87 pool on 17th March 1998, only so much (if any) of the amount to which this paragraph applies as exceeds that excess shall fall in accordance with this Schedule to be, or (as the case may be) to be included in, the amount treated as accruing to the settlor in the year 1999-00.
 
      (3) In sub-paragraph (2) above, the reference to the relevant chargeable amounts for the transitional period is (subject to sub-paragraph (5) below) a reference to the aggregate of the amounts on which beneficiaries of the relevant settlement are charged to tax under section 87 or 89(2) of the 1992 Act for any year of assessment ending after 17th March 1998 and before 6th April 1999 in respect of capital payments received by them.
 
      (4) In sub-paragraph (1) above, the reference to the section 87 pool on 17th March 1998 is (subject to sub-paragraph (5) below) a reference to the amount (if any) which, in accordance with subsection (2) of section 87 of the 1992 Act, would have fallen in relation to the relevant settlement to be carried forward from the year 1997-98 to be included in the amount of the trust gains for the year 1998-99 if-
 
 
    (a) the year 1997-98 had ended with 16th March 1998; and
 
    (b) the year 1998-99 had begun with 17th March 1998.
      (5) Where the property comprised in the relevant settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment or of any amount that would have been carried forward in accordance with section 87(2) of the 1992 Act as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account for the purposes of sub-paragraphs (3) and (4) above.
 
      (6) Where any reduction falls to be made by virtue of sub-paragraph (2) above in the amount to be attributed in accordance with this Schedule to any settlor for the year 1999-00, the reduction to be treated as made for that year in accordance with section 87(3) of the 1992 Act in the case of the settlement in question shall not be made until-
 
 
    (a) the reduction (if any) falling to be made by virtue of that sub-paragraph has been made in the case of every settlor to whom any amount is so attributed; and
 
    (b) the amount or aggregate amount which (after any reduction or reductions in accordance with sub-paragraph (2) above) is for that year to be attributed to settlors of the settlement in accordance with this Schedule has been applied in reducing the amount which (after any reductions in accordance with section 86A(6)(b) of that Act) is carried forward to that year in accordance with section 87(2) of that Act.
      (7) Where an amount or aggregate amount has been applied, in accordance with sub-paragraph (6)(b) above, in reducing the amount which in the case of any settlement is carried forward to the year 1999-00 in accordance with section 87(2) of the 1992 Act, that amount (or, as the case may be, so much of it as does not exceed the amount which it is applied in reducing) shall be deducted from the amount used for that year in the case of that settlement for making the reduction under section 87(3) of that Act.
 
      (8) In this paragraph "the transitional period" means the period beginning with 17th March 1998 and ending with 5th April 1999.
 
 
Interpretation of Schedule
     5. - (1) In this Schedule-
 
 
    "the 1992 Act" means the Taxation of Chargeable Gains Act 1992;
 
    "qualifying settlement", in relation to any year of assessment, means a settlement that is a qualifying settlement in that year for the purposes of section 86 of and Schedule 5 to the 1992 Act;
 
    "settlor", in relation to a settlement, has the same meaning as in Schedule 5 to the 1992 Act.
      (2) In this Schedule "protected settlement", in relation to any time and any settlor, means (subject to sub-paragraph (3) below)-
 
 
    (a) a settlement that is a protected settlement at that time, within the meaning given by sub-paragraph (10A) of paragraph 9 of Schedule 5 to the 1992 Act, or
 
    (b) a settlement that would be such a settlement at that time if that settlor were the only settlor of the settlement.
      (3) For the purposes of construing, in accordance with sub-paragraph (2) above, the references in paragraphs 2(8) and 3(8) above to a protected settlement, paragraph 9(10A)(a) of Schedule 5 to the 1992 Act shall be deemed to have effect with the omission of the words "or who were under that age at the end of the immediately preceding year of assessment".
 
      (4) References in this Schedule to the condition as to residence are references to the condition set out in section 86(2) of the 1992 Act.
 
      (5) For the purposes of this Schedule a person is a beneficiary of a settlement if-
 
 
    (a) there are any circumstances whatever in which property which is or may become comprised in the settlement is or will or may become applicable for his benefit or payable to him;
 
    (b) there are any circumstances whatever in which income which arises or may arise from property comprised in the settlement is or will or may become applicable for his benefit or payable to him;
 
    (c) he enjoys a benefit directly or indirectly from any property comprised in the settlement or any income arising from any such property;
  and references in this paragraph to the property comprised in the settlement in respect of which a person is a beneficiary shall be construed accordingly.
 
      (6) For the purposes of this paragraph, paragraph 8 of Schedule 5 to the 1992 Act shall apply for determining if property is property originating from any person as it applies for the purposes of that Schedule.
 
      (7) Expressions used in this Schedule and in the 1992 Act have the same meanings in this Schedule as in that Act.
 
 
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