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639 | Loans to participators in close companies |
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(1) | This section applies if any amount has been included in a person's income |
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under Chapter 6 of Part 4 (release of loan to participator in close company) in |
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respect of any loan or advance. |
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(2) | There is a corresponding reduction in the amount (if any) afterwards falling to |
| 5 |
be so included under section 633 in respect of the loan or advance. |
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640 | Grossing-up of deemed income |
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(1) | The whole or any part of a capital sum which is treated under section 633 as |
| |
income of the settlor for any tax year is treated as income of an amount equal |
| |
to the sum or the part of the sum, grossed up by reference to the rate applicable |
| 10 |
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(2) | The deductible amount is to be set off against the amount of tax charged on any |
| |
amount treated under section 633 as income of the settlor for any year. |
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(3) | In subsection (2) the “deductible amount” is an amount equal to— |
| |
(a) | tax at the rate applicable to trusts for the year on the amount treated |
| 15 |
under section 633 as the settlor’s income, |
| |
(b) | so much of the amount of tax at that rate as is equal to the tax charged, |
| |
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(c) | the amount of tax paid by the trustees on the grossed-up amount of so |
| |
much of the amount of income available up to the end of the year, in |
| 20 |
relation to the capital sum, as is taken into account under section 633 in |
| |
relation to that sum in that year (see subsections (4) to (7) below), |
| |
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(4) | For the purposes of subsection (3)(c)— |
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(a) | any reduction falling to be made under section 635(3)(d) is treated as |
| 25 |
made against income arising under the settlement in an earlier tax year |
| |
before income arising under the settlement in a later tax year, and |
| |
(b) | income arising under the settlement in an earlier tax year is treated as |
| |
taken into account under section 633 before income arising under the |
| |
settlement in a later tax year. |
| 30 |
(5) | For the purposes of subsection (3)(c)— |
| |
(a) | the grossed-up amount of any sum is an amount equal to the sum, |
| |
grossed up by reference to the appropriate rate for each part of the sum, |
| |
| |
(b) | the amount of tax paid by the trustees on that grossed-up amount is the |
| 35 |
difference between the grossed-up amount and the sum in question. |
| |
(6) | For the purposes of subsection (5)— |
| |
(a) | the appropriate rate for any part of a sum is 0% if— |
| |
(i) | the income that falls to be treated in accordance with subsection |
| |
(4) as representing that part of the sum is income from a source |
| 40 |
outside the United Kingdom, and |
| |
(ii) | the trustees were non-UK resident for the relevant tax year, and |
| |
(b) | the appropriate rate for any part of a sum in relation to which |
| |
paragraph (a) does not apply is— |
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(i) | 34%, if the relevant tax year is the year 2003-04 or any earlier tax |
| 45 |
| |
|
| |
|
| |
|
(ii) | 40%, if the relevant tax year is the year 2004-05 or any |
| |
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(7) | In subsection (6) “the relevant tax year”, in relation to any part of a sum, means |
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the tax year in which the income treated in accordance with subsection (4) as |
| |
representing that part of the sum arose under the settlement. |
| 5 |
Capital sums treated as income of settlor: connected bodies |
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641 | Capital sums paid to settlor by body connected with settlement |
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(1) | This section applies if— |
| |
(a) | a capital sum is paid to the settlor in a tax year by any body corporate |
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connected with the settlement in that year, and |
| 10 |
(b) | an associated payment has been, or is, made directly or indirectly to the |
| |
body by the trustees of the settlement. |
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(2) | The capital sum is, in accordance with this section, treated for the purposes of |
| |
section 633 as having been paid to the settlor by the trustees of the settlement. |
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(3) | A capital sum to which subsection (2) applies is treated as having been paid to |
| 15 |
the settlor in the tax year in which it is paid so far as the amount of the sum falls |
| |
within the total of the associated payment or payments made up to the end of |
| |
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(4) | A capital sum to which subsection (2) applies is treated as having been paid to |
| |
the settlor in the following year so far as the amount of the sum— |
| 20 |
(a) | is not treated as paid to the settlor in the year mentioned in subsection |
| |
| |
(b) | falls within the total of the associated payment or payments made up |
| |
to the end of the following year (less what was taken into account under |
| |
subsection (3) in relation to the sum in the previous year). |
| 25 |
(5) | Subsection (4) also applies for each subsequent year. |
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(6) | In its application to a subsequent year— |
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(a) | the references to the following year are to the subsequent year, |
| |
(b) | the reference to the year mentioned in subsection (3) is to that year and |
| |
any other year before the subsequent year, and |
| 30 |
(c) | the reference to what was taken into account under subsection (3) in |
| |
relation to the sum in the previous year is to what was taken into |
| |
account under this section in relation to the sum in the previous years. |
| |
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section 642 (exception for certain loans or repayments of loans), and |
| 35 |
section 643 (interpretation of sections 641 and 642). |
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642 | Exception for certain loans or repayments of loans |
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(1) | Section 641 does not apply to any sum paid to the settlor by way of loan or |
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repayment of a loan if conditions A and B are met. |
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(2) | Condition A is that the whole of the loan is repaid within 12 months of the date |
| 40 |
| |
|
| |
|
| |
|
(3) | Condition B is that the period for which amounts are outstanding in respect of |
| |
relevant loans in any period of 5 years is not more than 12 months. |
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(4) | In subsection (3) “relevant loans” means loans made— |
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(a) | to the settlor by the body corporate connected with the settlement or by |
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any other body corporate so connected, or |
| 5 |
(b) | by the settlor to the body corporate connected with the settlement or to |
| |
any other body corporate so connected. |
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643 | Interpretation of sections 641 and 642 |
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(1) | Any question in section 641 or 642 whether a capital sum has been paid— |
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(a) | to the settlor by a body corporate, or |
| 10 |
(b) | to a body corporate by the trustees, |
| |
| is determined in the same way as any question under section 633 whether a |
| |
capital sum has been paid to the settlor by the trustees. |
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(2) | For the circumstances in which a body corporate is treated for the purposes of |
| |
this Chapter as connected with a settlement, see section 637(8). |
| 15 |
(3) | In section 641 and this section “associated payment”, in relation to any capital |
| |
sum paid to the settlor by a body corporate, means— |
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(a) | any capital sum paid to the body by the trustees of the settlement, and |
| |
(b) | any other sum paid, or asset transferred, to the body by the trustees |
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which is not paid or transferred for full consideration in money or |
| 20 |
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| being any sum paid, or asset transferred, in the 5 years ending or beginning |
| |
with the date on which the capital sum is paid to the settlor. |
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(4) | For the purposes of sections 641 and 642 and this section any capital sum paid |
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by a body corporate, and any associated payment made to a body corporate, at |
| 25 |
a time when it is (within the meaning of section 416 of ICTA) associated with |
| |
another body corporate may be treated as paid by, or made to, the other body |
| |
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Settlements by two or more settlors |
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644 | Application to settlements by two or more settlors |
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(1) | In the case of a settlement where there is more than one settlor, this Chapter has |
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effect in relation to each settlor as if that settlor were the only settlor. |
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(2) | This works as follows. |
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(3) | In this Chapter, in relation to a settlor— |
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(a) | references to the property comprised in a settlement include only |
| 35 |
property originating from the settlor, and |
| |
(b) | references to income arising under the settlement include only income |
| |
originating from the settlor. |
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(4) | For the purposes of sections 629, 631 and 632 only the following are taken into |
| |
account in relation to a child of the settlor— |
| 40 |
(a) | income originating from the settlor, and |
| |
|
| |
|
| |
|
(b) | in a case in which section 631 applies, payments which under that |
| |
section (as adapted by subsection (5) below) are treated as payments of |
| |
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(5) | In applying section 631 to a settlor— |
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(a) | the reference to income arising under the settlement includes only |
| 5 |
income originating from the settlor, and |
| |
(b) | the reference to any payment made in connection with the settlement |
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includes only a payment made out of property originating from the |
| |
settlor or income originating from the settlor. |
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(6) | See section 645 for the meaning of references in this section to property or |
| 10 |
income originating from a settlor. |
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645 | Property or income originating from settlor |
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(1) | References in section 644 to property originating from a settlor are references |
| |
| |
(a) | property which the settlor has provided directly or indirectly for the |
| 15 |
purposes of the settlement, |
| |
(b) | property representing property so provided, and |
| |
(c) | so much of any property which represents both property so provided |
| |
and other property as, on a just and reasonable apportionment, |
| |
represents the property so provided. |
| 20 |
(2) | References in section 644 to income originating from a settlor are references |
| |
| |
(a) | income from property originating from the settlor, and |
| |
(b) | income provided directly or indirectly by the settlor. |
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(3) | In this section references to property or income which a settlor has provided |
| 25 |
| |
(a) | include references to property or income which has been provided |
| |
directly or indirectly by another person under reciprocal arrangements |
| |
| |
(b) | do not include references to property or income which the settlor has |
| 30 |
provided directly or indirectly under reciprocal arrangements with |
| |
| |
(4) | In this section references to property which represents other property include |
| |
references to property which represents accumulated income from the other |
| |
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Other supplementary provisions |
| |
646 | Adjustments between settlor and trustees etc. |
| |
(1) | A settlor is entitled to recover from— |
| |
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(b) | any other person to whom the income is payable in connection with the |
| 40 |
| |
| the amount of any tax paid by the settlor which became chargeable on the |
| |
settlor under section 624 or 629. |
| |
|
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|
| |
|
(2) | For this purpose, the settlor may require the Inland Revenue to provide the |
| |
settlor with a certificate specifying— |
| |
(a) | the amount of income in respect of which the settlor has so paid tax, and |
| |
(b) | the amount of tax so paid. |
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(3) | A certificate provided under subsection (2) is conclusive evidence of the facts |
| 5 |
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(4) | Subsection (5) applies if— |
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(a) | a settlor obtains a repayment of tax in respect of an allowance or relief, |
| |
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(b) | the repayment is in excess of the amount of the repayment to which the |
| 10 |
settlor would have been entitled but for sections 624 to 632. |
| |
(5) | The settlor must pay an amount equal to the excess to— |
| |
| |
(b) | the other person to whom the income is payable by virtue of or as a |
| |
result of the settlement. |
| 15 |
(6) | If there are two or more such persons, the amount must be apportioned among |
| |
them as the case may require. |
| |
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(a) | the amount of a payment under subsection (5), or |
| |
(b) | an apportionment to be made under subsection (6), |
| 20 |
| is to be decided by the General Commissioners whose decision is final. |
| |
(8) | Nothing in sections 624 to 632 is to be read as excluding a charge to tax on the |
| |
trustees as persons by whom any income is received. |
| |
647 | Power to obtain information |
| |
(1) | The Inland Revenue may by notice require any party to a settlement to provide |
| 25 |
them, within such period as they may direct, with such particulars as they |
| |
consider necessary for the purposes of this Chapter. |
| |
(2) | The period concerned must be not less than 28 days. |
| |
648 | Income arising under a settlement |
| |
(1) | References in this Chapter to income arising under a settlement include— |
| 30 |
(a) | any income chargeable to income tax by deduction or otherwise, and |
| |
(b) | any income which would have been so chargeable if it had been |
| |
received in the United Kingdom by a person domiciled, resident and |
| |
ordinarily resident there. |
| |
(2) | But this is subject to the rule in subsection (3) which applies if, in a tax year, the |
| 35 |
| |
(a) | not domiciled in the United Kingdom, |
| |
| |
(c) | not ordinarily UK resident. |
| |
(3) | The rule is that references in this Chapter to income arising under a settlement |
| 40 |
do not include income arising under the settlement in that tax year in respect |
| |
of which the settlor, if the settlor were actually entitled to it, would not be |
| |
|
| |
|
| |
|
chargeable to income tax by deduction or otherwise because of the settlor not |
| |
being domiciled in the United Kingdom, UK resident or ordinarily UK |
| |
| |
(4) | Subsection (5) qualifies the rule in subsection (3) if such income is remitted to |
| |
the United Kingdom in circumstances such that, if the settlor were actually |
| 5 |
entitled to the income when remitted, the settlor would be chargeable to |
| |
income tax because of being UK resident. |
| |
(5) | The income is treated for the purposes of this Chapter as arising under the |
| |
settlement in the year in which it is remitted. |
| |
| 10 |
Beneficiaries’ income from estates in administration |
| |
Charge to tax on estate income |
| |
649 | Charge to tax on estate income |
| |
(1) | Income tax is charged on estate income. |
| |
| 15 |
“estate income” means the income treated under this Chapter as arising |
| |
from an absolute, limited or discretionary interest in the whole or part |
| |
of the residue of an estate, and |
| |
“estate” means the estate of a deceased person (whether a UK estate or a |
| |
| 20 |
(3) | Estate income is treated as income for income tax purposes. |
| |
(4) | If different parts of an estate are subject to different residuary dispositions, |
| |
those parts are treated for the purposes of this Chapter as if they were separate |
| |
| |
650 | Absolute, limited and discretionary interests |
| 25 |
(1) | A person has an absolute interest in the whole or part of the residue of an estate |
| |
for the purposes of this Chapter if— |
| |
(a) | the capital of the residue or that part is properly payable to the person, |
| |
| |
(b) | it would be so payable, if the residue had been ascertained. |
| 30 |
(2) | A person has a limited interest in the whole or part of the residue of an estate |
| |
during any period for the purposes of this Chapter if— |
| |
(a) | the person does not have an absolute interest in it, and |
| |
(b) | the income from it would be properly payable to the person if the |
| |
residue had been ascertained at the beginning of that period. |
| 35 |
(3) | A person has a discretionary interest in the whole or part of the residue of an |
| |
estate for the purposes of this Chapter if— |
| |
(a) | a discretion may be exercised in the person’s favour, and |
| |
(b) | on its exercise in the person’s favour any of the income of the residue |
| |
during the whole or part of the administration period (see section 653) |
| 40 |
|
| |
|
| |
|
would be properly payable to the person if the residue had been |
| |
ascertained at the beginning of that period. |
| |
(4) | For the purposes of this section, an amount is only treated as properly payable |
| |
to a person if it is properly payable to the person, or to another in the person’s |
| |
right, for the person’s benefit, except where subsection (5) applies. |
| 5 |
(5) | The personal representatives of a deceased person (“A”) are to be treated as |
| |
having an absolute or limited interest in the whole or part of the residue of the |
| |
estate of another deceased person (“B”) if— |
| |
(a) | they have a right in their capacity as A’s personal representatives, and |
| |
(b) | were the right vested in them for their own benefit, they would have |
| 10 |
that interest in B’s estate. |
| |
(6) | For the purposes of subsection (4), it does not matter whether the amount is |
| |
payable directly by the personal representatives or through a trustee or other |
| |
| |
651 | Meaning of “UK estate” and “foreign estate” |
| 15 |
| |
“UK estate”, in relation to a tax year, means an estate which meets |
| |
conditions A and B, or condition C, for that year, and |
| |
“foreign estate”, in relation to a tax year, means an estate which is not a |
| |
UK estate in relation to that year. |
| 20 |
(2) | Condition A is that all the income of the estate either— |
| |
(a) | has borne United Kingdom income tax by deduction, or |
| |
(b) | is income in respect of which the personal representatives are directly |
| |
assessable to United Kingdom income tax for the tax year. |
| |
(3) | Condition B is that none of the income of the estate is income for which the |
| 25 |
personal representatives are not liable to United Kingdom income tax for the |
| |
tax year because they are not UK resident or not ordinarily UK resident. |
| |
(4) | For the purposes of conditions A and B sums within section 680(3) or (4) (sums |
| |
treated as bearing tax) are ignored. |
| |
(5) | Condition C is that the aggregate income of the estate for the tax year consists |
| 30 |
only of sums within section 680(3) or (4). |
| |
| |
652 | Estate income: absolute interests in residue |
| |
(1) | Income is treated as arising in a tax year from a person’s absolute interest in the |
| |
whole or part of the residue of an estate if— |
| 35 |
(a) | the person has an assumed income entitlement for the tax year in |
| |
respect of the interest (see sections 665 to 670), and |
| |
(b) | condition A or B is met. |
| |
(2) | Condition A is that a payment is made in respect of the interest in the tax year |
| |
and before the end of the administration period (see section 653). |
| 40 |
(3) | Condition B is that the tax year is the final tax year (see section 653). |
| |
|
| |
|