section applies with the substitution for subsection (4) of—
In subsection (3) a child’s “relevant settlement income” means
income which (apart from that subsection) would be treated as
income of the settlor under subsection (1) and which—
so far as consisting of such income as is mentioned in
paragraph 133 of Schedule 2, is income paid to or for the
benefit of the child, and
so far as consisting of other income, is income paid to or for
the benefit of, or otherwise treated as income of, the child.”
Any apportionment required for the purposes of sub-paragraph (1)(b) is to
be made on a just and reasonable basis.
Amounts treated as income of settlor: capital sums paid to settlor by trustees of settlement
In relation to any case which involves any previous tax years before 1995-96,
subsection (3) of section 635 applies in accordance with sub-paragraphs (2)
So far as that subsection applies in relation to those previous tax years, for
paragraph (c) substitute—
so much of any income arising under the settlement in any
previous year which has not been distributed as is shown to
consist of income which has been treated as income of the
settlor by virtue of section 671, 672, 674, 674A or 683 of ICTA,
any income arising under the settlement in any previous year
which has been treated as the income of the settlor by virtue
any sums paid by virtue or in consequence of the settlement,
to the extent that they are not allowable, by virtue of section
676 of ICTA, as deductions in computing the settlor's income
any sums paid by virtue or in consequence of the settlement
in any previous year which have been treated as the income
of the settlor by virtue of section 664(2)(b) of ICTA,
any sums included in the income arising under the settlement
as amounts which have been or could have been apportioned
to a beneficiary as mentioned in section 681(1)(b) of ICTA,
For paragraph (d) of that subsection substitute—
an amount equal to the sum of tax at the rate applicable to
the total amount of income arising under the
settlement in that year and any previous year which
has not been distributed, less
the total amount of the income and sums referred to
in paragraph (c) (in relation to tax years 1995-96
onwards) and paragraphs (c), (d), (e), (f) and (g) as
substituted by paragraph 134 of Schedule 2 (in
relation to tax years before 1995-96).”
In relation to any sum paid before 6th April 1995, subsection (3) of section
634 applies with the substitution of “in one of the events specified in section
673(3) of ICTA” for paragraphs (a) and (b).
Subsection (5)(a) of section 634 does not apply if the direction or assignment
was given or made before 6th April 1981.
Amounts treated as income of settlor: capital sums paid to settlor by body connected with
In relation to any capital sum paid to the settlor before tax year 1995-96,
section 641 applies with the insertion after subsection (6) of—
Where a capital sum is paid to the settlor in a tax year by a body
corporate connected with the settlement in that year it is to be
assumed until the contrary is shown that an associated payment of
an amount not less than that of the capital sum has been made to that
body by the trustees of the settlement.”
Beneficiaries’ income from estates in administration: basic amounts
Sub-paragraph (2) applies if any previous tax year to which regard is to be
had for the purposes of section 665 (assumed income entitlement) is a tax
year before 2005-06 (an “old tax year”).
In relation to the old tax year, the reference in step 4 in subsection (1) of that
section to basic amounts relating to the person’s absolute interest in respect
of which the person is liable to income tax for that year is to be taken as a
reference to the amount deemed to have been paid to that person as income
for that year in respect of that interest by virtue of section 696 of ICTA.
Sub-paragraph (4) applies if one or more of the absolute interests referred to
in section 671(1) (successive absolute interests) was held in one or more old
The reference in section 671(2)(b) to the basic amounts relating to any
previous such interest includes a reference to the amounts deemed to have
been paid to the previous holder as income for the old tax years in respect of
that interest by virtue of section 696 of ICTA.
Sub-paragraph (6) applies if any of the limited interests referred to in section
672(1)(d) (successive interests: assumed income entitlement of holder of
absolute interest following limited interest) was held in one or more old tax
The reference in section 672(4) to the basic amounts relating to any previous
such interest includes a reference to the amounts deemed to have been paid
to the holders of any such interests as income for the old tax years in respect
of those interests by virtue of section 695 of ICTA.
In the case of a UK estate, references in this paragraph to the amounts
deemed to have been paid are references to the amounts that would be
deemed to have been paid apart from sections 695(4)(a) and 696(4) of ICTA
Beneficiaries’ income from estates in administration: income treated as bearing income tax
A sum treated as part of the aggregate income of an estate by virtue of
section 547(1)(c) of ICTA (gains from life insurance contracts etc.) as the
result of an event that occurred before 6th April 2004 is treated for the
purposes mentioned in section 680 of this Act as bearing income tax at the
Ulster savings certificates
In the case of certificates acquired before 27th July 1981, section 693(5)
applies with the substitution for “the Department of Finance and Personnel”
Any scheme which was certified as mentioned in section 326(2)(c), (3)(b) or
(4)(b) of ICTA before 1st December 1994 is treated as a certified SAYE
savings arrangement for the purposes of Chapter 4 of Part 6 of this Act.
A European authorised institution arrangement is not an institutional
arrangement for the purposes of Chapter 4 of Part 6 if the arrangement was
established before 2nd May 1995.
the Treasury specification rules, nor
the Treasury authorisation rules,
apply to any scheme which was certified as mentioned in section 326(3)(b),
(4)(b) or (5)(b) of ICTA before 31st July 1995.
In sub-paragraph (1)—
“the Treasury specification rules” means sections 705(1)(b) and (2) to (4)
“the Treasury authorisation rules” means sections 707 and 708 of this
Venture capital trust dividends: shares acquired before the tax year 2004-05
In the case of dividends paid in respect of shares acquired before the tax year
2004-05, Chapter 5 of Part 6 (venture capital trust dividends) applies as if the
references in section 709(4) (annual acquisition limit) to £200,000 were
Purchased life annuity payments: old determinations concerning capital elements
Any determination in relation to an annuity as to the amount of the capital
element that was made under Chapter 5 of Part 14 of ICTA before 6th April
2005 and any decision on appeal that was so made against such a
determination have effect on and after that date, so far as is required for the
purposes of this Act, as a determination or decision as to the extent to which
annuity payments made under the annuity are within section 717(1)
(exemption for part of purchased life annuity payments) in accordance with
section 719 (extent of exemption under that section).
And a notification of such a determination or appeal or of an alteration of
such a determination has effect accordingly.
Purchased life annuity payments: carry forward of excess capital elements
This paragraph applies if, in the case of an annuity to which section 656(2) of
ICTA applied immediately before 6th April 2005, the total of the amounts
determined in accordance with that section to be capital elements in respect
of the annuity payments that arose before that date (and accordingly not to
be annual payments for income tax purposes) exceeded the total of those
The amount of the excess is to be added to the fixed sum mentioned in
section 719(4) for the first payment that arises after 5th April 2005.
Purchased life annuity payments: penalty for false statements
Section 723(7) (liability to penalty for false statements and representations to
obtain exemption under Chapter 7 of Part 6) does not apply (and section
658(5) of ICTA continues to apply) to any statement or representation made
before 6th April 2005, despite the fact that it relates to the tax year 2005-06 or
Section 723(7) (liability to penalty for false statements and representations to
obtain exemption under Chapter 7 of Part 6) applies (and section 658(5) of
ICTA does not apply) to any statement or representation made on or after
6th April 2005, despite the fact that it relates to a tax year before the tax year
Certain annual payments by individuals
Sections 727 (exemption for certain annual payments by individuals) and
730 (exemption for foreign maintenance payments) do not apply to—
any payment falling due before 16th March 1988, or
any payment falling due on or after that date but before 6th April
2000 to which this paragraph applies.
Paragraph (b) of sub-paragraph (1) applies to a payment made in pursuance
of an existing obligation (within the meaning of section 36(3) of FA 1988)
unless it meets any of conditions A to E.
Condition A is that the payment is treated as income of the payer under
Chapter 5 of Part 5 as a result of section 624 or 629.
Condition B is that the payment fell due from a husband to a wife or a wife
to a husband at a time after 5th April 1990 when they were living together.
Condition C is that an election is duly made under section 39 of FA 1988 in
Condition D is that the payment fell due on or after 6th April 1994 and is
in pursuance of an obligation within section 36(4)(a) to (c) of FA 1988
that is an obligation under—
an order made by a court,
a written or oral agreement, or
a deed executed for giving effect to an agreement, and
for the benefit, maintenance or education of a person (whether or not
the person to whom the payment is made) who attained the age of 21
on or before the day on which the payment fell due but after 5th
the payment is made in pursuance of an obligation within section
36(4)(a) of FA 1988 (existing obligations under certain court orders),
the payment is made for the benefit, maintenance or education of a
person (whether or not the person to whom the payment is made)
who attained the age of 21 before 6th April 1994, and
section 38 of FA 1988 (treatment of certain maintenance payments
under existing obligations) does not apply to the payment.
Annual payments for non-taxable consideration
Section 729 (exemption for payments for non-taxable consideration) applies
in the case of an annuity granted before 30th March 1977—
with the substitution in subsection (1) of “condition B, C or D” for
with the substitution of the following subsections for subsection
Condition D is that the payment is a payment under an
annuity charged on an interest in settled property and
granted by an individual to a company—
whose business then consisted wholly or mainly in
the acquisition of interests in settled property, or
which was then carrying on life assurance business in
In the application of subsections (4) and (5) to Scotland, the
references in those subsections to settled property are to be
read as references to property held in trust.”
Periodical payments of personal injury damages etc.
Subject to sub-paragraphs (4) and (5), sections 731, 733 and 734 apply with
the modifications in sub-paragraphs (2) and (3).
In section 731 (periodical payments of personal injury damages)—
for subsection (2) substitute—
This subsection applies to periodical payments made in
a court order making a final or interim award of
damages in respect of personal injury,
an agreement settling a claim or action for such
an agreement for a payment on account of the
damages that may be awarded in such an action.”,
in subsection (3)(b) for the words from “agreement” to the end of the
paragraph substitute “or agreement as is mentioned in subsection (2)
or a subsequent agreement”, and
In sections 733(a) and 734(1)(a)(i) for “agreement, undertaking” substitute
The modifications in sub-paragraphs (2) and (3) do not apply if an order has
been made under section 110(1) of the Courts Act 2003 (c. 39)
(commencement) making provision for section 100(2) and (3) of that Act to
come into force on a day earlier than 6th April 2005.
The power in section 110(1) of that Act includes power to make provision in
accordance with which the modifications in sub-paragraphs (2) and (3) do
not apply on or after a day appointed by the order that is later than 5th April
This paragraph applies if—
a disposal event is treated as occurring in relation to an individual
under paragraph 17(2) of Schedule 36 to FA 2003 (foster-care relief:
the individual is a relevant individual for the tax year 2004-05,
the individual has a chargeable period which corresponds to the
income period for the individual’s foster-care receipts in that tax
year (and therefore the chargeable period is a relevant chargeable
the next chargeable period of the individual is not a relevant
Subsection (4) of section 825 applies (despite anything in subsection (1) of
that section to the contrary) as if the reference to the first subsequent
chargeable period which is not a relevant chargeable period were to the
period mentioned in sub-paragraph (1)(d).
Foreign income: special rules
Relevant foreign income charged on remittance basis: income arising before the tax year 2005-
A claim may be made under section 831 (claim for relevant foreign income
to be charged on the remittance basis) for relevant foreign income to be
charged in accordance with section 832 for the tax year 2005-06 or any later
tax year, despite that income having arisen in a tax year before the tax year
2005-06; and sections 832 to 834 apply accordingly.
Relevant foreign income charged on remittance basis: delayed remittances
The fact that income arose in a tax year before 2005-06 does not prevent—
a claim being made in respect of it under section 835(1) (relief for
section 835(5) applying as respects the tax year in which the income
But sub-paragraphs (3) to (5) apply if—
such a claim is made in respect of any income (“the delayed
the delayed income arose in the tax year 1996-97 or an earlier tax
the basis year for that year is a different year, and
that basis year is not the basis year for two tax years.
Section 835(5) does not apply and the delayed income is to be treated as if it
were income received in the United Kingdom in that basis year.
In this paragraph “basis year”, in relation to tax chargeable for any tax year
in respect of any income, means the year by reference to which the amount
of the income chargeable finally falls to be calculated.
This paragraph does not affect which year is to be taken as the basis year for
calculating tax chargeable for any tax year.
Relief for backdated pensions charged on arising basis
The fact that the earlier year referred to in subsections (1)(b) and (2) of
section 840 (relief for backdated pensions charged on the arising basis) is a
tax year before 2005-06 does not prevent—
a claim being made under that section, or
such adjustments (by way of repayment of tax, assessment or
otherwise) as are necessary to give effect to that section being made
as respects such a tax year.
Unremittable income that arose before the tax year 2005-06
A claim may be made under section 842 (claim for relief on unremittable
income) for the tax year 2005-06 or any later tax year, despite the income
having arisen in a tax year before 2005-06.
Without prejudice to paragraph 4 of this Schedule, section 843 (withdrawal
of relief) applies for the tax year 2005-06 or any later tax year, despite the
income having arisen originally in a tax year before the tax year 2005-06
(whether the claim in respect of it was made under section 584 of ICTA
(relief for unremittable overseas income) or section 842 of this Act).
Sub-paragraph (4) applies if an appeal against an assessment for the tax year
2005-06 or a later tax year involves a question as to the operation of section
584 of ICTA or Chapter 4 of Part 8 of this Act as respects income that arose
in a tax year before 2005-06.
Section 31D of TMA 1970 (appeals: election to bring appeal before Special
Commissioners) applies with the omission of—
paragraph (b) of subsection (2),
the word “or” preceding that paragraph, and
subsections (3) to (7) (by virtue of which such an election may be
disregarded if the General Commissioners so direct).