Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 10 — Heritage maintenance settlements
268

506
Special rules for trustees affected by section 733 of ICTA
(1)
This section applies if—
(a)
interest payable to the trustees of an unauthorised unit trust in respect
of securities (“the affected income”) is attributable to a tax year,
(b)
because of section 733(1) of ICTA (dividend buying etc: persons
5
entitled to exemptions), some part of the affected income is not exempt
from income tax, and
(c)
the trustees are treated as making deemed payments in the tax year.
(2)
For the purposes of section 505(7) the trustees’ modified net income for the tax
year is reduced by the amount of the affected income.
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(3)
In this section “interest” and “securities” are to be read in accordance with
section 731(9) of ICTA.
Chapter 10
Heritage maintenance settlements
Introduction
15
507
Overview of Chapter
(1)
This Chapter makes provision about income arising from heritage
maintenance property comprised in a heritage maintenance settlement.
(2)
In this Chapter—
“heritage body” means a body or charity of a kind mentioned in
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paragraph 3(1)(a)(ii) of Schedule 4 to IHTA 1984 (maintenance funds
for historic buildings etc),
“heritage direction” means a direction under paragraph 1 of that
Schedule,
“heritage maintenance property” means any property in respect of which
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a heritage direction has effect,
“heritage maintenance settlement” means a settlement which comprises
heritage maintenance property, and
“property maintenance purpose” means any of the purposes mentioned
in paragraph 3(1)(a)(i) of that Schedule.
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(3)
If a settlement comprises both heritage maintenance property and other
property, the heritage maintenance property and the other property are treated
as comprised in separate settlements for the purposes of Chapters 2 to 8 of this
Part and the following provisions—
(a)
sections 64 to 66 and sections 75 to 79 (trade loss relief against general
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income),
(b)
sections 83 to 88 (carry-forward trade loss relief), and
(c)
Chapter 5 of Part 5 of ITTOIA 2005.

Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 10 — Heritage maintenance settlements
269

Trustees’ election in respect of income etc
508
Election by trustees
(1)
The trustees of a heritage maintenance settlement may elect for this section to
have effect for a tax year.
(2)
If an election under subsection (1) has effect for a tax year, the rules in
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subsections (3) and (4) apply.
(3)
Income arising in the year from the heritage maintenance property comprised
in the settlement, which would otherwise be treated as income of the settlor
under Chapter 5 of Part 5 of ITTOIA 2005, is not to be so treated.
(4)
Any sum applied out of the heritage maintenance property in the year for a
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property maintenance purpose, which would otherwise be treated for income
tax purposes as the income of a person—
(a)
because of the person’s interest in (or occupation of) the property in
respect of which the sum is applied, or
(b)
under section 633 of ITTOIA 2005 (capital sums paid to settlor by
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trustees of settlement),

is not to be so treated.
(5)
An election under subsection (1) must be made on or before the first
anniversary of the normal self-assessment filing date for the tax year to which
it relates.
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509
Change of circumstances during a tax year
(1)
If a change of circumstances arises during a tax year—
(a)
the part of the year before the change and the part of the year after the
change are to be treated as separate tax years for the purposes of section
508, this section and section 510, and
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(b)
separate elections under section 508(1) may be made for each part.
(2)
A change of circumstances arises if conditions A and B are met.
(3)
Condition A is that for any part of the tax year—
(a)
a heritage direction has effect, and
(b)
income arising from the heritage maintenance property comprised in
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the settlement is treated as income of the settlor under Chapter 5 of Part
5 of ITTOIA 2005.
(4)
Condition B is that for the remaining part of the year one or both of the
following paragraphs applies—
(a)
no heritage direction has effect, and
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(b)
no income arising from property comprised in the settlement is treated
as income of the settlor under Chapter 5 of Part 5 of ITTOIA 2005.
Absence of election and income treated as income of settlor: special rules
510
Sums applied for property maintenance purposes
(1)
This section applies if—
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Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 10 — Heritage maintenance settlements
270

(a)
income arises from the heritage maintenance property comprised in a
heritage maintenance settlement in a tax year in respect of which no
election is made under section 508,
(b)
the income is treated under Chapter 5 of Part 5 of ITTOIA 2005 as
income of the settlor, and
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(c)
a sum in excess of the income is applied for a property maintenance
purpose in the year.
(2)
Any such sum which is so applied in that year, which would otherwise be
treated for income tax purposes as the income of a person—
(a)
because of the person’s interest in (or occupation of) the property in
10
respect of which the sum is applied, or
(b)
under section 633 of ITTOIA 2005 (capital sums paid to settlor by
trustees of settlement),

is not to be so treated.
511
Prevention of double taxation: reimbursement of settlor
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(1)
This section applies to income arising from heritage maintenance property if—
(a)
the income is treated under Chapter 5 of Part 5 of ITTOIA 2005 as
income of the settlor,
(b)
the income is applied in reimbursing the settlor for expenditure
incurred by the settlor for a property maintenance purpose, and
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(c)
the expenditure is deductible in calculating the profits of—
(i)
a trade, or
(ii)
a UK property business,

carried on by the settlor.
(2)
Any such income—
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(a)
is not to be brought into account as a receipt in calculating the profits of
that trade or business, and
(b)
is not to be treated as income of the settlor otherwise than under
Chapter 5 of Part 5 of ITTOIA 2005.
Application of property for non-heritage purposes: charge to tax
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512
Charge to tax on some settlements
(1)
Income tax is charged in respect of a heritage maintenance settlement on any
of the occasions described in cases A to D, subject to sections 516 and 517.
(2)
Case A is where any of the property comprised in the settlement (whether
capital or income) is applied otherwise than—
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(a)
for a property maintenance purpose, or
(b)
as respects income not so applied and not accumulated, for the benefit
of a heritage body.
(3)
Case B is where any of that property, on ceasing to be comprised in the
settlement, devolves otherwise than on a heritage body.
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(4)
Case C is where the heritage direction ceases to have effect in respect of the
settlement.

Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 10 — Heritage maintenance settlements
271

(5)
Case D is where any of the property comprised in the settlement, on ceasing at
any time to be comprised in the settlement—
(a)
devolves on a heritage body, and
(b)
at or before that time an interest under the settlement is or has been
acquired for a consideration in money or money’s worth by that or
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another such body.
(6)
For the purposes of subsection (5)(b) any acquisition from another such body
is to be ignored.
513
Income charged
(1)
Tax is charged under section 512 on the whole of the income—
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(a)
which has arisen in the relevant period from the property comprised in
the settlement, and
(b)
which has not been applied (whether or not it has been first
accumulated) for a property maintenance purpose or for the benefit of
a heritage body.
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(2)
In this section “relevant period” means—
(a)
if tax has become chargeable under section 512 in respect of the
settlement on a previous occasion, the period since the last occasion,
and
(b)
in any other case, the period since the settlement took effect.
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(3)
Tax charged under section 512 is in addition to any tax otherwise chargeable.
(4)
All the provisions of the Income Tax Acts relating to assessments and to the
collection and recovery of income tax (so far as applicable) are to apply to that
charge.
514
Persons liable
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The persons liable for any tax charged under section 512 are the trustees of the
settlement.
515
Rate of tax
Tax is charged under section 512 at the rate found by—
(a)
taking the higher rate for the tax year during which the charge arises,
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and
(b)
reducing it by the trust rate for that year.
516
Transfer of property between settlements
(1)
This section applies if the whole of the property comprised in a settlement
becomes comprised in another settlement because of a tax-free transfer.
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(2)
The occasion of charge under section 512, which would otherwise occur at the
time of transfer, occurs when tax first becomes chargeable under that section in
respect of any settlement comprising the transferred property (“the chargeable
settlement”).
(3)
For the purposes of section 513(1) as it applies to the chargeable settlement, the
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relevant period is adjusted so that it begins—

Income Tax Bill
Part 10 — Special rules about charitable trusts etc
272

(a)
on the occasion when tax last became chargeable under section 512 in
respect of any previous settlement from which the property was
transferred, or
(b)
if there has been no such occasion, when such previous settlement (or
the first of them) took effect.
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(4)
In this section “tax-free transfer” means a transfer of property from one
settlement into another in either of the following cases—
(a)
where paragraph 9(1) of Schedule 4 to IHTA 1984 provides (or, but for
paragraph 9(4) of that Schedule, would provide) an exception from
charge in respect of the property, or
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(b)
where, both immediately before and immediately after the transfer, the
property is heritage maintenance property.
517
Exemption for income treated as income of settlor
(1)
Tax is not chargeable under section 512 in respect of income which is treated
under section 624 or 629 of ITTOIA 2005 as income of the settlor.
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(2)
If such income arises in a tax year, any sums applied in the year—
(a)
for a property maintenance purpose, or
(b)
for the benefit of a heritage body,

are to be treated as paid first out of that income and, so far as there is any
excess, out of income that does not fall within subsection (1).
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Part 10
Special rules about charitable trusts etc
Introduction
518
Overview of Part
(1)
This Part makes provision about some gifts and payments made to charitable
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trusts, including provision imposing charges to income tax and conferring
exemptions from those charges (see sections 520 to 523).
(2)
This Part also provides for some of the income of charitable trusts and others
to be exempt from charges to income tax (see sections 524 to 537).
(3)
In the provisions of this Part containing exemptions, references to total income
30
of a charitable trust are to the total income of the trustees of the charitable trust
concerned.
(4)
See section 538 for provision about making claims for the exemptions under
this Part.
(5)
In the case of a charitable trust which has a non-exempt amount for a tax year
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(see section 540), the exemptions under this Part are subject to restrictions (see
section 539).
(6)
The non-exempt amount for a tax year depends on the charitable trust’s
attributable income and gains for the tax year and its non-charitable
expenditure for the tax year (see sections 540 and 543 to 564).
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