Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

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

513
Income charged
(1)
Tax is charged under section 512 on the whole of the income—
(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
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accumulated) for a property maintenance purpose or for the benefit of
a heritage body.
(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,
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and
(b)
in any other case, the period since the settlement took effect.
(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
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charge.
514
Persons liable
The persons liable for any tax charged under section 512 are the trustees of the
settlement.
515
Rate of tax
20
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,
and
(b)
reducing it by the trust rate for that year.
516
Transfer of property between settlements
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(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.
(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
30
settlement”).
(3)
For the purposes of section 513(1) as it applies to the chargeable settlement, the
relevant period is adjusted so that it begins—
(a)
on the occasion when tax last became chargeable under section 512 in
respect of any previous settlement from which the property was
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transferred, or
(b)
if there has been no such occasion, when such previous settlement (or
the first of them) took effect.
(4)
In this section “tax-free transfer” means a transfer of property from one
settlement into another in either of the following cases—
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Income Tax Bill
Part 10 — Special rules about charitable trusts etc
272

(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
(b)
where, both immediately before and immediately after the transfer, the
property is heritage maintenance property.
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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.
(2)
If such income arises in a tax year, any sums applied in the year—
(a)
for a property maintenance purpose, or
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(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).
Part 10
Special rules about charitable trusts etc
15
Introduction
518
Overview of Part
(1)
This Part makes provision about some gifts and payments made to charitable
trusts, including provision imposing charges to income tax and conferring
exemptions from those charges (see sections 520 to 523).
20
(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
of a charitable trust are to the total income of the trustees of the charitable trust
concerned.
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(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
(see section 540), the exemptions under this Part are subject to restrictions (see
section 539).
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(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).
519
Meaning of “charitable trust”
In this Part “charitable trust” means a trust established for charitable purposes
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only.

Income Tax Bill
Part 10 — Special rules about charitable trusts etc
273

Gifts and other payments
520
Gifts entitling donor to gift aid relief: income tax treated as paid
(1)
This section applies if a gift is made to a charitable trust by an individual and
the gift is a qualifying donation for the purposes of Chapter 2 of Part 8 (gift aid).
(2)
The charitable trust is treated as receiving, under deduction of income tax at
5
the basic rate for the tax year in which the gift is made, a gift of an amount equal
to the grossed up amount of the gift.
(3)
The grossed up amount of the gift is the amount of the gift grossed up by
reference to the basic rate for the tax year in which the gift is made.
(4)
The income tax treated as deducted is treated as income tax paid by the trustees
10
of the charitable trust.
521
Gifts entitling donor to gift aid relief: income tax liability and exemption
(1)
This section applies if gifts are made to charitable trusts by individuals and the
gifts are qualifying donations for the purposes of Chapter 2 of Part 8 (gift aid).
(2)
Income tax is charged on the gifts under this section.
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(3)
It is charged on the grossed up amount of the gifts arising in the tax year.
(4)
But a gift is not taken into account in calculating total income so far as it is
applied to charitable purposes only.
(5)
The grossed up amount of a gift is the amount of the gift grossed up by
reference to the basic rate for the tax year in which the gift is made.
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(6)
The trustees of the charitable trust are liable for any tax charged under this
section.
522
Gifts of money from companies: income tax liability and exemption
(1)
This section applies if gifts of sums of money are made to charitable trusts by
companies.
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(2)
But this section does not apply to a gift of a sum of money made by a company
that is itself a charity (see section 523).
(3)
Income tax is charged on the gifts under this section.
(4)
It is charged on the full amount of the gifts arising in the tax year.
(5)
But a gift is not taken into account in calculating total income so far as it is
30
applied to charitable purposes only.
(6)
The trustees of the charitable trust are liable for any tax charged under this
section.
523
Payments from other charities: income tax liability and exemption
(1)
This section applies to payments which—
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(a)
are received by charitable trusts from other charities,
(b)
are not made for full consideration in money or money’s worth,

Income Tax Bill
Part 10 — Special rules about charitable trusts etc
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(c)
are not charged to income tax, apart from this section, and
(d)
are not of a description which (on a claim) would be exempt from
income tax under any of the exemptions conferred by this Part.
(2)
This section does not apply to a payment which arises from a source outside
the United Kingdom.
5
(3)
Income tax is charged under this section on the payments.
(4)
It is charged on the full amount of the payments arising in the tax year.
(5)
But a payment is not taken into account in calculating total income so far as it
is applied to charitable purposes only.
(6)
The amount charged under this section in the case of certain payments made
10
by the trustees of a charitable trust in the exercise of a discretion is subject to
section 494 (grossing up of discretionary payments from trusts).
(7)
The trustees of the charitable trust are liable for any tax charged under this
section.
Other exemptions
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524
Exemption for profits etc of charitable trades
(1)
The income mentioned in subsection (2) is not taken into account in calculating
total income if conditions A and B are met.
(2)
The income referred to in subsection (1) is—
(a)
the profits of a trade carried on by a charitable trust,
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(b)
amounts treated as adjustment income of a charitable trust under
section 228 of ITTOIA 2005 in respect of a trade carried on by the trust,
and
(c)
post-cessation receipts arising from a trade carried on by a charitable
trust which are received by the trustees of the trust or to which they are
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entitled.
(3)
Condition A is—
(a)
in the case of the profits of a trade, that the profits are profits of a tax
year in relation to which the trade is a charitable trade,
(b)
in the case of an amount treated as adjustment income, that the amount
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arises in a tax year in relation to which the trade is a charitable trade,
and
(c)
in the case of a post-cessation receipt, that the trade was a charitable
trade in relation to the tax year in which the cessation occurred.

See section 525 as to when a trade is a charitable trade in relation to a tax year.
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(4)
Condition B is that the profits are, or the amount or post-cessation receipt is,
(as the case may be) applied to the purposes of the charitable trust only.
(5)
Sections 232(1) and (2), 235 and 236 of ITTOIA 2005 (when adjustment income
is treated as arising) apply for the purposes of subsection (3) as they apply for
the purposes of Chapter 17 of Part 2 of that Act.
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(6)
In this section “post-cessation receipt” means an amount that is a post-
cessation receipt for the purposes of Chapter 18 of Part 2 of ITTOIA 2005 (post-
cessation receipts) (see sections 246 to 253 of that Act).