Office of Public Sector Information
PART 5 continued CHAPTER 2 continued
(1) In this Chapter references to the sale of property include the exchange of property.
(2) In this section—
references to property include know-how, and
references to the sale of property include the disposal of know-how.
(3) For the purposes of subsection (1), any provision of this Chapter referring to a sale has effect with the necessary modifications, including, in particular, those in subsections (4) and (5).
(4) References to the proceeds of sale and to the price include the consideration for the exchange.
(5) References to capital sums included in the proceeds of sale include references to so much of the consideration for the exchange as would have been a capital sum if it had been a money payment.
(1) Any reference in this Chapter to the sale of property includes the sale of that property together with other property.
(2) In this section—
references to property include know-how, and
references to the sale of property include the disposal of know-how.
(3) For the purposes of subsection (1), all property sold as a result of one bargain is to be treated as sold together even though—
(a) separate prices are, or purport to be, agreed for separate items of that property, or
(b) there are, or purport to be, separate sales of separate items of that property.
(4) If an item of property is sold together with other property, then, for the purposes of the charges under sections 583 and 587—
(a) the net proceeds of the sale of that item are treated as being so much of the net proceeds of the sale of all the property as, on a just and reasonable apportionment, is attributable to that item, and
(b) the expenditure incurred on the provision or purchase of that item is treated as being so much of the consideration given for all the property as, on a just and reasonable apportionment, is attributable to that item.
(1) Any question about the way in which a sum is to be apportioned under section 606 must be determined in accordance with section 563(2) to (6) of CAA 2001 (procedure for determining certain questions affecting two or more persons) if it materially affects two or more taxpayers.
(2) For the purposes of subsection (1) a question materially affects two or more taxpayers if at the time when the question falls to be determined it appears that the determination is material to the liability to tax (for whatever period) of two or more persons.
Section 4 of CAA 2001 (meaning of “capital sums” etc.) applies in relation to this Chapter as it applies in relation to that Act.
(1) Income tax is charged on income from a business involving the exploitation of films or sound recordings where the activities carried on do not amount to a trade.
Such a business is referred to in this Chapter as a “non-trade business”.
(2) Expressions which are used in this Chapter and in Chapter 9 of Part 2 (trade profits: films and sound recordings) have the same meaning in this Chapter as they do in that Chapter.
(1) Tax is charged under this Chapter on the full amount of the income arising in the tax year.
(2) See sections 612 and 613 for provision about the calculation of the amount of income charged under this Chapter.
(3) This section is subject to Part 8 (foreign income: special rules).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.
(1) This section applies for calculating the amount of income charged under this Chapter.
(2) Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.
(3) If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.
(4) Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.
(5) Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.
(6) Any relief given as a result of section 613 is additional to the relief under this section.
The provisions of Chapter 9 of Part 2 apply in relation to non-trade businesses as they apply in relation to trades but as if—
(a) references to a basis period were to a tax year, and
(b) references to anything not constituting trading stock of a trade were omitted.
(1) Income tax is charged on income derived from a relevant telecommunication right that is not used or held for the purposes of a trade, profession or vocation.
(2) “Relevant telecommunication right” has the same meaning as in Chapter 10 of Part 2 (see section 146).
(1) Tax is charged under this Chapter on the full amount of the income arising in the tax year.
(2) See section 617 for provision about the calculation of the amount of certain income charged under this Chapter.
(3) This section is subject to Part 8 (foreign income: special rules).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.
(1) This section applies for calculating the amount of income charged under this Chapter other than annual payments.
(2) The following sections apply as they apply for the purpose of calculating the profits of a trade, profession or vocation—
(a) section 147 (expenditure and receipts in respect of relevant telecommunication rights treated as revenue in nature), and
(b) section 148 (credits or debits arising from revaluation in respect of relevant telecommunication rights).
(3) Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.
(4) If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.
(5) Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.
(6) Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.
(7) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.
Income tax deducted under either of the following sections from an annual payment within this Chapter is treated as income tax paid by the recipient—
section 348(1)(b) of ICTA (under which income tax may be deducted from some payments by the payer), and
section 349(1)(a) of ICTA (under which income tax must be deducted from some payments by the payer).
(1) Income tax is charged on—
(a) income which is treated as income of a settlor as a result of section 624 (income where settlor retains an interest),
(b) income which is treated as income of a settlor as a result of section 629 (income paid to unmarried minor children of settlor),
(c) capital sums which are treated as income of a settlor as a result of section 633 (capital sums paid to settlor by trustees of settlement), and
(d) capital sums which are treated as income of a settlor as a result of section 641 (capital sums paid to settlor by body connected with settlement).
(2) The charge on the settlor under subsection (1)(a) or (b) above operates on distribution income by treating the income as if it were income to which section 1A of ICTA (application of lower rate to income from savings and distributions) applies as a result of subsection (2)(b) of that section (income chargeable under Chapter 3, 5 or 6 of Part 4: dividends etc. from UK resident companies etc. and release of loan to participator in close company).
(3) In subsection (2) “distribution income” means income which represents income received by the trustees of the settlement, or any other person to whom it is payable, which is—
(a) income chargeable under Chapter 3 of Part 4 (dividends etc. from UK resident companies etc.),
(b) income chargeable under Chapter 4 of Part 4 (dividends from non-UK resident companies),
(c) income chargeable under Chapter 5 of Part 4 (stock dividends from UK resident companies),
(d) income chargeable under Chapter 6 of Part 4 (release of loan to participator in close company), or
(e) a relevant foreign distribution chargeable under Chapter 8 of this Part (income not otherwise charged).
(4) In subsection (3) “relevant foreign distribution” means any distribution of a non-UK resident company which—
(a) is not chargeable under Chapter 4 of Part 4, but
(b) would be chargeable under Chapter 3 of that Part if the company were UK resident.
(1) In this Chapter—
“settlement” includes any disposition, trust, covenant, agreement, arrangement or transfer of assets (except that it does not include a charitable loan arrangement), and
“settlor”, in relation to a settlement, means any person by whom the settlement was made.
(2) A person is treated for the purposes of this Chapter as having made a settlement if the person has made or entered into the settlement directly or indirectly.
(3) A person is, in particular, treated as having made a settlement if the person—
(a) has provided funds directly or indirectly for the purpose of the settlement,
(b) has undertaken to provide funds directly or indirectly for the purpose of the settlement, or
(c) has made a reciprocal arrangement with another person for the other person to make or enter into the settlement.
(4) This Chapter applies to settlements wherever made.
(5) In this section—
“charitable loan arrangement” means any arrangement so far as it consists of a loan of money made by an individual to a charity either—
for no consideration, or
for a consideration which consists only of interest, and
“charity” includes each of the bodies mentioned in section 507 of ICTA (the National Heritage Memorial Fund, the British Museum etc.).
Tax is charged under this Chapter on all income and capital sums to which section 619(1) applies.
The person liable for any tax charged under this Chapter is the settlor.
(1) This section applies for the purpose of calculating the liability to tax of a settlor charged under this Chapter.
(2) The same deductions and reliefs are allowed as would have been allowed if the amount treated as the settlor’s income as a result of this Chapter had been received by the settlor as income.
(1) Income which arises under a settlement is treated for income tax purposes as the income of the settlor and of the settlor alone if it arises—
(a) during the life of the settlor, and
(b) from property in which the settlor has an interest.
(2) For more on a settlor having an interest in property, see section 625.
(3) For exceptions to the rule in subsection (1), see—
section 626 (exception for outright gifts between spouses),
section 627 (exceptions for certain types of income), and
section 628 (exception for gifts to charities).
(1) A settlor is treated for the purposes of section 624 as having an interest in property if there are any circumstances in which the property or any related property—
(a) is payable to the settlor or the settlor’s spouse,
(b) is applicable for the benefit of the settlor or the settlor’s spouse, or
(c) will, or may, become so payable or applicable.
(2) Subsection (1) does not apply if the only circumstances are one or more of—
(a) the bankruptcy of a person who is, or may become, beneficially entitled to the property or any related property,
(b) the assignment of the property or any related property by such a person,
(c) the charging of (or, in Scotland, the granting of a right in security over) the property or any related property by such a person,
(d) in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage, and
(e) the death of a child of the settlor who had become beneficially entitled to the property or any related property at not more than 25 years old.
(3) Subsection (1) does not apply if—
(a) there are no circumstances in which the property or any related property can become payable or applicable as mentioned in that subsection during the life of a person other than—
(i) the bankruptcy of the person, or
(ii) the assignment or charging of the person’s interest in the property or any related property, and
(b) the person is alive and under 25 years old.
(4) In subsection (1) “the settlor’s spouse” does not include—
(a) a spouse from whom the settlor is separated under an order of a court or a separation agreement,
(b) a spouse from whom the settlor is separated where the separation is likely to be permanent,
(c) the widow or widower of the settlor, or
(d) a person to whom the settlor is not married but may later marry.
(5) In this section “related property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income from it.
(1) The rule in section 624(1) does not apply in respect of an outright gift—
(a) of property from which income arises,
(b) made by one spouse to the other, and
(c) meeting conditions A and B.
(2) Condition A is that the gift carries a right to the whole of the income.
(3) Condition B is that the property is not wholly or substantially a right to income.
(4) A gift is not an outright gift for the purposes of this section if—
(a) it is subject to conditions, or
(b) there are any circumstances in which the property, or any related property—
(i) is payable to the giver,
(ii) is applicable for the benefit of the giver, or
(iii) will, or may become, so payable or applicable.
(5) “Related property” has the same meaning in this section as in section 625.
(1) The rule in section 624(1) does not apply to income which—
(a) arises under a settlement made by one party to a marriage by way of provision for the other—
(i) after the dissolution or annulment of the marriage, or
(ii) while they are separated under an order of a court, or under a separation agreement, or where the separation is likely to be permanent, and
(b) is payable to, or applicable for the benefit of, the other party.
(2) The rule in section 624(1) does not apply to income which consists of—
(a) annual payments made by an individual for commercial reasons in connection with the individual’s trade, profession or vocation,
(b) qualifying donations for the purposes of section 25 of FA 1990 (donations to charity by individuals), or
(c) a benefit under a relevant pension scheme.
(3) In subsection (2)(c) “relevant pension scheme” means—
(a) a registered pension scheme,
(b) a pension scheme established by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees (or an annuity acquired using funds held for the purposes of such a pension scheme), or
(c) any pension arrangements of any description prescribed by regulations made under section 11(2)(h) of the Welfare Reform and Pensions Act 1999 (c. 30) or Article 12(2)(h) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11)).
(1) The rule in section 624(1) does not apply to any qualifying income which arises under a UK trust if—
(a) it is given by the trustees to a charity in the tax year in which it arises, or
(b) it is income to which a charity is entitled under the terms of the trust.
(2) In this section “qualifying income” means—
(a) income which is to be accumulated,
(b) income which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it), or
(c) income which (before being distributed) is income of any person other than the trustees.
(3) Subsection (4) applies if in any tax year qualifying income which arises under a UK trust from different sources exceeds the total of—
(a) the amount of that income which falls within subsection (1), and
(b) the amount of that income which falls within section 630(1) (comparable exception for income of unmarried minor children of settlor).
(4) The amount of the qualifying income from different sources which falls within subsection (1) above is rateably apportioned between those sources.
(5) This does not affect the operation of any requirement that the whole, or any specified part, of the income from a particular source is to be given to a charity.
(6) In this section—
“charity” includes each of the bodies mentioned in section 507 of ICTA (the National Heritage Memorial Fund, the British Museum etc.),
“resident”, in relation to the trustees of a trust, is to be read in accordance with section 110 of FA 1989 (residence of trustees), and
“UK trust” means a trust whose trustees are UK resident.
(1) Income which arises under a settlement is treated for income tax purposes as the income of the settlor and of the settlor alone for a tax year if, in that year and during the life of the settlor, it—
(a) is paid to, or for the benefit of, an unmarried minor child of the settlor, or
(b) would otherwise be treated (apart from this section) as income of an unmarried minor child of the settlor.
(2) Subsection (1) does not apply to income which is treated as income of the settlor under section 624.
(3) Subsection (1) does not apply in relation to a child’s relevant settlement income in any tax year if, in that year, the total amount of that income does not exceed £100.
(4) In subsection (3) a child’s “relevant settlement income” means income—
(a) which is paid to or for the benefit of, or otherwise treated as income of, the child, and
(b) which (apart from subsection (3)) would be treated as income of the settlor under subsection (1).
(5) Subsection (1) does not apply so far as provided by section 630 (exception for gifts to charities).
(6) See—
section 631 for the treatment for the purposes of subsection (1) of retained or accumulated income, and
section 632 for the treatment for the purposes of this section and section 631 of certain deemed income connected to offshore income gains.
(7) In this section and sections 631 and 632—
(a) “child” includes a stepchild,
(b) “minor” means a person under the age of 18 years, and “minor child” is to be read accordingly, and
(c) references to payments include payments in money’s worth.
(1) The rule in section 629(1) does not apply to any qualifying income which arises under a UK trust if—
(a) it is given by the trustees to a charity in the tax year in which it arises, or
(b) it is income to which a charity is entitled under the terms of the trust.
(2) Subsection (3) applies if in any tax year qualifying income which arises under a UK trust from different sources exceeds the total of—
(a) the amount of that income which falls within subsection (1), and
(b) the amount of that income which falls within section 628(1) (comparable exception for income where settlor retains an interest).
(3) The amount of the qualifying income from different sources which falls within subsection (1) above is rateably apportioned between those sources.
(4) This does not affect the operation of any requirement that the whole, or any specified part, of the income from a particular source is to be given to a charity.
(5) In this section “charity”, “qualifying income” and “UK trust” have the same meaning as in section 628.
(1) This section applies if—
(a) the trustees of a settlement retain or accumulate income arising under the settlement, and
(b) a payment is subsequently made in connection with the settlement to, or for the benefit of, an unmarried child of the settlor.
(2) The payment is treated for the purposes of section 629(1) as a payment of income, but only so far as there is retained or accumulated income available.
(3) For the purposes of subsection (1) a payment is made in connection with a settlement if it is made by virtue of or in consequence of—
(a) the settlement, or
(b) any enactment relating to the settlement.
(4) For the purposes of subsection (2) retained or accumulated income is available at any time when—
A > B
where—
A is the total amount of the income which has arisen under the settlement since it was made, and
B is the total amount of disregarded income.
(5) In subsection (4) “disregarded income” means any income arising under the settlement since it was made which has been—
(a) treated as income of the settlor,
(b) paid (whether as income or capital) to, or for the benefit of, a beneficiary other than an unmarried minor child of the settlor,
(c) otherwise treated as the income of such a beneficiary,
(d) treated as income of an unmarried minor child of the settlor, and subject to income tax, in any of the tax years 1995-96, 1996-97 and 1997-98, or
(e) applied in meeting expenses of the trustees which—
(i) were properly chargeable to income, or
(ii) would have been so chargeable but for any express provisions of the trust.
(6) For the purposes of subsection (5)(d), income arising under the settlement that is treated as income of the child is subject to income tax so far as it does not exceed the taxable amount.
(7) In subsection (6) “the taxable amount”, in relation to a tax year, means the amount by which—
TI > TAD
where—
TI is the child’s total income for income tax purposes, and
TAD is the total amount of allowances and deductions that may be set against the total income.
(1) This section applies if—
(a) an offshore income gain accrues in respect of a disposal by a trustee of assets held by the trustee for a minor, and
(b) the minor would be absolutely entitled as against the trustee but for being a minor.
(2) The income which, under section 761(1) of ICTA (charge to income tax of offshore income gain), is treated as arising by reference to that gain is treated for the purposes of sections 629 and 631 as paid to the minor.
(3) In this section “offshore income gain” has the same meaning as in Chapter 5 of Part 17 of ICTA (charge to tax of offshore income gains).
(1) Any capital sum paid directly or indirectly in any tax year by the trustees of a settlement to the settlor is treated for income tax purposes as follows.
Income Tax (Trading and Other Income) Act 2005