Finance Act, 1995

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Amendment of provisions relating to settlements on minors.

12.—(1) Chapter II of Part XXVIII of the Income Tax Act, 1967 , is hereby amended—

(a) in section 443—

(i) by the substitution of the following subsection for subsection (1):

“(1) Where, by virtue or in consequence of a settlement and during the life of the settlor, any income is, in any year of assessment, paid to or for the benefit of a person, such income shall, if at the time of payment such person is a minor, be treated for the purposes of this Act as income of the settlor for that year and not as income of any other person:

Provided that—

(a) for the purposes of this Chapter, but subject to section 444, income which, by virtue or in consequence of a settlement to which this Chapter applies, is so dealt with that it, or assets representing it, will or may become payable or applicable to or for the benefit of a person in the future (whether on the fulfilment of a condition, or on the happening of a contingency, or as the result of the exercise of a power or discretion conferred on any person, or otherwise) shall be deemed to be paid to or for the benefit of that person, and

(b) any income dealt with as aforesaid which is not required by the settlement to be allocated, at the time when it is so dealt with, to any particular person or persons shall be deemed to be paid in equal shares to or for the benefit of each of the persons to or for the benefit of whom or any of whom the income or assets representing it will or may become payable or applicable.”,

and

(ii) by the addition of the following subsection after subsection (4):

“(5) This Chapter shall not apply to any income which, by virtue or in consequence of a settlement and during the life of the settlor, is in any year of assessment paid to or for the benefit of a minor, not being a child of the settlor, if such minor is permanently incapacitated by reason of mental or physical infirmity.”,

(b) in section 444, by the substitution of the following paragraphs for paragraphs (a) and (b):

“(a) section 443 (1) shall not apply in respect of any part of such income which is, in the said year of assessment, accumulated for the benefit of a person nor in respect of income arising in the said year of assessment from accumulations of the income hereinbefore mentioned;

(b) whenever in any year of assessment any sum whatsoever is paid under the trusts of such irrevocable instrument out of such property or the accumulations of the income thereof or out of the income of such property or the income of the said accumulations to or for the benefit of a person who at the time of payment, is a minor, such sum shall be deemed for the purposes of this Chapter to be paid as income, but subject to the limitation that this paragraph shall not apply to so much of such sum as is equal to the amount by which the aggregate of such sum and all other (if any) sums paid after the 5th day of April, 1937, under the trusts of such irrevocable instrument to or for the benefit of the said person or any other person (being a person who, at the beginning of the year of assessment in which such other sum was paid, was a minor) exceeds the aggregate amount of the income arising after the 5th day of April, 1937, from such property together with the income arising after the said date from the said accumulations.”,

(c) in section 445—

(i) by the substitution, in paragraph (a), of the following subparagraphs for subparagraphs (i) and (ii):

“(i) the payment or application to or for the settlor for the settlor's own benefit of any capital or income or accumulations of income in any circumstances whatsoever during the life of a person to or for the benefit of whom any income or accumulations of income is or are or may be payable or applicable under the trusts of the instrument;

(ii) the payment or application during the life of the settlor to or for the wife or husband of the settlor for her own or his own benefit of any capital or income or accumulations of income in any circumstances whatsoever during the life of any such person as aforesaid;”,

and

(ii) by the substitution, in paragraph (b), of the following subparagraphs for subparagraphs (i) to (iii):

“(i) a provision whereunder any capital or income or accumulations of income will or may become payable to or applicable for the benefit of the settlor, or the wife or the husband of the settlor, on the bankruptcy of a person to or for the benefit of whom any income or accumulations of income is or are or may be payable or applicable under the trusts of the instrument;

(ii) a provision whereunder any capital or income or accumulations of income will or may become payable to or applicable for the benefit of the settlor, or the wife or the husband of the settlor, in the event of any such person as aforesaid making an assignment of or charge on such capital or income or accumulations of income;

(iii) a provision for the termination of the trusts of the instrument in such circumstances or manner that such termination would not, during the life of any such person as aforesaid, benefit any person other than such person or his or her wife, husband, or issue;”,

and

(d) in section 447, by the insertion of the following definition before the definition of “settlement”:

“‘minor’ means a person who is under the age of eighteen years and who is not or has not been married;”.

(2) Subsection (1) shall apply in respect of every settlement (within the meaning of Chapter II of Part XXVIII of the Income Tax Act, 1967 ) made on or after the 8th day of February, 1995, and it shall also apply, as on and from the 6th day of April, 1995, in respect of every settlement (within the same meaning) which was made before the 8th day of February, 1995.

(3) Section 440 , and subsection (4) of section 443 (as amended by this section), of the Income Tax Act, 1967 , shall cease to apply and have effect as on and from the 6th day of April, 1995.