Income Tax (Trading and Other Income) Act 2005

Income treated as income of settlor: [F2relevant] childrenU.K.

629Income paid to [F3relevant] children of settlorU.K.

(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, [F4a relevant] child of the settlor, or

(b)would otherwise be treated (apart from this section) as income of [F4a relevant] 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) [F5or section 630A (exception for protected foreign-source income)].

(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, F6. . .

(c)references to payments include payments in money's worth [F7, and]

[F8(d)“relevant child” means a minor child who is unmarried or not in a civil partnership.]

[F9(8)Subsection (1) is subject to section 28A of FA 2005.]

630Exception for gifts to charitiesU.K.

(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.

[F10630AException for protected foreign-source incomeU.K.

(1)The rule in section 629(1) does not apply to income which arises under a settlement if it is protected foreign-source income for a tax year.

(2)Sections 628A(2) to (12) and 628B (meaning of “protected foreign-source income”) have effect also for this purpose.

(3)Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of this section.]

631Retained and accumulated incomeU.K.

(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, [F11a child of the settlor who is unmarried or not in a civil partnership].

(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—

(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 [F12a relevant] 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 [F13terms of the settlement].

(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—

632Offshore income gainsU.K.

(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 [F15regulation 17 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (charge to tax)], 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 [F16Chapter 5 of Part 2 of those Regulations].