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CHAPTER 3
Income Tax, Corporation Tax and Capital Gains Tax
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Exemption from tax on certain income and gains.
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17.—(1) Chapter 1 of Part 7 of the Principal Act is amended—
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(a) in section 189 by substituting the following for subsection (2):
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“(2) (a) In this subsection—
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‘relevant gains’ means chargeable gains (including allowable losses) within the meaning of the Capital Gains Tax Acts, which accrue to an individual, to or in respect of whom payments to which this section applies are made, from the disposal of—
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(a) assets acquired with such payments,
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(b) assets acquired with relevant income, or
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(c) assets acquired directly or indirectly with the proceeds from the disposal of assets referred to in paragraphs (a) and (b);
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‘relevant income’ means income which arises to an individual, to or in respect of whom payments to which this section applies are made, from the investment—
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(a) in whole or in part of such payments, or
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(b) of income derived directly or indirectly from such payments,
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being income consisting of dividends or other income which, but for this section, would be chargeable to tax under Schedule C or under Case III, IV (by virtue of section 59 or section 745) or V of Schedule D or under Schedule F.
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(b) Where for any year of assessment the aggregate of the relevant income arising to and the relevant gains accruing to an individual exceeds 50 per cent of the aggregate of the total income arising to and the total chargeable gains (including allowable losses) accruing to the individual for that year of assessment—
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(i) the relevant income shall be exempt from income tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts, but the provisions of those Acts relating to the making of returns shall apply as if this section had not been enacted, and
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(ii) the relevant gains shall be exempt from capital gains tax, but the provisions of the Capital Gains Tax Acts relating to the making of returns shall apply as if this section had not been enacted.
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(c) For the purposes of computing whether a chargeable gain is, in whole or in part, a relevant gain, or whether income is, in whole or in part, relevant income, all such apportionments shall be made as are, in the circumstances, just and reasonable.”,
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(b) in section 189A by substituting the following for subsections (3) and (4):
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“(3) Gains accruing to trustees of a qualifying trust in respect of the trust funds shall not be chargeable gains for the purposes of the Capital Gains Tax Acts.
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(4) (a) In this subsection—
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‘relevant gains’ means chargeable gains (including allowable losses) within the meaning of the Capital Gains Tax Acts, which accrue to an incapacitated individual from the disposal of—
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(a) assets acquired with payments made by the trustees of a qualifying trust,
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(b) assets acquired with relevant income, or
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(c) assets acquired directly or indirectly with the proceeds from the disposal of assets referred to in paragraphs (a) and (b);
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‘relevant income’ means income which—
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(a) consists of payments made by the trustees of a qualifying trust to or in respect of an incapacitated individual, being a subject of the trust, or
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(b) arises to such an incapacitated individual from the investment—
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(i) in whole or in part of payments, made by the trustees of a qualifying trust, or
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(ii) of income derived directly or indirectly from such payments,
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being income consisting of dividends or other income which, but for this section, would be chargeable to tax under Schedule C or under Case III, IV (by virtue of section 59 or section 745) or V of Schedule D or under Schedule F.
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(b) Where for any year of assessment the aggregate of relevant income arising to and the relevant gains accruing to an individual exceeds 50 per cent of the aggregate of the total income arising to and the total chargeable gains (including allowable losses) accruing to the individual in that year of assessment—
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(i) the relevant income shall be exempt from income tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts, but the provisions of those Acts relating to the making of returns shall apply as if this section had not been enacted, and
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(ii) the relevant gains shall be exempt from capital gains tax, but the provisions of the Capital Gains Tax Acts relating to the making of returns shall apply as if this section had not been enacted.
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(c) For the purposes of computing whether a chargeable gain is, in whole or in part, a relevant gain, or whether income is, in whole or in part, relevant income, all such apportionments shall be made as are, in the circumstances, just and reasonable.”,
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(c) in section 191(3) by substituting “the Income Tax Acts and the Capital Gains Tax Acts” for “the Income Tax Acts”, and
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(d) in section 192 by inserting the following after subsection (2):
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“(3) Gains which accrue to a person, to or in respect of whom payments to which this section applies are made, from the disposal of—
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(a) assets acquired with such payments,
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(b) assets acquired with income exempted from income tax under subsection (2), or
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(c) assets acquired directly or indirectly with the proceeds from the disposal of assets referred to in paragraphs (a) and (b),
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shall not be chargeable gains for the purposes of the Capital Gains Tax Acts.
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(4) For the purposes of computing whether by virtue of this section a gain is, in whole or in part, a chargeable gain, or whether income is, in whole or in part, exempt from income tax, all such apportionments shall be made as are, in the circumstances, just and reasonable.”.
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(2) This section applies for the year of assessment 2004 and subsequent years of assessment.
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