I think it might be desirable to take amendments Nos. 1, 2 and 3 together; they are, in effect, interlinked. They are the amendments of which I gave notice on the Committee Stage I would introduce. I move:
1. In page 3, before Section 2 (2), to insert a new sub-section as follows:—
(2) Where by virtue of an irrevocable instrument property is vested in or held by trustees upon such trusts that, in any year of assessment, the next preceding sub-section of this section would (but for this sub-section) apply to the income of such property, the following provisions shall apply and have effect, that is to say:—
(a) the said next preceding sub-section 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 child (being a child who, at the beginning of such year, is under the age of twenty-one years and is unmarried) of the settlor 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 beginning after the 5th day of April, 1937, 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 child (being a child who, at the beginning of such year, is under the age of twenty-one years and is unmarried) of the settlor, such sum shall be deemed for the purposes of this section 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 child or any other child (being a child who, at the beginning of the year of assessment in which such other sum was paid, was under the age of twenty-one years and unmarried) of the settlor 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.
In this sub-section the word "property" does not include any annual or other periodical payment secured by the covenant of the settlor, or by a charge made by the settlor on the whole or any part of his property or the whole or any part of his future income, or by both such covenant and such charge.
2. In page 4, before Section 2 (9), to insert a new sub-section as follows:—
(9) The following provisions shall apply and have effect in relation to the construction of the expression "irrevocable instrument" in this section, that is to say:—
(a) the said expression shall be construed as including instruments made before, as well as instruments made after, the passing of this Act;
(b) an instrument shall not be an irrevocable instrument for the purposes of this section if the trusts thereof provide for all or any one or more of the following matters, that is to say:—
(i) the payment or application to or for the settlor for his own benefit of any capital or income or accumulations of income in any circumstances whatsoever during the life of a child of the settlor 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 or his own benefit of any capital or income or accumulations of income in any circumstances whatsoever during the life of any such child as aforesaid of the settlor;
(iii) the termination of the trusts of the instrument by the act or on the default of any person;
(iv) the payment by the settlor of a penalty in the event of his failing to comply with the provisions of the instrument;
(c) an instrument shall not be prevented from being an irrevocable instrument for the purposes of this section by reason only that the trusts thereof include any one or more of the following provisions, that is to say:—
(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 child of the settlor 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 child as aforesaid of the settlor 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 child as aforesaid of the settlor, benefit any person other than such child or his or her wife, husband, or issue.
3. In page 4, section 2 (9), to delete all from the word "where" in line 32 to the word "section" in line 37 and substitute the words and brackets "except where it occurs in the expression ‘income tax' and where, in sub-section (1), paragraph (b) of sub-section (2), and sub-sections (6) and (7), it is immediately preceded by the word ‘as' or (in the said sub-section (6) by the word ‘his')."
The effect of these amendments, broadly speaking, will be that income from invested funds which is settled to or for the benefit of a child of the settlor under an irrevocable settlement shall, to the extent that such income has in fact been accumulated for the benefit of the child, be treated as not being the income of the parent.
