INCOME TAX ACT 1967 (ACT 53) PART III - ASCERTAINMENT OF CHARGEABLE INCOME Chapter 8-Special cases
Section 65. Settlements.
(1) Subject to this section, where-
(a) by virtue or in consequence (whether directly or indirectly) of any settlement and during the life of the settlor, any income from a source or assets representing income from a source will or may become payable or applicable in the basis period for a year of assessment to or for the benefit of any relative of the settlor; and
(b) at the commencement of that year of assessment that relative is unmarried and has not attained the age of twenty-one years,
the income or assets shall be deemed to be income of the settlor and not income of any other person.
(2) Subject to this section, if and so long as the terms of any settlement are such that-
(a) any person has or may have power, whether immediately or in the future, and whether with or without the consent of any other person, to revoke or otherwise determine the settlement or any provision thereof; and
(b) in the event of the exercise of the power, the settlor or a wife or husband of the settlor will or may become beneficially entitled to the whole or any part of the property then comprised in the settlement, or of the income arising from the whole or any part of the property so comprised,
all income arising under the settlement from the property comprised in the settlement shall be deemed to be income of the settlor and, subject to subsection 45 (2), not income of any other person:
Provided that this subsection shall not apply by reason only of the fact that the settlor or a wife or husband of the settlor will or may become beneficially entitled to any income or property relating to the interest of any beneficiary under the settlement in the event of that beneficiary predeceasing him or her, as the case may be.
(3) Subject to this section, where in the basis year for any year of assessment the settlor in relation to a settlement or any relative of the settlor or any company with respect to which the settlor or any of his relatives has control makes use for his or its own purposes, whether by borrowing or otherwise, of any income arising or of any accumulated income which has arisen under the settlement (being income to which he or it is not entitled thereunder), the amount of that income or accumulated income so made use of shall be deemed to be income of the settlor for that basis year and not the income of any other person; and, where any other person is or was beneficially entitled to that income, there shall be made to that other person such repayments of any tax paid by him in respect of that income as are made necessary by the operation of this subsection.
(4) Where, in relation to any settlement to which this section applies, in consequence of any provision of this section (and, where applicable, any other provision of this Act) any tax is charged on or paid by the settlor, he shall be entitled to recover from any trustee of the settlement in receipt of income arising whether directly or indirectly by virtue or in consequence of the settlement (or from any person in receipt of any such income which is deemed to be income of the settlor under this section) the amount of the tax so paid by him, and for that purposes to require the Director General to furnish a certificate specifying the amount of tax so paid; and any certificate so furnished shall be conclusive evidence of the facts appearing therein.
(5) Where any income or assets representing income are deemed to be income of the settlor and not income of any other person under the foregoing subsections, then, subject to subsection (6)-
(a) in a case where the terms of the settlement are such that there is a trust so that the income or assets in question are income or assets of a person having a beneficial interest in that trust, the amount of the income so deemed to be income of the settlor shall be taken to be-
(i) the amount of what would have been, but for this section, the statutory income of that other person from any property comprised in the settlement or, where that other person is not resident, what would have been his statutory income from any such property if he had been resident for all relevant basis years; or
(ii) where subsection (3) is applicable, such an amount as the Director General having regard to all the circumstances may direct;
(b) in any other case, the amount of the income so deemed to be income of the settlor shall be taken to be-
(i) the amount of what would have been, but for this section, the statutory income of that other person from any property comprised in the settlement or, where that other person is not resident, what would have been his statutory income from any such property if he had been resident for all relevant basis years; or
(ii) where subsection (3) is applicable, such an amount as the Director General having regard to all the circumstances may direct,
and in any case, the income so deemed to be that of the settlor shall be deemed to be derived from such place and source as the Director General having regard to all the circumstances may direct and to be statutory income of the settlor.
(6) Notwithstanding subsection (5), in any case to which subsection (2) applies in relation to a settlement, the statutory income from each source of the trust body of the trust the subject of the settlement shall be deemed to be statutory income of the settlor and to be derived from such place and source of the settlor as the Director General having regard to all the circumstances may direct.
(7) If any question arises as to the amount of any payment of income or as to any apportionment of income or of statutory income under this section, that question shall be determined by the Director General and no appeal shall lie from his decision.
(8) This section shall apply to every settlement wherever it was made or entered into and whether it was made or entered into before or after the commencement of this Act.
(9) In the case of any settlement where there are two or more settlors, this section shall have effect in relation to each settlor as if he were the only settlor and in any such case-
(a) references in this section to the property comprised in the settlement include, in relation to any settlor, only property originating from that settlor, and references in this section to income in relation to any settlement or arising under the settlement include, in relation to any settlor, only income originating from that settlor;
(b) references in this subsection to property originating from a settlor are references to-
(i) property which that settlor has provided directly or indirectly for the purposes of the settlement;
(ii) property representing property so provided; and
(iii) so much of any property representing both property so provided and other property as on a just apportionment represents the property so provided; and
(c) references in this subsection to income originating from a settlor are references to-
(i) income from property originating from that settlor; and
(ii) income provided directly or indirectly by that settlor.
(10) In this section any reference to property comprised in a settlement includes a reference to property representing property so comprised and any reference to property representing other property includes a reference to property representing accumulated income from that other property.
(11) In this section-
"relative" means a child of the settlor (including a step-child of the settlor and a child of whom the settlor has the custody or whom he maintains wholly or partly at his own expense), a child adopted by the settlor or the husband or wife of the settlor in accordance with any law, and any person who is a wife, grandchild, brother, sister, uncle, aunt, nephew, niece or cousin of the settlor;
"settlement" includes any disposition, trust, covenant, arrangement or agreement and any transfer of assets or income, but does not include-
(a) a settlement which in the opinion of the Director General is made for valuable and adequate consideration;
(b) a settlement resulting from an order of a court; or
(c) any agreement made by an employer to pay to an employee or to the widow or any relative or dependant of an employee after his death such remuneration, pension or lump sum as in the opinion of the Director General is fair and reasonable;
"settlor", in relation to a settlement, includes any person by whom the settlement was made or entered into directly or indirectly, and any person who was provided or undertaken to provide funds or credit directly or indirectly for the purpose of the settlement or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement.