Commentary on Sections Overview Overview
1497.A heritage maintenance settlement (an HMS) is a settlement that holds property (“heritage maintenance property”) solely for the maintenance of, or for making provision of public access to, “qualifying property” designated under section 31 of IHTA. And the heritage maintenance property itself must be the subject of a direction under paragraph 1 of Schedule 4 to that Act.
1498.The provisions of this Chapter grant income tax benefits to complement inheritance tax benefits granted under IHTA provisions. So many of the definitions in section 507 cross-refer to IHTA provisions.
1499.“Qualifying property” is defined in paragraph 3(2) of Schedule 4 to IHTA, and includes:
	land of outstanding scenic, historic or scientific interest;
	buildings of such outstanding historical or architectural interest that special steps should be taken to preserve them, and land essential to protect the character and amenities of such buildings; and
	objects historically associated with such buildings.
1500.An HMS does not usually own the qualifying property itself. Its role is to hold the heritage maintenance property that has been settled for the purpose of maintaining the qualifying property and providing access to it. The IHTA rules specify that the heritage maintenance property must be subject to the terms of the trust for at least six years from the time it goes into the trust.
1501.An HMS may also have subsidiary purposes, such as the maintenance of property held under the trust for maintenance of the qualifying property. During the six-year period the trust must provide that any other application or devolution of income or capital outside these main and subsidiary purposes must be for the benefit of a charity with heritage purposes or a body listed in Schedule 3 to IHTA.
1502.In the absence of the rules in this Chapter, the ordinary income tax rules would apply for charging the settlors of certain settlements under Chapter 5 of Part 5 of ITTOIA. In such cases all income, and certain capital sums paid to the settlor, are charged on the settlor as income. (The nature of an HMS means that any settlor of any HMS will fall within both the definition of settlor in section 467 of this Act and the definition in section 620 of ITTOIA.)
1503.By contrast, sections 508 and 509 make it possible for the trustees of an HMS to elect, for a tax year, that:
	the income not be treated as that of the settlor; and
	any sum applied out of the heritage maintenance property not be treated as the income of an owner or occupier of the qualifying property.
1504.But the trustees may not consider it appropriate to make such an election. In such cases section 510 ensures that, if in a tax year any sum applied for a property maintenance purpose is greater than the trustees’ income for that year, the settlor is not charged to tax on the excess.
1505.And, in the absence of an election, section 511 protects the settlor from double taxation if the trustees’ income is applied for a property maintenance purpose through a trade carried on by the settlor and would therefore ordinarily be a receipt of that trade. The settlor is only charged under Chapter 5 of Part 5 of ITTOIA, not also on the trading receipt.
1506.The Chapter also charges the trustees to tax in cases where the conditions for property to be qualifying property, or the rules concerning the purposes of the HMS, are breached (sections 512 to 517).