Commentary on Sections Overview Overview Section 512: Charge to tax on some settlements
1529.This section makes provision for a charge to income tax on income arising to the trustees in a number of circumstances. It is based on section 694(1) and (5) of ICTA.
1530.Most of the circumstances involved (cases A to C) involve a breach of the main IHTA conditions.
1531.But no charge will arise under this section if the settlor has already been charged on the income as trust income: see section 517. This charge can, therefore, only arise if an election under section 508 has been made.
1532.Case D is an anti-avoidance provision to guard against loss of tax if a non-heritage beneficiary with a reversionary interest in property comprised in the HMS sells that interest to another heritage body (H1).
1533.The charge under this Chapter would not ordinarily arise when the property leaves the HMS on reversion, because the recipient is a heritage body or a charity. But the non-heritage person would have effectively obtained money from the heritage property.
1534.So it is provided that if, earlier or at the time, H1 (or any other heritage body) has paid monetary consideration for any interest under the settlement, a charge on the trustees will arise. But if H1 has acquired the interest from another heritage body, there is no charge.