Commentary on Sections Structure of Chapters Overview Section 646: Adjustments between settlor and trustees etc.
2469.This section enables a settlor to recover from the trustees or others tax which has been charged on him or her under sections 624 or 629 as well as requiring him to repay to the trustees any tax repayment which would not have arisen to him or her apart from the charge under these two sections. The section is based on section 660D of ICTA.
2470.Subsection (1) enables the settlor to recover from the trustees, or whoever else has received the settlement income, the tax payable by the settlor as a result of a charge under sections 624 or 629. Since the settlor has not in fact received the income it is considered inequitable that he or she should have to pay the additional tax. The net effect where such a recovery is made is that the trustees or beneficiary of the settlement effectively pay the tax on the income but at the settlor’s highest tax rate.
2471.Subsection (2) enables the settlor to request a certificate of tax paid from the Inland Revenue which is conclusive, under subsection (3), of the facts in it.
2472.Section 660D(1)(b) refers to “an officer of the Board”. Similar references have been replaced in this Act by the term “Inland Revenue” to achieve a more consistent approach. This is not a change in the law since section 878(1) of this Act defines “the Inland Revenue” as “any officer of the Board of Inland Revenue”.
2473.Subsections (4) and (5) require a repayment of tax to the trustees or other persons receiving the settlement income which a person would not have received but for a charge under sections 624 and 629. This is most likely to arise where the income charged on the settlor has had tax deducted at source and a repayment of tax is made to the settlor because there is a surplus of allowances or reliefs to set against that income. The repayment may be apportioned where the settlement income was received by more than one person.
2474.Section 660D(2) of ICTA refers to “a person” obtaining a repayment of income tax. This is rewritten here as “a settlor”. The person referred to can only be the settlor and the use of “person” simply reflects the language of FA 1922, on which that section is based, which refers to the settlor as “a person making a disposition”.
2475.Subsection (8) ensures that a charge on settlement income in respect of settlor-interested settlements and settlements in respect of minor children of the settlor may still be made on the trustees as recipients of the income.