Chapter II

Settlements on Children Generally

443. —(1) Where, by virtue or in consequence of a settlement and during the life of the settlor, any income is, in any year of assessment, paid or payable or accumulated to or for the benefit of a child of the settlor, such income shall, if at the beginning of such year such child is under the age of twenty-one years and is unmarried, be treated for the purposes of this Act as income of the settlor for that year and not as income of any other person.

(2) This Chapter applies to every settlement, wheresoever made or entered into and whether it was made or entered into before or after the passing of this Act.

(3) This Chapter shall not apply in relation to any income arising under a settlement in any year of assessment for which the settlor is not chargeable to income tax as a resident in the State, and references in this Chapter to income shall be construed accordingly.

(4) This Chapter shall not apply to any income which, by virtue or in consequence of a settlement and during the life of the settlor, is in any year of assessment paid or payable or accumulated to or for the benefit of a child of the settlor if the settlor proves to the satisfaction of the Revenue Commissioners—

(a) that the aggregate amount of such income so paid, payable, or accumulated in such year does not exceed £60, and

(b) that at the beginning of such year such child is over the age of sixteen years and is permanently incapacitated by mental or physical infirmity from maintaining himself and from receiving full-time instruction at a university, college, school, or other educational establishment, and

(c) that such child is not entitled for such year to income exceeding in the aggregate £40, exclusive of income to which this Chapter would have applied if this subsection had not been enacted.

444. —Where by virtue of an irrevocable instrument property is vested in or held by trustees upon such trusts that, in any year of assessment, section 443 (1) would (but for this section) apply to the income of such property, the following provisions shall apply and have effect, that is to say:

(a) section 443 (1) 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 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 Chapter 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 section “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.

445. —The following provisions shall have effect in relation to the construction of “irrevocable instrument” in this Chapter:

(a) an instrument shall not be an irrevocable instrument for the purposes of this Chapter if the trusts thereof provide for all or any one or more of the following matters:

(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;

(b) an instrument shall not be prevented from being an irrevocable instrument for the purposes of this Chapter by reason only that the trusts thereof include any one or more of the following provisions:

(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;

(c) “irrevocable instrument” includes instruments made before, as well as instruments made after, the passing of this Act.

446. —(1) Where, by virtue of this Chapter, any income tax or sur-tax becomes chargeable on and is paid by a settlor, such settlor shall be entitled to recover from any trustee or other person to whom the income is payable by virtue or in consequence of the settlement the amount of the tax so paid, and for that purpose to require the Revenue Commissioners to furnish to him a certificate specifying the amount of the income in respect of which he has so paid tax and the amount of the tax so paid, and every certificate so furnished shall be conclusive evidence of the matters of fact stated therein.

(2) Where a person obtains, in respect of any allowance or relief, a repayment of income tax in excess of the amount of the repayment to which he would, but for this Chapter, have been entitled, an amount equal to the excess shall be paid by him to the trustee or other person to whom the income is payable by virtue or in consequence of the settlement and, where there are two or more such trustees or other persons, in such proportions as the circumstances may require.

If any question arises as to the amount of any payment or as to any apportionment to be made under this subsection, such question shall be decided by the Special Commissioners, whose decision thereon shall be final.

(3) Any income which by virtue of this Chapter is treated as income of any person shall be deemed to be the highest part of his income.

(4) No repayment shall be made under section 154 on account of tax paid in respect of any income which has by virtue of this Chapter been treated as income of a settlor.

447. —In the preceding provisions of this Chapter—

“child” includes a stepchild, an adopted child, and an illegitimate child;

“settlement” includes any disposition, trust, covenant, agreement, or arrangement, and any transfer of money or other property or of any right to money or other property;

“income” (except where, in sections 443 (1), 444 (b) and 446 (3) (4), it is immediately preceded by “as” or “his”) includes any income chargeable to income tax by deduction or otherwise and any income which would have been so chargeable if it had been received in the State by a person resident or ordinarily resident in the State.

448. —(1) Where by any means whatsoever (including indirect means or means consisting of a series of operations and whether adopted before or after the passing of this Act), a trade, which at any time before the adoption of such means was carried on by any person solely or in partnership, becomes a trade carried on by one or more than one child of such person or by way of a partnership in which such person and one or more than one child of such person are partners, the following provisions shall have effect:

(a) such means shall, for the purposes of this Chapter, be deemed to constitute a settlement as respects which such person shall be deemed to be the settlor,

(b) the profits or gains arising from the trade after the adoption of such means, in so far as they arise to (as the case may be) one or more than one child of such person or such person and one or more than one child of such person, shall for the purposes of this Chapter, be deemed to be the same income as would have arisen to such person had such means not been adopted, and

(c) “income” where it first occurs in section 443 shall be deemed to include the said profits or gains in so far as they arise to one or more than one child of such person.

(2) In subsection (1), the word “child” includes a stepchild, an adopted child, and an illegitimate child.

(3) The amount of the income of a person from the profits or gains of a trade which is to be deemed by virtue of subsection (1) to be income of another person shall, if the first-mentioned person is engaged actively in the carrying on of the trade, be the full amount of the said income reduced by a sum (in subsection (4) referred to as the appropriate sum) equal to the amount which would have been allowed in computing the said profits or gains in respect of the first-mentioned person if he, instead of being a person engaged in the carrying on of the trade, had been a person employed by a person or persons carrying on the trade.

(4) The appropriate sum shall be deemed to be profits or gains arising to the first-mentioned person referred to in subsection (3) from the exercise of an office or employment within the meaning of Schedule E.