Income Tax (Trading and Other Income) Act 2005 section 634

Meaning of "capital sum" and "sums paid to settlor"

Section 634 defines what counts as a "capital sum" and what counts as "sums paid to the settlor" for the purposes of taxing income arising under a settlement.

• A capital sum includes any loan, loan repayment, or other non-income payment where full market value consideration has not been given in return.
• Sums that could only become payable to the settlor in limited circumstances beyond their control (such as the bankruptcy of a beneficiary or the death of a beneficiary under age 25) are excluded from the definition.
• Payments made by trustees to a third party at the settlor's direction, or otherwise applied for the settlor's benefit, are treated as capital sums paid to the settlor.
• References to sums paid to the settlor also cover sums paid to the settlor's spouse or civil partner, or paid jointly to the settlor (or their spouse or civil partner) together with another person.