Settlements Legislation: School fee Schemes
What is settlements legislation?
As is the case with many elements of tax law, the original settlements legislation can be traced back decades, to the 1920s to be exact. It was, however, updated in 1988 and more recently in 2005, when written into its current form known as Section 624 of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005. There is a straightforward premise to settlements legislation:-

“If the transfer of shares/assets is substantially a right to income, the income will still be deemed part of the settlor’s income in relation to income tax. Basically, the settlor has retained an interest in the shares/assets.”

The legislation has been widened to include spouses, civil partners, children and third parties, where a member of the settlor’s family benefits directly or indirectly. This is a direct means of trying to head off an array of school fee schemes which have attempted to sidestep legislation, reducing income tax to pay for further education.
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