Revenue Note for Guidance

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Revenue Note for Guidance

Income under dispositions for short periods


This section provides that where a person makes a disposition of income to, or for the benefit of, another person, then, subject to certain exceptions, that income is to remain the income of the disponer for income tax purposes.


(1)(a) A “relevant individual” is a person who is permanently incapacitated by mental or physical infirmity or who is aged 65 years or over.

(1)(b) Subject to specified exceptions, any income which, by virtue or in consequence of any disposition made directly or indirectly by a person (other than a disposition for valuable and sufficient consideration), is payable to or applicable for the benefit of any other person, is deemed for income tax purposes to be the income of the person, if living, who made the disposition and not of any other person. The specified exceptions are —

  • (1)(b)(i) income arising from capital which the disponer has divested himself or herself absolutely,
  • (1)(b)(iv) income payable, for a period which exceeds or may exceed 6 years, to a relevant individual for his/her own use, and
  • (1)(b)(v) income payable, for a period which exceeds or may exceed 6 years, for the benefit of a relevant individual.

(2)(a) & (b) Except in the case of dispositions made in favour of individuals who are permanently incapacitated by mental or physical infirmity, the recognition for tax purposes of a disposition(s) within subparagraphs (iv) and (v) of subsection (1)(b) made by an individual in a year of assessment is limited to 5 per cent of the individual’s total income for the year of assessment.

(2)(c) Where the 5 per cent limit applies and there is more than one disponee, the income which is not to be treated as income of the disponer for tax purposes is apportioned between the disponees in proportion to their entitlements under the disposition(s).

(4) Certain transitional arrangements (see paragraph 27 of Schedule 32) apply in regard to the application of this section for the tax year 1997–98 in relation to certain dispositions to certain individuals residing with, and sharing normal household expenses with, the disponer.

Relevant Date: Finance Act 2021