Commentary

I5.1106 Covenanted payments as settlements

IHT, trusts and estates

I5.1106 Covenanted payments as settlements

I5.1106 Covenanted payments as settlements

A covenanted payment is within the definition of a settlement (see I5.1105) and (apart from a covenanted payment to charity) is not allowed as a deduction in calculating the total income of the settlor. Such a payment is an annual payment and does not give rise to income tax liability if it is paid by an individual and arises in the UK, unless it is made for commercial reasons or is made for non-taxable consideration1.

A covenanted payment to charity is not treated as a settlement and relief is allowable under the

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