The position is that under the clause an individual who is ordinarily resident in the United Kingdom and who has no liability to tax under section 478 of the Taxes Act 1970, and who receives a capital benefit from a non-resident or non-domiciled person after 10 March 1981, will be assessed to schedule D, Case VI income tax on the amount or value of such benefit by reference to the relevant income—defined in the clause—of the non-resident or non-domiciled person arising on or after 10 March 1981.

So long as the capital benefit does not exceed the amount of the relevant income for years of assessment up to and including the year in which it is received, the capital benefit is to be treated for income purposes as part of the individual's income for the year of receipt. To the extent that the capital benefit exceeds the amount of the previous relevant income the excess of the capital benefit is carried forward to subsequent years and matched with the relevant income of those parts and treated as the individual's income for income tax purposes until the capital benefit equals the amount of relevant income.

In my view there should be a proviso in that part of the clause so as to avoid the taxation of the same sum twice. Any capital payment that is treated as a capital payment for the purposes of clause 76 and is therefore charged to capital gains tax for the purpose of that clause should not be part of the capital convened into income for the purpose of clause 44. It is amendment No. 221 that endeavours to remedy that position of a possible double taxation of the same sum.

There is another possibility of a double charge to tax as a result of the clause. The clause would apply, I think, to a case in which one of the trustees of a settlement is resident in the United Kingdom. The whole of the settlement income would then be assessed in his name, with the consequence that the income might suffer exactly the same rate of United Kingdom tax as it would have done as income arising wholly to resident United Kingdom trustees. If a beneficiary of such a settlement is chargeable under the clause on the balance of the settlement income the effect would be a charge to tax twice over on the same amount.

This situation can be remedied for the purposes of the clause and the definition of relevant income if that definition were stated not to include income that has already been assessed to United Kingdom tax in the name of a United Kingdom resident trustee. It is amendment No. 220 that seeks to put that right.

The clause requires also to be considered in the capital transfer tax context, in particular, paragraphs 11(7) and (8) of schedule 5 of the Finance Act 1975. As my hon. and learned Friend will know, the effect of those paragraphs is that distribution payments, which are income of a person for any of the purposes of income tax, are not within the charge to capital transfer tax.

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If the clause remains in its present form it appears that in some cases it will be impossible to determine the capital transfer tax liability arising on an appointment of capital to a beneficiary. The amount of such capital sum ultimately to be treated as income for income tax purpose under this clause cannot be determined either at the date when the appointment was made or even at the later time when capital transfer tax becomes due and payable.

If capital transfer tax is assessed and paid on the basis of the situation existing at the date of the capital appointment, it appears to me that in some cases the Revenue will be required to make annual repayments of capital transfer tax where the clause bites on future relevant income. In order to meet that capital transfer tax difficulty, amendment No. 222 makes an addition to paragraph 11 of schedule 5 of the Finance Act 1975, which, briefly, provides that any amount treated as the income of an individual by virtue of the provisions of clause 44 should be treated as reducing the amount of the distribution payment.

Those are the first three amendments in my name. The fourth, amendment No. 223, is of a different kind, but still in reference to clause 44. It is noticeable that clause 44 allows no relief for expenses incurred by overseas trustees. The full gross amount of the relevant income can form the basis of assessment under the clause. That is quite unreasonable. It should be recognised that the income may be reduced by necessary expenses. This amendment endeavours to take that into account.