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In this subsection— | |
(i) “tax avoidance purpose” means any purpose that consists in | |
securing a tax advantage (whether for the holder of the policy | |
or any other person); and | |
(ii) “tax advantage” has the same meaning as in Chapter 1 of Part | 5 |
17 (tax avoidance).”. | |
Retrospective exception of past and present pure protection group life policies | |
3 (1) For the purposes of Chapter 2 of Part 13 of the Taxes Act 1988 (and any | |
former enactment that is re-enacted in that Chapter), any event happening | |
before 9th April 2003 in relation to a policy of life insurance which, at the | 10 |
time of the event, was a pure protection group life policy shall be deemed | |
not to have been a chargeable event. | |
(2) For the purposes of this paragraph a policy of life insurance is at any time a | |
pure protection group life policy if at that time it is a group life policy whose | |
terms do not provide for any sums or other benefits to be paid or conferred | 15 |
except on death or disability. | |
Existing group life policies: time for compliance with the conditions in section 539A | |
4 (1) Where— | |
(a) on 9th April 2003 a policy of life insurance issued in respect of an | |
insurance made before that date is a group life policy but the | 20 |
conditions in section 539A of the Taxes Act 1988 are not satisfied, | |
(b) on or after that date, the terms of the policy are varied so that those | |
conditions are satisfied before 6th April 2004, and | |
(c) during the period beginning with 9th April 2003 and ending with the | |
date when the variation takes effect (“the transitional period”), no | 25 |
sums become payable, and no other benefits arise, under the policy | |
except on death or disability, | |
the conditions in section 539A of the Taxes Act 1988 shall be taken for the | |
purposes of Chapter 2 of Part 13 of the Taxes Act 1988 to have been satisfied | |
with respect to the policy throughout the transitional period. | 30 |
(2) Where, for the purposes of Chapter 2 of Part 13 of the Taxes Act 1988,— | |
(a) on 9th April 2003 a policy of life insurance issued in respect of an | |
insurance made before that date (“the old policy”) is a group life | |
policy but the conditions in section 539A of the Taxes Act 1988 are | |
not satisfied, | 35 |
(b) on or after that date, the terms of the insurance are varied solely for | |
the purpose of securing that those conditions are satisfied before 6th | |
April 2004 with respect to a policy in respect of the insurance, and | |
(c) as a result of the variation, the old policy is replaced by a new policy | |
(“the new policy”), | 40 |
sub-paragraph (3) applies. | |
(3) Where this sub-paragraph applies— | |
(a) the old policy and the new policy shall be treated for the purposes | |
of— | |
(i) paragraph 3(1), | 45 |
(ii) sub-paragraph (1), and | |
(iii) Chapter 2 of Part 13 of the Taxes Act 1988, | |
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as a single policy issued in respect of an insurance made at the time | |
of the making of the insurance in respect of which the old policy was | |
issued, and | |
(b) that deemed single policy shall be treated for the purposes of sub- | |
paragraph (1) as if the variation mentioned in sub-paragraph (2)(b) | 5 |
had been a variation of its terms taking effect on the date on which | |
that variation takes effect (but not resulting in the replacement of the | |
deemed single policy). | |
Deaths before 6th April 2004: period for insurer to give certificate under section 552(1)(a) | |
5 (1) If any death giving rise to benefits under a group life policy occurs— | 10 |
(a) on or after 9th April 2003, but | |
(b) before 6th April 2004, | |
subsection (6) of section 552 of the Taxes Act 1988 (relevant three month | |
period for insurer to give certificate under section 552(1)(a) to policy holder) | |
shall have effect in relation to that policy and that death as if there were | 15 |
included among the paragraphs of that subsection the unnumbered | |
paragraph set out in sub-paragraph (2). | |
(2) That paragraph is— | |
“( ) if the event is a death and the policy in question is a group life | |
policy, the period of three months following 5th April 2004;”. | 20 |
Part 2 | |
Charitable and non-charitable trusts | |
Interpretation | |
6 In section 539 of the Taxes Act 1988 (introductory) in subsection (3), insert | |
each of the following definitions at the appropriate place— | 25 |
““charitable trust” means any trust established for charitable | |
purposes only;” | |
““non-charitable trust” means any trust other than a charitable | |
trust.”. | |
Method of charging gain to tax | 30 |
7 (1) Section 547 of the Taxes Act 1988 is amended as follows. | |
(2) In subsection (1) (attribution of gain) in paragraph (a) (which refers to trusts | |
created by an individual) before “trusts” insert “non-charitable”. | |
(3) In paragraph (b) of that subsection (which refers to trusts created by a | |
company) before “trusts” insert “non-charitable”. | 35 |
(4) After paragraph (c) of that subsection (personal representatives) insert— | |
“(cc) if, immediately before the happening of that event, those | |
rights— | |
(i) were held on charitable trusts, or | |
(ii) were held as security for a debt owed by trustees of a | 40 |
charitable trust, | |
subsection (9) or (10) below (as the case may be) shall apply | |
in relation to the amount of the gain;”. | |
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(5) In paragraph (d) of that subsection (trusts) in sub-paragraph (i) (rights held | |
on trusts etc) before “trusts”, where first occurring, insert “non-charitable”. | |
(6) For the word “or” at the end of sub-paragraph (i) of that paragraph | |
substitute the following sub-paragraph— | |
“(ia) those rights were held on non-charitable trusts and | 5 |
the circumstances were not such as are mentioned in | |
paragraph (a), (b) or (c) above or sub-paragraph (i) | |
above, or”. | |
(7) In sub-paragraph (ii) of that paragraph (rights held as security for debt owed | |
by trustees) after “trustees” insert “of a non-charitable trust”. | 10 |
(8) After subsection (4) insert— | |
“(4A) In subsection (1) above— | |
(a) paragraph (cc) is subject to paragraph 12(1) of Schedule 34 to | |
the Finance Act 2003 (which applies paragraph 7(1) of | |
Schedule 14 to the Finance Act 1998); | 15 |
(b) paragraph (d)(ia) is subject to paragraph 12(2) of that | |
Schedule (exception for certain cases where insurance etc | |
made or effected before 9th April 2003).”. | |
(9) In subsection (5AA) (which, in a case falling within subsection (1)(d), | |
applies, with modifications, to trustees the tax treatment for individuals | 20 |
under subsection (5)) for “subsection (1)(d)” substitute “subsection (1)(cc) or | |
(d)”. | |
(10) In subsection (9) (treatment of gains in case falling within subsection (1)(d) | |
where trustees resident in United Kingdom)— | |
(a) for “(1)(d)” substitute “(1)(cc) or (d)”; and | 25 |
(b) in paragraph (b) (gain to be chargeable to income tax at the rate | |
applicable to trusts) for “the rate applicable to trusts” substitute “the | |
appropriate rate”. | |
(11) After subsection (9) insert— | |
“(9A) For the purposes of subsection (9) above, the “appropriate rate” for | 30 |
any year— | |
(a) in a case falling within subsection (1)(cc) above, is the basic | |
rate for that year; and | |
(b) in a case falling within subsection (1)(d) above, is the rate | |
applicable to trusts for that year.”. | 35 |
(12) In subsection (10) (treatment of gains in case falling within subsection (1)(d) | |
where trustees not resident in United Kingdom) for “(1)(d)” substitute | |
“(1)(cc) or (d)”. | |
Method of charging gain to tax: multiple interests | |
8 (1) Section 547A of the Taxes Act 1988 is amended as follows. | 40 |
(2) In subsection (3) (the cases where a person has a relevant interest) in | |
paragraph (a) (which refers to trusts created by an individual) before | |
“trusts” insert “non-charitable”. | |
(3) In paragraph (b) of that subsection (which refers to trusts created by a | |
company) before “trusts” insert “non-charitable”. | 45 |
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(4) After paragraph (c) of that subsection (personal representatives) insert— | |
“(cc) in the case of trustees of a charitable trust, if a share in the | |
rights is held by them or as security for a debt owed by | |
them;”. | |
(5) In paragraph (d) of that subsection (trustees) after “trustees” insert “of a non- | 5 |
charitable trust”. | |
(6) For the word “or” at the end of sub-paragraph (i) of that paragraph | |
substitute the following sub-paragraph— | |
“(ia) if a share in the rights is held by them which does not | |
also fall within paragraph (a), (b) or (c) above or sub- | 10 |
paragraph (i) above; or”. | |
(7) In subsection (6) (rights or share held on trusts created by two or more | |
persons) before “trusts”, where first occurring, insert “non-charitable”. | |
(8) In subsection (10) (case where different shares of the whole trust property | |
originate from different persons)— | 15 |
(a) in paragraph (a), before “trusts” insert “non-charitable”; and | |
(b) in the closing words, before “trusts” insert “non-charitable”. | |
Deemed surrender of certain loans | |
9 (1) Section 548(1) of the Taxes Act 1988 is amended as follows. | |
(2) In paragraph (a) (condition that gain would be treated under section 547 as | 20 |
part of an individual’s total income or income of a company) after “income | |
of a company” insert “or of any trustees”. | |
(3) In paragraph (c) (condition that sum is lent to, or at the direction of, the | |
individual or company by, or by arrangement with, the body issuing etc the | |
policy or contract) after “company” insert “or those trustees”. | 25 |
Right of individual to recover tax from trustees | |
10 In section 551 of the Taxes Act 1988, in subsection (1) (individual liable as | |
settlor) in paragraph (b), for “trust” substitute “non-charitable trusts”. | |
Right of company to recover tax from trustees | |
11 In section 551A of the Taxes Act 1988, in subsection (1) (company liable as | 30 |
settlor) in paragraph (b), for “trust” substitute “non-charitable trusts”. | |
Section 547(1)(cc) and (d)(ia): exception for certain old policies and contracts | |
12 (1) Paragraph 7(1) of Schedule 14 to the Finance Act 1998 (c. 36) (exception for | |
certain cases where the trust was created before 17th March 1998, the creator | |
etc was an individual who died before that date and the insurance etc was | 35 |
made or effected before that date) has effect in relation to section 547(1)(cc) | |
of the Taxes Act 1988 as it has effect in relation to section 547(1)(d) of that | |
Act. | |
(2) Paragraph (d) of section 547(1) of the Taxes Act 1988 (trustees of a non- | |
charitable trust) does not have effect by virtue of sub-paragraph (ia) of that | 40 |
paragraph in relation to the amount of a gain if the gain is treated as arising | |
on the happening of a chargeable event in relation to a pre-commencement | |
policy or contract. | |
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(3) In this paragraph “pre-commencement policy or contract” means— | |
(a) any policy of life insurance issued in respect of an insurance made | |
before 9th April 2003, | |
(b) any contract for a life annuity made before that date, or | |
(c) any capital redemption policy where the contract was effected before | 5 |
that date, | |
but does not include any such policy or contract falling within sub- | |
paragraph (4). | |
(4) A policy or contract falls within this sub-paragraph if, on or after 9th April | |
2003 (but before the happening of the chargeable event in question),— | 10 |
(a) the policy or contract has been varied so as to increase the benefits | |
secured or to extend the term of the insurance, annuity or capital | |
redemption policy (any exercise of rights conferred by the policy | |
being regarded for this purpose as a variation); or | |
(b) there has been an assignment (whether or not for money’s worth) of | 15 |
the rights, or a share in the rights, conferred by the policy or contract | |
to trustees of a non-charitable trust, as defined in section 539(3) of the | |
Taxes Act 1988. | |
Part 3 | |
Meaning of “life annuity” | 20 |
Restriction of “life annuity” to contracts to which section 656 of the Taxes Act 1988 applies | |
13 In section 539 of the Taxes Act 1988 (introductory) in subsection (3), for the | |
definition of “life annuity” substitute— | |
““life annuity” means any annuity to which section 656 (as read with | |
section 657) applies.”. | 25 |
Part 4 | |
Rollover of gain on maturity into new policy | |
Repeal of section 540(2) of the Taxes Act 1988 | |
14 (1) Section 540(2) of the Taxes Act 1988 (maturity not a chargeable event if | |
option exercised to re-invest whole proceeds of maturing policy in new | 30 |
policy) shall cease to have effect. | |
(2) This paragraph is subject to paragraph 15. | |
Saving for certain policies maturing on or after 9th April 2003 | |
15 (1) The maturity of a policy of life insurance (“the old policy”) on or after 9th | |
April 2003 is not a chargeable event for the purposes of Chapter 2 of Part 13 | 35 |
of the Taxes Act 1988 if— | |
(a) a new policy is issued in consequence of the exercise of an option | |
conferred by the old policy, | |
(b) all sums becoming payable under the old policy on or after 9th April | |
2003 are retained by the company with which the insurance was | 40 |
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made and applied in the payment of one or more premiums under | |
the new policy, and | |
(c) sub-paragraph (2) applies. | |
(2) This sub-paragraph applies if— | |
(a) the option was exercised in writing on or before 8th April 2003, or | 5 |
(b) the old policy matures on or before 30th April 2003 and has not been | |
varied on or after 9th April 2003 so as to— | |
(i) change the date of maturity of the policy, | |
(ii) change any option conferred by the policy, or | |
(iii) confer any option. | 10 |
Schedule 35 | |
Section 172 | |
Gains on policies of life insurance, etc: rate of tax | |
Application of the lower rate | |
1 (1) Section 1A of the Taxes Act 1988 (application of lower rate to income from | |
savings and distributions) is amended as follows. | 15 |
(2) In subsection (2) (which specifies the income to which the lower rate applies) | |
omit the word “and” immediately preceding paragraph (c) and at the end of | |
that paragraph insert “; and | |
(d) any amount included in an individual’s total income by | |
virtue of section 547(1)(a) (chargeable event gains on life | 20 |
policies etc).”. | |
(3) In subsection (5) (ordering rule for highest part of income for the purposes | |
of the Income Tax Acts) after “the Income Tax Acts” insert “(other than | |
section 550)”. | |
Method of charging gains from policies of life insurance etc to tax | 25 |
2 (1) Section 547 of the Taxes Act 1988 is amended as follows. | |
(2) In subsection (5)(a) (individual to be treated as having paid income tax at the | |
basic rate on a sum included in his income by virtue of subsection (1)(a)) for | |
“the basic rate” substitute “the lower rate”. | |
(3) In subsection (9A)(a) (definition of “the appropriate rate” where charitable | 30 |
trustees are liable to income tax on a gain by virtue of subsection (9)) for “the | |
basic rate for that year” substitute “the lower rate”. | |
Relief where gain charged at a higher rate | |
3 In section 550(3) (rates of tax to be applied in calculating tax which would be | |
chargeable on gain if calculated by reference to the appropriate fraction) for | 35 |
“the basic rate” substitute “the lower rate”. | |
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Gains included in aggregate income of estate of deceased | |
4 In section 699A(4)(b) (sums included in aggregate income of estate of the | |
deceased by virtue of section 547(1)(c) to be assumed to bear tax at the basic | |
rate) for “the basic rate” substitute “the lower rate”. | |
Income to be disregarded in determining highest part of person’s income | 5 |
5 In section 833(3)(b) of the Taxes Act 1988 (which provides that, where | |
income falls to be treated as the highest part of a person’s income, his income | |
shall be calculated without regard to any amount included in total income | |
by virtue of section 547(1)(a)) after “section 547(1)(a)” add “which is a sum | |
in relation to which section 547(5) applies”. | 10 |
Schedule 36 | |
Section 175 | |
Foster carers | |
Part 1 | |
Introduction | |
Introductory | 15 |
1 (1) This Schedule provides relief on income from the provision by an individual | |
of foster care (see paragraph 4). | |
(2) The form of relief available depends on whether his total foster care receipts | |
(see paragraph 5) exceed his limit (see paragraphs 6 to 9). | |
(3) If they do not, paragraph 10 provides for the income to be exempt from | 20 |
income tax. | |
(4) If they do, the individual may elect for an alternative method of calculating | |
the income (see paragraphs 11 to 14). | |
Individuals qualifying for relief | |
2 (1) An individual qualifies for relief under this Schedule for a year of | 25 |
assessment for which the following conditions are met. | |
(2) The first condition is that the individual has foster care receipts (see | |
paragraph 3). | |
(3) The second condition is that the individual does not derive any taxable | |
income, other than foster care receipts, from any relevant trade, profession | 30 |
or vocation, or from any relevant foster care arrangement. | |
(4) For the purposes of sub-paragraph (3)— | |
(a) “taxable income” means receipts or other income in respect of which | |
the individual is chargeable to tax for the year of assessment; | |
(b) a relevant trade, profession or vocation, or a relevant foster care | 35 |
arrangement, is one from which the individual derives any foster | |
care receipts for that year. | |
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