Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

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Part 8 — Other reliefs
Chapter 2 — Gift aid
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411
Ineligibility of interest where business is occupation of commercial
woodlands
(1)
Interest that would be eligible for relief under this Chapter apart from this
section is not eligible if—
(a)
the interest is on a loan to which section 392, 396 or 398 applies, and
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(b)
the business carried on by the close company, employee-controlled
company or partnership concerned consists of the occupation of
commercial woodlands.
(2)
If only part of the business consists in such occupation, only part of the interest
is ineligible for the relief.
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(3)
That part is such part of the interest as it is just and reasonable to attribute to
that part of the business having regard to all the relevant circumstances and, in
particular, to the extent of the other part of the business.
(4)
For the purposes of this section two or more businesses carried on by a
company or partnership are to be regarded as a single business.
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(5)
In this section “commercial woodlands” means woodlands in the United
Kingdom which are managed on a commercial basis and with a view to the
realisation of profits.
412
Information
(1)
A person (“the payer”) who claims relief under this Chapter for a payment of
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interest made in a tax year is entitled to request the person to whom the interest
is paid to give the payer a statement in writing about that interest containing
the information specified in subsection (3).
(2)
That request must be in writing.
(3)
The information is—
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(a)
the date when the debt was incurred,
(b)
the amount of the debt when incurred,
(c)
the interest paid in the tax year, and
(d)
the name and address of the debtor.
(4)
The person to whom the interest is paid has a duty to comply with a request
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under subsection (1) and that duty is enforceable by the payer.
(5)
This section does not apply if the interest is paid to a building society or to a
local authority.
Chapter 2
Gift aid
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The relief
413
Overview of Chapter
(1)
This Chapter gives relief for some gifts of money to charities by individuals.
(2)
The relief is set out in section 414.

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Chapter 2 — Gift aid
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(3)
The Chapter contains provisions under which, in some circumstances—
(a)
the individual’s entitlement to some other reliefs may be restricted (see
section 423), and
(b)
the individual may be charged to income tax (see section 424).
(4)
See section 430 for bodies that are treated as charities for the purposes of this
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Chapter.
(5)
For related reliefs for charities see Part 10 of this Act, section 25(10) of FA 1990
and section 505 of ICTA.
414
Relief for gifts to charity
(1)
An individual who makes a gift to a charity which is a qualifying donation is
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entitled to the relief set out in subsection (2).
(2)
The Income Tax Acts have effect in their application to the individual for the
tax year in which the gift is made as if—
(a)
the gift had been made after deduction of income tax at the basic rate,
and
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(b)
the basic rate limit (see section 20) were increased by an amount equal
to the grossed up amount of the gift.
(3)
See subsection (7) of section 535 of ITTOIA 2005 (gains from contracts for life
insurance etc: top slicing relief) for provision about how relief under this
Chapter is to be ignored for the purpose of calculating relief under that section.
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415
Meaning of “grossed up amount”
In this Chapter references to the grossed up amount of a gift are to the amount
of the gift grossed up by reference to the basic rate for the tax year in which the
gift is made.
416
Meaning of “qualifying donation”
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(1)
A gift made to a charity by an individual is a qualifying donation for the
purposes of this Chapter if—
(a)
conditions A to G are met, and
(b)
the individual gives the charity a gift aid declaration relating to the gift
(see section 428).
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(2)
Condition A is that the gift takes the form of a payment of a sum of money.
(3)
Condition B is that the payment is not subject to any condition as to repayment.
(4)
Condition C is that the payment is not a sum falling within section 713(3) of
ITEPA 2003 (payroll deduction scheme).
(5)
Condition D is that the payment is not deductible in calculating the
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individual’s income from any source.
(6)
Condition E is that the payment is not conditional on, associated with or part
of an arrangement involving, the acquisition of property by the charity from
the individual or a person connected with the individual.

An acquisition by way of gift is ignored for the purposes of this condition.
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(7)
Condition F is that—

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Chapter 2 — Gift aid
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(a)
there are no benefits associated with the gift, or
(b)
there are benefits associated with the gift but the restrictions on those
benefits are not breached.

See sections 417 to 421 for provision about benefits associated with gifts.
(8)
Condition G is that the gift is not a disqualified overseas gift (see section 422).
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417
Meaning of “benefits associated with a gift”
A benefit is associated with a gift for the purposes of this Chapter if it is
received by the individual who makes the gift, or a person connected with the
individual, in consequence of making the gift.
Restrictions on associated benefits
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418
Restrictions on associated benefits
(1)
For the purposes of section 416(7), the restrictions on benefits associated with
a gift are breached if condition A or B is met.
(2)
Condition A is that the total value of the benefits associated with the gift
exceeds the variable limit, which is—
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(a)
25% of the amount of the gift, if the amount of the gift is £100 or less,
(b)
£25, if the amount of the gift is more than £100 but not more than £1,000,
(c)
2.5% of the amount of the gift, if the amount of the gift is more than
£1,000.
(3)
Condition B is that the sum of—
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(a)
the total value of the benefits associated with the gift, and
(b)
the total value of the benefits (if any) associated with each relevant
prior gift,

is more than £250.
(4)
“Relevant prior gift” means a gift—
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(a)
which has already been made by the individual to the charity in the tax
year, and
(b)
which is a qualifying donation.
(5)
This section needs to be read with sections 419 to 421.
419
Gifts and benefits linked to periods of less than 12 months
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(1)
This section modifies the application of section 418(2) in relation to a gift if
condition A, B, C or D is met.
(2)
Condition A is that a benefit associated with the gift relates to a period of less
than 12 months.
(3)
Condition B is that a benefit associated with the gift consists of a right to receive
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benefits at intervals over a period of less than 12 months.
(4)
Condition C is that a benefit associated with the gift is one of a series of benefits
which are—
(a)
received at intervals, and
(b)
associated with a series of gifts made at intervals of less than 12 months.
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Chapter 2 — Gift aid
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(5)
Condition D is that—
(a)
a benefit associated with the gift is not one of a series of benefits
received at intervals, and
(b)
the gift is one of a series of gifts made at intervals of less than 12 months.
(6)
If condition A, B or C is met, then for the purposes of section 418(2)—
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(a)
the value of the benefit is taken to be the annual equivalent of its actual
value, and
(b)
the amount of the gift is taken to be the annual equivalent of its actual
amount.
(7)
If condition D is met, the amount of the gift is taken for the purposes of section
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418(2) to be the annual equivalent of its actual amount.
(8)
The annual equivalent of the value of a benefit, or of the amount of a gift, is
calculated as follows.


Step 1
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Multiply the value or amount by 365.


Step 2

If condition A or B is met in relation to the benefit (and neither condition C nor
condition D is met in relation to it), divide the result by the number of days in
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the period of less than 12 months referred to in subsection (2) or (as the case
may be) subsection (3).

If condition C or D is met in relation to the benefit, divide the result by the
average number of days in the intervals of less than 12 months referred to in
subsection (4)(b) or (as the case may be) subsection (5)(b).
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Admission rights
420
Disregard of certain admission rights
(1)
A benefit associated with a gift is ignored for the purposes of this Chapter if the
benefit consists of a relevant right of admission.
(2)
“Right of admission” means a right which—
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(a)
benefits the individual who makes the gift or that individual and one
or more members of that individual’s family (whether or not the right
must be exercised by all of them at the same time),
(b)
authorises admission to premises or property to which the public are
admitted on payment of an admission fee, and
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(c)
authorises admission to those premises or that property without
payment of the admission fee or on payment of a reduced fee.
(3)
A right of admission is a relevant right of admission if—
(a)
conditions A and B are met in relation to it, and
(b)
either condition C or condition D is met in relation to it.
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(4)
Condition A is that the opportunity to make a gift and to receive the right of
admission in consequence is available to the public.

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(5)
Condition B is that the right of admission is a right granted by the charity for
the purpose of viewing property preserved, maintained, kept or created by a
charity for its charitable purposes.
(6)
The property mentioned in subsection (5) includes, in particular—
(a)
buildings,
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(b)
grounds or other land,
(c)
plants,
(d)
animals,
(e)
works of art (but not performances),
(f)
artefacts, and
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(g)
property of a scientific nature.
(7)
Condition C is that the right of admission applies, during a period of at least 12
months, at all times at which the public can obtain admission.
(8)
Condition D is that—
(a)
a member of the public could purchase the same right of admission,
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and
(b)
the amount of the gift is greater by at least 10% than the amount the
member of the public would have to pay.
(9)
This section needs to be read with section 421.
421
Admission rights: supplementary
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(1)
This section applies for the purposes of section 420.
(2)
Condition C is to be treated as met even if the right does not apply on days
which are specified by the charity as event days, provided no more than 5 days
are so specified in relation to the applicable period.
(3)
The applicable period is—
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(a)
the period during which the right applies, in the case of a right which
applies for a period of 12 months, or
(b)
each calendar year during all or part of which the right applies, in the
case of a right which applies for a period of more than 12 months.
(4)
An “event day” is a day on which an event is to take place on the premises to
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which the right relates.
(5)
In condition D the “same right of admission” means a right relating to the same
property, classes of persons and periods of time as the right received in
consequence of the gift.
Disqualified overseas gifts
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422
Disqualified overseas gifts
(1)
This section applies for the purposes of section 416(8).
(2)
A gift is an “overseas gift” if—
(a)
it is made by an individual to a charity at a time when the individual is
neither UK resident nor in Crown employment, and
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(b)
ignoring condition G in section 416(8), it is a qualifying donation.

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(3)
An overseas gift made by an individual in a tax year is a “disqualified overseas
gift” if, as a result of the gift, the overseas gifts total is more than the
individual’s charged amount (see section 427).
(4)
In subsection (3) “overseas gifts total” means the sum of the grossed up
amounts of all overseas gifts made by the individual in the tax year.
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(5)
In this section “Crown employment” means employment under the Crown—
(a)
which is of a public nature, and
(b)
the earnings from which are payable out of the public revenue of the
United Kingdom or of Northern Ireland.
Measures to ensure donor’s liability not less than tax treated as deducted
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423
Restriction of certain reliefs
(1)
This section applies if—
(a)
an individual makes one or more gifts to charities in a tax year which
are qualifying donations, and
(b)
amount A is greater than amount B.
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(2)
In this section—
“amount A” means the total amount of the tax treated as deducted from
the gifts under section 414, and
“amount B” means the total amount of income tax and capital gains tax to
which the individual is charged for the tax year (before applying this
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section).
(3)
For the purposes of this section, the total amount of income tax to which the
individual is charged for the tax year is the amount calculated in accordance
with section 425.
(4)
The individual’s entitlement to the reliefs mentioned in subsection (5) is
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extinguished, so far as is necessary to ensure that the total amount of income
tax and capital gains tax to which the individual is charged for the tax year
(after applying this section)—
(a)
is equal to amount A, or
(b)
if that is not possible, falls short of amount A by as little as possible.
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(5)
The reliefs are—
(a)
an allowance under Chapter 2 of Part 3 of this Act or section 257 or 265
of ICTA (personal allowance and blind person’s allowance),
(b)
a tax reduction under Chapter 3 of Part 3 of this Act or section 257A,
257AB, 257BA or 257BB of ICTA (tax reductions for married couples
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and civil partners),
(c)
relief under section 457 or 458 of this Act or section 266(7) of ICTA
(payments to trade unions and police organisations), and
(d)
a tax reduction under section 459 of this Act or section 273 of ICTA
(payments for benefit of family members).
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424
Charge to tax
(1)
Income tax is charged under this section if—

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(a)
an individual makes one or more gifts to charity in a tax year which are
qualifying donations, and
(b)
amount A is greater than amount C.
(2)
In this section—
“amount A” means the total amount of the tax treated as deducted from
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the gifts under section 414, and
“amount C” means the sum of—
(a)
the amount of income tax to which the individual is charged for
the tax year, and
(b)
the amount of capital gains tax to which the individual is
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charged for the tax year.
(3)
For the purposes of this section, the total amount of income tax to which the
individual is charged for the tax year is the amount calculated in accordance
with section 425, after taking into account any restriction of relief under section
423.
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(4)
The amount of the tax charged under this section is equal to the difference
between amount A and amount C.
(5)
Tax charged under this section is charged for the tax year in which the gift or
gifts are made.
(6)
The person liable for any tax charged under this section is the individual.
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425
Total amount of income tax to which individual charged for a tax year
(1)
For the purposes of sections 423 and 424, the total amount of income tax to
which an individual is charged for a tax year is the amount calculated as
follows.
(2)
Calculate the individual’s liability to income tax for the tax year in accordance
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with section 23, as modified by subsection (3).
(3)
In applying section 23—
(a)
at Step 6, ignore any tax reductions to which the individual is entitled
for the tax year under a provision listed in subsection (4), and
(b)
ignore Step 7.
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(4)
The tax reductions to be ignored are tax reductions under—
(a)
section 453 (qualifying maintenance payments),
(b)
section 788 of ICTA (double taxation arrangements: relief by
agreement), or
(c)
section 790(1) of ICTA (relief for foreign tax where no double taxation
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arrangements).
(5)
From the amount calculated in accordance with subsections (2) to (4) deduct—
(a)
any tax treated as having been paid under—
(i)
section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK
resident companies etc on which there is no tax credit),
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(ii)
section 414(1) of that Act (stock dividend income),
(iii)
section 421(1) of that Act (release of loan to participator in close
company),