Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 8 — Other reliefs
Chapter 2 — Gift aid
227

(iv)
section 530(1) of that Act (gains from contracts for life
insurance), or
(v)
section 685A(3) of that Act (settlor-interested settlements), and
(b)
any tax treated as deducted from estate income under section 656(3) or
657(4) of ITTOIA 2005, so far as that income is treated under section 679
5
of that Act as paid from sums within section 680(3)(b) or (4) of that Act.
(6)
For the purposes of this section a person is treated as being entitled to a tax
reduction under section 788 of ICTA if the person is entitled to credit against
income tax under double taxation arrangements.
Election to carry back relief
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426
Election by donor: gift treated as made in previous tax year
(1)
If—
(a)
an individual makes a gift to a charity that is a qualifying donation, and
(b)
the condition in subsection (2) is met,

the individual may elect to be treated as if the gift had been made in the
15
previous tax year (“year P”).
(2)
The condition is that the individual’s charged amount for year P (see section
427) is at least equal to the increased total of gifts.
(3)
If an election is made, sections 414 and 423 to 425 have effect in relation to the
individual as if the gift were a qualifying donation made by the individual in
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year P.
(4)
The increased total of gifts is the sum of—
(a)
the grossed up amount of the gift, and of any gifts that are the subject
of the same election or an election made at the same time,
(b)
the sum of the grossed up amounts of any gifts to charities made by the
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individual in year P which—
(i)
are qualifying donations, and
(ii)
are not themselves treated as made in the tax year before year P
because of an election under this section, and
(c)
the sum of the grossed up amounts of any gifts which, as a result of an
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earlier election under this section, are treated as made in year P.
(5)
The grossed up amount of the gifts mentioned in paragraphs (a) and (c) of
subsection (4) is to be determined as if the gifts were made in year P.
(6)
An election must be made—
(a)
on or before the date on which the individual delivers a return for year
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P under section 8 of TMA 1970 (personal return), and
(b)
not later than the normal self-assessment filing date for year P.
(7)
An election does not affect the position of the recipient of the gift (see section
520 (gifts to charitable trusts: income tax treated as paid) and section 25(10) of
FA 1990 (gifts to charitable companies)).
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(8)
This section does not apply to gifts which are treated as qualifying donations
under section 429 (giving through self-assessment return).

Income Tax Bill
Part 8 — Other reliefs
Chapter 2 — Gift aid
228

Supplementary
427
Meaning of “charged amount”
(1)
For the purposes of this Chapter, an individual’s charged amount is the
amount calculated as follows.
(2)
Calculate the amount of the individual’s modified net income for year X (see
5
section 958).
(3)
Calculate the amount on which the individual is chargeable to capital gains tax
for year X.
(4)
Add together the amounts calculated under subsections (2) and (3).

The result is the individual’s charged amount for year X.
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428
Meaning of “gift aid declaration”
(1)
In this Chapter “gift aid declaration” means a declaration which—
(a)
is given in the manner specified by regulations made by the
Commissioners for Her Majesty’s Revenue and Customs, and
(b)
contains any information and any statements required by the
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regulations.
(2)
The regulations may provide for declarations—
(a)
to have effect,
(b)
to cease to have effect, or
(c)
to be treated as never having had effect,
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in any circumstances and for any purposes specified by the regulations.
(3)
The regulations may—
(a)
require charities to keep records with respect to declarations received
from individuals, and
(b)
make different provision for declarations made in a different manner.
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429
Giving through self-assessment return
(1)
This section applies if—
(a)
as a result of a personal return for a tax year being made by an
individual, a tax repayment for one or more tax years falls to be made
to the individual, and
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(b)
conditions A and B are met.
(2)
Condition A is that the personal return contains a single direction, in the form
specified in the return, requiring—
(a)
the whole of the tax repayment, or so much of it as does not exceed a
specified amount, to be paid on the individual’s behalf as a gift to a
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single listed charity which is specified in the return, and
(b)
the gift to be treated as a qualifying donation for the purposes of this
Chapter.
(3)
Condition B is that the gift meets Conditions A to G mentioned in section 416.

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Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
229

(4)
The gift is to be treated for the purposes of this Chapter as a qualifying
donation made by the individual at the time the payment is received by the
charity.
(5)
In this section—
“listed charity” means a charity which, at the time the personal return is
5
made, is included (at the request of the charity) in a list maintained for
the purposes of this section by the Commissioners for Her Majesty’s
Revenue and Customs,
“personal return” means a return under section 8 of TMA 1970,
“tax repayment” means a repayment (after any set-off that falls to be made
10
against the individual’s liabilities) of either or both of—
(a)
income tax or amounts paid on account of income tax, and
(b)
capital gains tax,
and, for the purposes of subsection (2)(a), includes any repayment
supplement (within the meaning of section 824 of ICTA or section 283
15
of TCGA 1992).
430
“Charity” to include exempt bodies
(1)
In this Chapter “charity” includes—
(a)
the Trustees of the National Heritage Memorial Fund,
(b)
the Historic Buildings and Monuments Commission for England,
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(c)
the National Endowment for Science, Technology and the Arts, and
(d)
a club that is registered as a community amateur sports club for the
purposes of Schedule 18 to FA 2002.
(2)
For the purposes of the application of section 414(1) in relation to clubs that are
charities as a result of subsection (1)(d) of this section, membership fees are not
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gifts.
Chapter 3
Gifts of shares, securities and real property to charities etc
Entitlement to relief
431
Relief for gifts of shares, securities and real property to charities etc
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(1)
An individual who disposes of the whole of the beneficial interest in a
qualifying investment (see section 432) to a charity is entitled to relief if—
(a)
the disposal is otherwise than by way of a bargain made at arm’s
length, and
(b)
the individual makes a claim.
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(2)
The relief is given by deducting the relievable amount in calculating the
individual’s net income for the tax year in which the disposal is made (see Step
2 of the calculation in section 23).
(3)
For the calculation of the relievable amount, see section 434.
(4)
If the qualifying investment is a qualifying interest in land (see section 433),
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this section is subject to—

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
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section 441 (certificates),
section 442 (qualifying interests in land held jointly),
section 443 (calculation of relievable amount where joint disposal), and
section 444 (disqualifying events).
(5)
See section 446 for bodies that are treated as charities for the purposes of this
5
Chapter.
(6)
See subsection (7) of section 535 of ITTOIA 2005 (top slicing relief) for provision
about how relief under this Chapter is to be ignored for the purpose of
calculating relief under that section.
432
Meaning of “qualifying investment”
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(1)
In this Chapter “qualifying investment” means—
(a)
shares or securities which are listed or dealt in on a recognised stock
exchange,
(b)
units in an authorised unit trust,
(c)
shares in an open-ended investment company,
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(d)
an interest in an offshore fund, and
(e)
a qualifying interest in land.
(2)
In this section—
“offshore fund” has the same meaning as in Chapter 5 of Part 17 of ICTA
(see sections 756A to 756C of that Act), and
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“open-ended investment company” is to be read in accordance with
section 468A(2) to (4) of ICTA.
433
Meaning of “qualifying interest in land”
(1)
In this Chapter “qualifying interest in land” means—
(a)
a freehold interest in land in the United Kingdom, or
25
(b)
a leasehold interest in land in the United Kingdom which is a term of
years absolute.

This is subject to subsections (2) to (5).
(2)
Subsection (3) applies if an individual with a beneficial interest in a freehold or
leasehold interest mentioned in subsection (1)(a) or (b) makes a disposal to a
30
charity of—
(a)
the whole of the beneficial interest, and
(b)
an easement, servitude, right or privilege so far as benefiting the land
in question.
(3)
The disposal mentioned in subsection (2)(b) is regarded for the purposes of this
35
Chapter as a disposal by the individual of the whole of the individual’s
beneficial interest in a qualifying interest in land separate from the disposal
mentioned in subsection (2)(a).
(4)
If an individual who has a freehold or leasehold interest in land in the United
Kingdom grants a lease for a term of years absolute to a charity of the whole or
40
part of that land, the grant of the lease is regarded for the purposes of this
Chapter as a disposal by the individual of the whole of the beneficial interest
in the leasehold interest so granted.

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Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
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(5)
Neither an agreement to acquire a freehold interest nor an agreement for a
lease is a qualifying interest in land.
(6)
In the application of this section to Scotland—
(a)
references to a freehold interest in land are to the interest of the owner,
(b)
references to a leasehold interest in land which is a term of years
5
absolute are to a tenant’s right over or interest in a property subject to
a lease,
(c)
references to an agreement for a lease do not include missives of let that
constitute an actual lease, and
(d)
in subsection (4) the reference to granting a lease for a term of years
10
absolute is to granting a lease.
Amount of relief
434
The relievable amount
(1)
If the disposal is a gift, the relievable amount is given by the formula—

where—
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V is the value of the net benefit to the charity at, or immediately after, the
time when the disposal is made, whichever is less,
IC is the amount of the incidental costs of making the disposal to the
individual making it, and
B is the total value of any benefits received in consequence of making the
20
disposal by the individual making the disposal or a person connected
with the individual.
(2)
If the disposal is at an undervalue, the relievable amount is given by the
formula—

where—
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E is the amount (if any) by which V (as defined in subsection (1)) exceeds
the amount or value of the consideration for the disposal,
C is given by subsection (4), and
B is as defined in subsection (1).
(3)
But if the amount given by the formula in subsection (1) or (2) is a negative
30
amount, the relievable amount is nil.
(4)
C is found by taking the following steps.


Step 1

Calculate the consideration for which the disposal is treated as made for the
35
purposes of TCGA 1992 as a result of section 257(2)(a) of that Act (in case of
disposal to charity etc, consideration to be such that no gain or loss accrues).


Step 2

Find the excess (if any) of the amount calculated at Step 1 over the amount or
40
value of the consideration for the disposal.

If there is such an excess, C is the amount of that excess or, if less, the amount
of the incidental costs of making the disposal to the individual making it.

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Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
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If there is no such excess, C is nil.
(5)
This section needs to be read with—
(a)
section 435 (incidental costs of making disposal),
(b)
section 436 (consideration), and
(c)
sections 437 to 440 (value of net benefit to charity).
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435
Incidental costs of making disposal
References in section 434 to the incidental costs of making the disposal to the
individual making it are to—
(a)
fees, commission or remuneration paid for the professional services of
a surveyor, valuer, auctioneer, accountant, agent or legal adviser which
10
are wholly and exclusively incurred by the individual for the purposes
of the disposal,
(b)
costs of transfer or conveyance wholly and exclusively incurred by the
individual for the purposes of the disposal,
(c)
costs of advertising to find a buyer, and
15
(d)
costs reasonably incurred in making any valuation or apportionment
required for the purposes of this Chapter.
436
Consideration
(1)
For the purposes of the formula in section 434(2) consideration for the disposal
is brought into account—
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(a)
without any discount for postponement of the right to receive any part
of it,
(b)
in the first instance, without regard to a risk of any part of it being
irrecoverable, and
(c)
in the first instance, without regard to the right to receive any part of it
25
being contingent.
(2)
If—
(a)
any part of the consideration so brought into account subsequently
proves to be irrecoverable, and
(b)
a claim is made,
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such adjustment as is required in consequence must be made.
(3)
An adjustment under subsection (2) may be made by way of discharge or
repayment of tax or otherwise.
Value of net benefit to charity
437
Value of net benefit to charity
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(1)
For the purposes of this Chapter the value of the net benefit to a charity is—
(a)
the market value of the qualifying investment, or
(b)
if the charity is, or becomes, subject to a disposal-related obligation, the
market value of the qualifying investment reduced by the total amount
of the disposal-related liabilities of the charity.
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(2)
This section is supplemented by—
section 438 (market value of qualifying investments),

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Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
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section 439 (meaning of “disposal-related obligation”), and
section 440 (meaning and amount of “disposal-related liability”).
438
Market value of qualifying investments
(1)
The market value of a qualifying investment for the purposes of this Chapter
is determined in accordance with sections 272 to 274 of TCGA 1992 (subject to
5
Part 1 of Schedule 11 to that Act).
(2)
But, in the case of an interest in an offshore fund for which separate buying and
selling prices are published regularly by the managers of the fund, the market
value for the purposes of this Chapter is equal to the buying price (that is the
lower price) published on—
10
(a)
the day of the disposal, or
(b)
if none were published on that day, on the latest day on which the
prices were published before that day.
439
Meaning of “disposal-related obligation”
(1)
In this Chapter an obligation is a “disposal-related obligation”, in relation to a
15
qualifying investment, if condition A or condition B is met in relation to it.
(2)
The obligation may be to any person (whether or not the individual making the
disposal or a person connected with the individual).
(3)
Condition A is that it is reasonable to suppose that the disposal of the
qualifying investment to the charity would not have been made in the absence
20
of the obligation.
(4)
Condition B is that the obligation (whether in whole or in part) relates to, is
framed by reference to, or is conditional on the charity receiving, the qualifying
investment or a disposal-related investment.
(5)
In applying condition A, all the circumstances must be taken into account
25
(including, in particular, the difference in the value of the net benefit to the
charity calculated under section 437(1)(a) and that value calculated under
section 437(1)(b)).
(6)
In subsection (4) “disposal-related investment” means any of the following—
(a)
an asset of the same class or description as the qualifying investment
30
(irrespective of size, quantity or amount),
(b)
an asset derived from, or representing, the qualifying investment,
whether in whole or in part and whether directly or indirectly, and
(c)
an asset from which the qualifying investment is derived, or which the
qualifying investment represents, whether in whole or in part and
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whether directly or indirectly.
(7)
In this Chapter “obligation” includes a reference to each of the following—
(a)
a scheme, arrangement or understanding of any kind, whether or not
legally enforceable, and
(b)
a series of obligations (whether or not between the same parties).
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