Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 8 — Other reliefs
Chapter 5 — Qualifying maintenance payments
239

452
The gross amount of a payment
References in this Chapter to the gross amount of a payment are to the amount
of the payment before deduction of the sum representing income tax
deductible from it under Chapter 6 of Part 14 (deduction from annual
payments and patent royalties).
5
Chapter 5
Qualifying maintenance payments
453
Tax reduction for qualifying maintenance payments
(1)
An individual who makes a claim is entitled to a tax reduction for a tax year in
which any qualifying maintenance payments made by the individual fall due.
10
(2)
The amount of the tax reduction is 10% of—
(a)
the total amount of qualifying maintenance payments made by the
individual which fall due in the tax year, or
(b)
if less, the amount specified in section 43 (tax reductions for married
couples and civil partners: meaning of “the minimum amount”).
15
(3)
The tax reduction is given effect at Step 6 of the calculation in section 23.
454
Meaning of “qualifying maintenance payment”
(1)
For the purposes of section 453 a payment is a “qualifying maintenance
payment” if conditions A to E are met.
(2)
Condition A is that the payment is a periodical payment made by—
20
(a)
one of the parties to a marriage or civil partnership (including a
marriage or civil partnership which has been dissolved or annulled) to
or for the benefit of the other party and for the maintenance of the other
party, or
(b)
one parent of a child to the child’s other parent for the maintenance of
25
the child by the other parent or by one person to another for the
maintenance by the other of a relevant child of theirs.
(3)
Condition B is that—
(a)
in a case falling within subsection (2)(a), either of the parties to the
marriage or civil partnership was born before 6 April 1935, and
30
(b)
in a case falling within subsection (2)(b), either the person who made
the payment, or the person to whom it is made, was born before that
date.
(4)
Condition C is that the payment is made—
(a)
under an order made by a court in a member State, or
35
(b)
under a written agreement the law applicable to which is the law of a
member State or of a part of a member State.
(5)
Condition D is that the payment is due at a time when—
(a)
in a case falling within subsection (2)(a)—
(i)
the two parties are not a married couple, or civil partners of
40
each other, living together (see section 945), and

Income Tax Bill
Part 8 — Other reliefs
Chapter 5 — Qualifying maintenance payments
240

(ii)
the party to whom or for whose benefit the payment is made
has not entered into a new marriage or a new civil partnership,
and
(b)
in a case falling within subsection (2)(b), the person making the
payment and the person to whom the payment is made are not living
5
together.
(6)
Condition E is that relief from tax in respect of the payment is not available to
the person making it under any provision of the Income Tax Acts other than
section 453.
(7)
In subsection (4) the reference to an order made by a court in a member State
10
includes a reference to a maintenance calculation.
(8)
“Maintenance calculation” means—
(a)
a maintenance calculation made under the Child Support Act 1991
(c. 48), or
(b)
a maintenance assessment made under the Child Support (Northern
15
Ireland) Order 1991 (S.I. 1991/2628 (N.I. 23)).
(9)
In this section—
“child” means a person under 21 years of age,
“periodical payment” does not include an instalment of a lump sum, and
“relevant child”, in relation to any two persons, means a child who (not
20
being a child who has been boarded out with them by a public
authority or voluntary organisation) has been treated by both of them
as a child of their family.
455
Child support maintenance payments
(1)
Condition A in section 454(2) is treated as met in relation to a payment if—
25
(a)
it is a periodical payment made under a maintenance calculation by any
person,
(b)
another person is, for the purposes of the Child Support Act 1991 or (as
the case may be) the Child Support (Northern Ireland) Order 1991 (S.I.
1991/2628 (N.I. 23)), a parent of the child or children with respect to
30
whom the calculation has effect,
(c)
the calculation was not made under section 7 of the Child Support Act
1991 (right of child in Scotland to apply for maintenance calculation),
and
(d)
any of the conditions mentioned in subsection (2) is met.
35
(2)
The conditions are that—
(a)
the payment is made to the Secretary of State in accordance with
regulations made under section 29 of the Child Support Act 1991 by
virtue of subsection (3)(a)(ii) of that section (collection of child support
maintenance: payment to or through Secretary of State),
40
(b)
the payment is retained by the Secretary of State in accordance with
regulations made under section 41 of that Act (arrears of child support
maintenance),
(c)
the payment is made to the Department of Health, Social Services and
Public Safety for Northern Ireland in accordance with regulations made
45
under Article 29 of the Child Support (Northern Ireland) Order 1991
(S.I. 1991/2628 (N.I. 23)), by virtue of paragraph (3)(a)(ii) of that Article

Income Tax Bill
Part 8 — Other reliefs
Chapter 6 — Miscellaneous other reliefs
241

(collection of child support maintenance: payment to or through
Department), or
(d)
the payment is retained by the Department of Health, Social Services
and Public Safety for Northern Ireland in accordance with regulations
made under Article 38 of that Order (arrears of child support
5
maintenance).
(3)
“Maintenance calculation” and “periodical payment” have the meanings given
in section 454(8) and (9).
456
Payments under orders for recovery of benefit etc
(1)
Condition A in section 454(2) is treated as met in relation to a payment made
10
by any person if—
(a)
it is a periodical payment made to the Secretary of State or to the
Department of Health, Social Services and Public Safety for Northern
Ireland, and
(b)
it is made under a recovery of benefit order.
15
(2)
A “recovery of benefit order” is—
(a)
one made under section 106 of the Social Security Administration Act
1992 (c. 5) or section 101 of the Social Security Administration
(Northern Ireland) Act 1992 (c. 8) (recovery of expenditure on benefit
from person liable for maintenance) in respect of income support
20
claimed by any other person, or
(b)
one made by virtue of section 23 of the Jobseekers Act 1995 (c. 18) or
Article 25 of the Jobseekers (Northern Ireland) Order 1995 (S.I. 1995/
2705 (N.I. 15)) (recovery of sums in respect of maintenance), in respect
of an income-based jobseeker’s allowance claimed by any other person.
25
(3)
In subsection (2) “income-based jobseeker’s allowance” has the same meaning
as in—
(a)
the Jobseekers Act 1995, or
(b)
for Northern Ireland, the Jobseekers (Northern Ireland) Order 1995 (S.I.
1995/2705 (N.I. 15)).
30
(4)
“Periodical payment” has the meaning given in section 454(9).
Chapter 6
Miscellaneous other reliefs
Payments for life insurance etc
457
Payments to trade unions
35
(1)
An individual who makes a payment to a trade union in a tax year is entitled
to relief for the tax year if—
(a)
part of the payment (the “qualifying amount”) is attributable to the
provision of superannuation, life insurance or funeral benefits,
(b)
the individual meets the requirements of section 460 (residence etc),
40
and
(c)
the individual makes a claim.

Income Tax Bill
Part 8 — Other reliefs
Chapter 6 — Miscellaneous other reliefs
242

(2)
The amount of the relief is equal to half the qualifying amount.
(3)
But the maximum amount of relief under this section to which an individual is entitled
for a tax year is £100.
(4)
The relief is given by deducting the amount of the relief in calculating the
individual’s net income for the tax year (see Step 2 of the calculation in section
5
23).
(5)
“Trade union” has the meaning given by section 1 of the Trade Union and
Labour Relations (Consolidation) Act 1992 (c. 52).
458
Payments to police organisations
(1)
An individual who makes a payment to a police organisation in a tax year is
10
entitled to relief for the tax year if—
(a)
part of the payment (the “qualifying amount”) is attributable to the
provision of superannuation, life insurance or funeral benefits,
(b)
the sum of the qualifying amounts for all the payments which the
individual makes in the tax year is at least £20,
15
(c)
the individual meets the requirements of section 460 (residence etc),
and
(d)
the individual makes a claim.
(2)
The amount of the relief is equal to half the qualifying amount.
(3)
But the maximum amount of relief under this section to which an individual is entitled
20
for a tax year is £100.
(4)
The relief is given by deducting the amount of the relief in calculating the
individual’s net income for the tax year (see Step 2 of the calculation in section
23).
(5)
“Police organisation” means an organisation of persons in police service.
25
459
Payments for benefit of family members
(1)
An individual who pays a sum, or from whose earnings a sum is deducted, in
a tax year is entitled to a tax reduction for the tax year if—
(a)
the sum is paid or deducted under an Act or the individual’s terms and
conditions of employment,
30
(b)
the sum is for the purpose of—
(i)
securing a deferred annuity after the individual’s death for the
individual’s surviving spouse or civil partner, or
(ii)
making provision after the individual’s death for the
individual’s children,
35
(c)
the individual meets the requirements of section 460 (residence etc),
and
(d)
the individual makes a claim.
(2)
The amount of the tax reduction is equal to income tax at the basic rate on the
total of all the sums paid or deducted in the tax year.
40
(3)
But the maximum amount of the tax reduction under this section to which an
individual is entitled for a tax year is equal to income tax at the basic rate on £100.

Income Tax Bill
Part 8 — Other reliefs
Chapter 6 — Miscellaneous other reliefs
243

(4)
A tax reduction under this section is given effect at Step 6 of the calculation in
section 23.
(5)
There is no entitlement to a tax reduction under this section in respect of a
contribution paid by any person under—
(a)
Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4),
5
or
(b)
Part 1 of the Social Security Contributions and Benefits (Northern
Ireland) Act 1992 (c. 7).
(6)
This section is also subject to sections 192 to 194 of FA 2004 (relief for pension
contributions).
10
(7)
In this section “earnings” has the meaning given by section 62 of ITEPA 2003.
460
Residence etc of claimants
(1)
This section applies in relation to an individual who claims—
(a)
relief under section 457 or 458 (payments to trade unions and police
organisations) for a tax year, or
15
(b)
a tax reduction under section 459 (payments for benefit of family
members) for a tax year.
(2)
The individual meets the requirements of this section if the individual—
(a)
is UK resident for the tax year, or
(b)
meets the condition in subsection (3).
20
(3)
An individual meets the condition in this subsection if, at any time in the tax
year, the individual—
(a)
is resident in the Isle of Man or the Channel Islands,
(b)
has previously resided in the United Kingdom and is resident abroad
for the sake of the health of—
25
(i)
the individual, or
(ii)
a member of the individual’s family who is resident with the
individual,
(c)
is a person who is or has been employed in the service of the Crown,
(d)
is employed in the service of any territory under Her Majesty’s
30
protection,
(e)
is employed in the service of a missionary society, or
(f)
is a person whose late spouse or late civil partner was employed in the
service of the Crown.
Patent royalty receipts
35
461
Spreading of patent royalty receipts
(1)
A person who makes a claim is entitled to a tax reduction for a tax year in
which the person receives a payment of a royalty or other sum if—
(a)
the payment is in respect of the use of a patent,
(b)
the use of the patent has extended over a period of two years or more,
40
and
(c)
the payment is one from which a sum representing income tax is
required to be deducted under section 836.

Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 1 — Introduction
244

(2)
The amount of the tax reduction is the difference between—
(a)
the amount of income tax payable by the person in respect of the
payment, and
(b)
the total amount of income tax which would have been payable by the
person in respect of the payment on the assumptions in subsection (3).
5
(3)
Those assumptions are that—
(a)
the payment was made in a number of equal instalments at yearly
intervals,
(b)
the last instalment was paid on the date on which the payment was in
fact made, and
10
(c)
the number of instalments was the same as the number of complete
years in the period over which the use of the patent extended, but
subject to a maximum of 6.
(4)
The tax reduction is given effect at Step 6 of the calculation in section 23.
15
Part 9
Special rules about settlements and trustees
Chapter 1
Introduction
462
Overview of Part
20
(1)
This Part sets out special rules about settlements and trustees.
(2)
Chapter 2 contains general provision about settlements and trustees, for
example, definitions of expressions relating to settlements.
(3)
Chapter 3 provides for income tax to be charged at the dividend trust rate or at
the trust rate on certain amounts included in the net income of the trustees of
25
a settlement.
(4)
Chapter 4 provides—
(a)
for expenses of the trustees of a settlement to be set against the trustees’
trust rate income (see section 463(2)), and
(b)
consequentially, for the amount of the trust rate income to be reduced.
30
(5)
Chapter 5 qualifies section 479 (which is in Chapter 3) in the case of the trustees
of an approved share incentive plan.
(6)
Chapter 6 provides that the first slice of the trust rate income of the trustees of
a settlement is not to be charged at the dividend trust rate or at the trust rate.
(7)
Chapter 7 deals with the treatment of payments made by the trustees of a
35
settlement in the exercise of a discretion.

This affects the way the trustees and the recipients of such payments are taxed.
(8)
Chapter 8 deals with the treatment of expenses of the trustees of a settlement
where income arising to the trustees is, before being distributed, the income of
a person other than the trustees themselves.
40

This affects the way that other person is taxed on that income.

Income Tax Bill
Part 9 — Special rules about settlements and trustees
Chapter 2 — General provision about settlements and trustees
245

(9)
Chapter 9 deals with unauthorised unit trusts.
(10)
Chapter 10 deals with heritage maintenance settlements.
(11)
See also Part 10 for special rules about charitable trusts.
(12)
See also Chapter 4 of Part 2 of FA 2005 for provision about trusts with
vulnerable beneficiaries.
5
463
Interpretation of Part
(1)
In this Part—
“other income” means income which is neither dividend income nor
savings income, and
“the trustees of a settlement” does not include personal representatives.
10
(2)
References in this Part to the trust rate income for a tax year of the trustees of a
settlement are references to the trustees’ net income for the tax year so far as it
includes amounts on which income tax is charged at the dividend trust rate or
at the trust rate (ignoring Chapters 4 and 6).
464
Scottish trusts
15
(1)
This section applies if—
(a)
income arises to trustees under a trust having effect under the law of
Scotland,
(b)
the trustees are UK resident, and
(c)
a beneficiary under the trust (“B”) would have an equitable right in
20
possession to the income if the trust had effect under the law of England
and Wales.
(2)
B is treated for income tax purposes as having an equitable right in possession
to the income (even though B has no such right under the law of Scotland).
Chapter 2
25
General provision about settlements and trustees
Overview
465
Overview of Chapter and interpretation
(1)
This Chapter contains general provision about settlements and trustees.
(2)
Section 466 explains what is meant by references to settled property.
30
(3)
Sections 467 to 473 explain what is meant by references to a settlor in relation
to a settlement.
(4)
Sections 474 to 476 treat the trustees of a settlement as a single and distinct
person and set out rules in relation to the residence and ordinary residence of
that person.
35
(5)
Section 477 relates to sub-fund elections under paragraph 1 of Schedule 4ZA to
TCGA 1992.