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Income Tax Bill


 

Income Tax Bill

 


 

 
 

The Bill is divided into three volumes. Volume I contains Clauses 1 to 461. Volume

II contains Clauses 462 to 968. Volume III contains the Schedules

to the Bill.

EXPLANATORY NOTES

Explanatory notes to the Bill, prepared by Her Majesty’s Revenue and Customs, are

published separately in three volumes. Bill 14—EN(I) contains the explanatory notes

to Clauses 1 to 461. Bill 14—EN(II) contains the explanatory notes to Clauses 462 to

968. Bill 14—EN(III) contains the explanatory notes to the Schedules to the Bill.

EUROPEAN CONVENTION ON HUMAN RIGHTS

Mr Chancellor of the Exchequer has made the following statement under section

19(1)(a) of the Human Rights Act 1998:

In my view the provisions of the Income Tax Bill are compatible with the Convention

rights.

 

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Income Tax Bill

 
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Income Tax Bill

 

 
 

The Bill is divided into three volumes. Volume I contains Clauses 1 to 461. Volume

II contains Clauses 462 to 968. Volume III contains the Schedules to the Bill.

Contents

Part 1

Overview

1   

Overview of Income Tax Acts

2   

Overview of Act

Part 2

Basic provisions

Chapter 1

Charges to income tax

3   

Overview of charges to income tax

4   

Income tax an annual tax

5   

Income tax and companies

Chapter 2

Rates at which income tax is charged

The rates

6   

The starting rate, basic rate and higher rate

7   

The savings rate

8   

The dividend ordinary rate and dividend upper rate

9   

The trust rate and dividend trust rate

Income charged at particular rates

10   

Income charged at the starting, basic and higher rates: individuals

11   

Income charged at the basic rate: other persons

12   

Income charged at the savings rate

13   

Income charged at the dividend ordinary and dividend upper rates:

individuals

14   

Income charged at the dividend ordinary rate: other persons

 

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Income Tax Bill

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15   

Income charged at the trust rate and the dividend trust rate

16   

Savings and dividend income to be treated as highest part of total income

17   

Repayment: tax paid at basic rate instead of starting or savings rate

18   

Meaning of “savings income”

19   

Meaning of “dividend income”

Starting rate limit and basic rate limit

20   

The starting rate limit and the basic rate limit

21   

Indexation of the starting rate limit and the basic rate limit

Chapter 3

Calculation of income tax liability

22   

Overview of Chapter

23   

The calculation of income tax liability

24   

Reliefs deductible at Step 2

25   

Reliefs and allowances deductible at Steps 2 and 3: supplementary

26   

Tax reductions

27   

Order of deducting tax reductions: individuals

28   

Order of deducting tax reductions: other persons

29   

Tax reductions: supplementary

30   

Additional tax

31   

Total income: supplementary

32   

Liability not dealt with in the calculation

Part 3

Personal reliefs

Chapter 1

Introduction

33   

Overview of Part

Chapter 2

Personal allowance and blind person’s allowance

Introduction

34   

Allowances under Chapter

Personal allowances

35   

Personal allowance for those aged under 65

36   

Personal allowance for those aged 65 to 74

37   

Personal allowance for those aged 75 and over

Blind person’s allowance

38   

Blind person’s allowance

 
 

Income Tax Bill

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39   

Transfer of part of blind person’s allowance to a spouse or civil partner

40   

Election for transfer of allowance under section 39

Supplementary

41   

Allowances in year of death

Chapter 3

Tax reductions for married couples and civil partners

Introduction

42   

Tax reductions under Chapter

43   

Meaning of “the minimum amount”

44   

Election for new rules to apply

Married couple’s allowance

45   

Marriages before 5 December 2005

46   

Marriages and civil partnerships on or after 5 December 2005

Elections to transfer relief

47   

Election by individual to transfer relief under section 45 or 46

48   

Joint election to transfer relief under section 45 or 46

49   

Election for partial transfer back of relief

50   

Procedure for making and withdrawing elections under sections 47 to 49

Transfer of unused relief

51   

Transfer of unused relief

52   

Transfer back of unused relief

53   

Transfer of unused relief: general

Supplementary

54   

Tax reductions in the year of marriage or entry into civil partnership

55   

Sections 45 to 53: supplementary

Chapter 4

General

56   

Residence etc of claimants

57   

Indexation of allowances

58   

Meaning of “adjusted net income”

 
 

Income Tax Bill

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Part 4

Loss relief

Chapter 1

Introduction

59   

Overview of Part

Chapter 2

Trade losses

Introduction

60   

Overview of Chapter

61   

Non-partners: losses of a tax year

62   

Partners: losses of a tax year etc

63   

Prohibition against double counting

Trade loss relief against general income

64   

Deduction of losses from general income

65   

How relief works

Restriction on relief for uncommercial trades

66   

Restriction on relief unless trade is commercial

Restriction on relief for "hobby" farming or market gardening

67   

Restriction on relief in case of farming or market gardening

68   

Reasonable expectation of profit

69   

Whether trade is the same trade

70   

Determining losses in previous tax years

Use of trading loss as CGT loss

71   

Treating trade losses as CGT losses

Early trade losses relief

72   

Relief for individuals for losses in first 4 years of trade

73   

How relief works

74   

Restrictions on relief unless trade is commercial etc

Restrictions on sideways relief for certain capital allowances

75   

Trade leasing allowances given to individuals

76   

First-year allowances: introduction

77   

First-year allowances: partnerships with companies

78   

First-year allowances: arrangements to reduce tax liabilities

79   

Capital allowances restrictions: supplementary

 
 

Income Tax Bill

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Restriction on sideways relief for specific trades

80   

Ring fence income

81   

Dealings in commodity futures

82   

Exploitation of films

Carry-forward trade loss relief

83   

Carry forward against subsequent trade profits

84   

How relief works

85   

Use of trade-related interest and dividends if trade profits insufficient

86   

Trade transferred to a company

87   

Ring fence trades

88   

Carry forward of certain interest as loss

Terminal trade loss relief

89   

Carry back of losses on a permanent cessation of a trade

90   

Losses that are “terminal losses”

91   

How relief works

92   

Use of trade-related interest and dividends if trade profits insufficient

93   

Mineral extraction trade and carry back of balancing allowances

94   

Carry back of certain interest as loss

Wholly foreign trades

95   

Foreign trades etc: reliefs only against foreign income

Post-cessation trade relief

96   

Post-cessation trade relief

97   

Meaning of “qualifying payment”

98   

Meaning of “qualifying event” etc

99   

Reduction of relief for unpaid trade expenses

100   

Prohibition against double counting

101   

Treating excess post-cessation trade relief as CGT loss

Chapter 3

Restrictions on trade loss relief for certain partners

Introduction

102   

Overview of Chapter

103   

Meaning of “sideways relief”, “capital gains relief” and “firm”

Limited partners

104   

Restriction on reliefs for limited partners

105   

Meaning of “contribution to the firm”

106   

Meaning of “limited partner”

Members of LLPs

107   

Restriction on reliefs for members of LLPs

 
 

 
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Revised 8 December 2006