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House of Commons

Session 2006 - 07 Internet Publications Other Bills before Parliament

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 ii
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
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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”
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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
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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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