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 4 — Annual payments and patent royalties
237

448
Relief for individuals
(1)
This section applies to a payment made in a tax year if—
(a)
the person who makes it is an individual,
(b)
a sum representing income tax is required by section 900(2) or 903(5)
(deduction from annual payments and patent royalties) to be deducted
5
from it, and
(c)
the payment is not deductible in calculating the individual’s income
from any source.
(2)
The individual is entitled to relief for the tax year equal to the gross amount of
the payment.
10
(3)
But this is subject to the restrictions in subsection (4) and section 451.
(4)
The total amount of relief given under this section to an individual for a tax
year cannot be greater than the amount of the individual’s modified net
income for the tax year (see section 1025).
(5)
The relief is given by deducting the amount of the relief in calculating the
15
individual’s net income for the tax year (see Step 2 of the calculation in section
23).
449
Relief for other persons
(1)
This section applies to a payment made in a tax year if—
(a)
the person who makes it is not an individual,
20
(b)
a sum representing income tax is required by section 901(3) or 903(6)
(deduction from annual payments and patent royalties) to be deducted
from it, and
(c)
the payment is not deductible in calculating the person’s income from
any source.
25
(2)
The person who makes the payment is entitled to relief for the tax year equal
to the gross amount of the payment.
(3)
But this is subject to the restrictions in subsections (4) and (5) and section 451.
(4)
Relief is not given for the payment so far as it is ineligible for relief (see section
450).
30
(5)
The total amount of relief given under this section to a person for a tax year
cannot be greater than the amount of the person’s modified net income for the
tax year (see section 1025).
(6)
The relief is given by deducting the amount of the relief in calculating the
person’s net income for the tax year (see Step 2 of the calculation in section 23).
35
450
Other persons: payments ineligible for relief
(1)
This section sets out the circumstances in which a payment to which section
449 applies, or part of it, is ineligible for relief.
(2)
The payment is ineligible for relief if, or so far as, it can lawfully be made only
out of—
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(a)
capital, or
(b)
income that is exempt from income tax.

Income Tax Bill
Part 8 — Other reliefs
Chapter 4 — Annual payments and patent royalties
238

(3)
If the payment or any part of it is charged to capital, the payment or that part
is ineligible for relief.
(4)
If—
(a)
the person who makes the payment treats it or any part of it as made
out of income that is exempt from income tax, and
5
(b)
the rights or obligations of any person are or may in the future be
different from what they would have been if the payment or part had
not been so treated,

the payment, or the part concerned, is ineligible for relief.
(5)
If the payment or a part of it is not ultimately borne by the person who makes
10
it, the payment or the part concerned is ineligible for relief.
(6)
But subsection (5) does not apply to a payment or part of a payment if—
(a)
the person who makes the payment is liable to income tax on an
amount, and
(b)
it is because the person receives that amount or benefits from it in some
15
other way that the payment or the part concerned is not ultimately
borne by that person.
451
Special rule for persons affected by section 733 of ICTA
(1)
This section applies if—
(a)
interest payable to a person in respect of securities (“the affected
20
income”) is attributable to a tax year,
(b)
because of section 733(1) of ICTA (dividend buying etc: persons
entitled to exemptions), some part of the affected income is not exempt
from income tax, and
(c)
the person makes one or more relievable payments in the tax year
25
which are qualifying annual payments.
(2)
Relief under this Chapter for those payments is given only for—
(a)
the sum of the gross amounts of the payments, or
(b)
if less, the amount of the person’s non-affected income.
(3)
The person’s non-affected income is—
30
(a)
the person’s modified net income for the tax year (see section 1025), less
(b)
the affected income.
(4)
Apply this section before working out the result of section 448(4) or 449(5).
(5)
In this section—
“interest” and “securities” are to be read in accordance with section 731(9)
35
of ICTA,
“relievable payment” means a payment to which section 448 or 449
applies, and
“qualifying annual payment” has the same meaning as in Chapter 6 of
Part 15 (see section 899).
40
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

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

deductible from it under Chapter 6 of Part 15 (deduction from annual
payments and patent royalties).
Chapter 5
Qualifying maintenance payments
453
Tax reduction for qualifying maintenance payments
5
(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.
(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
10
(b)
if less, the amount specified in section 43 (tax reductions for married
couples and civil partners: meaning of “the minimum amount”).
(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
15
payment” if conditions A to E are met.
(2)
Condition A is that the payment is a periodical payment made by—
(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
20
party, or
(b)
one parent of a child to the child’s other parent for the maintenance of
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—
25
(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
(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.
30
(4)
Condition C is that the payment is made—
(a)
under an order made by a court in a member State, or
(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—
35
(a)
in a case falling within subsection (2)(a)—
(i)
the two parties are not a married couple, or civil partners of
each other, living together (see section 1011), and
(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,
40
and

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Part 8 — Other reliefs
Chapter 5 — Qualifying maintenance payments
240

(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
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
5
section 453.
(7)
In subsection (4) the reference to an order made by a court in a member State
includes a reference to a maintenance calculation.
(8)
“Maintenance calculation” means—
(a)
a maintenance calculation made under the Child Support Act 1991
10
(c. 48), or
(b)
a maintenance assessment made under the Child Support (Northern
Ireland) Order 1991 (S.I. 1991/2628 (N.I. 23)).
(9)
In this section—
“child” means a person under 21 years of age,
15
“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
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.
20
455
Child support maintenance payments
(1)
Condition A in section 454(2) is treated as met in relation to a payment if—
(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
25
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
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),
30
and
(d)
any of the conditions mentioned in subsection (2) is met.
(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
35
virtue of subsection (3)(a)(ii) of that section (collection of child support
maintenance: payment to or through Secretary of State),
(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),
40
(c)
the payment is made to the Department of Health, Social Services and
Public Safety for Northern Ireland in accordance with regulations made
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
(collection of child support maintenance: payment to or through
45
Department), or

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Part 8 — Other reliefs
Chapter 6 — Miscellaneous other reliefs
241

(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
maintenance).
(3)
“Maintenance calculation” and “periodical payment” have the meanings given
5
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
by any person if—
(a)
it is a periodical payment made to the Secretary of State or to the
10
Department of Health, Social Services and Public Safety for Northern
Ireland, and
(b)
it is made under a recovery of benefit order.
(2)
A “recovery of benefit order” is—
(a)
one made under section 106 of the Social Security Administration Act
15
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
claimed by any other person, or
(b)
one made by virtue of section 23 of the Jobseekers Act 1995 (c. 18) or
20
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.
(3)
In subsection (2) “income-based jobseeker’s allowance” has the same meaning
as in—
25
(a)
the Jobseekers Act 1995, or
(b)
for Northern Ireland, the Jobseekers (Northern Ireland) Order 1995 (S.I.
1995/2705 (N.I. 15)).
(4)
“Periodical payment” has the meaning given in section 454(9).
Chapter 6
30
Miscellaneous other reliefs
Payments for life insurance etc
457
Payments to trade unions
(1)
An individual who makes a payment to a trade union in a tax year is entitled
to relief for the tax year if—
35
(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),
and
(c)
the individual makes a claim.
40
(2)
The amount of the relief is equal to half the qualifying amount.

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Part 8 — Other reliefs
Chapter 6 — Miscellaneous other reliefs
242

(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
23).
5
(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
entitled to relief for the tax year if—
10
(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,
(c)
the individual meets the requirements of section 460 (residence etc),
15
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 for a tax year is £100.
20
(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.
459
Payments for benefit of family members
25
(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,
(b)
the sum is for the purpose of—
30
(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,
(c)
the individual meets the requirements of section 460 (residence etc),
35
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.
(3)
But the maximum amount of the tax reduction under this section to which an
40
individual is entitled for a tax year is equal to income tax at the basic rate on
£100.

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Chapter 6 — Miscellaneous other reliefs
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(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 903.