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Income Tax Bill


Income Tax Bill
Part 3 — Personal reliefs
Chapter 3 — Tax reductions for married couples and civil partners

25

 

(2)   

In making that calculation, do not deduct any tax reduction under—

(a)   

section 788 of ICTA (double taxation arrangements: relief by

agreement), or

(b)   

section 790(1) of ICTA (relief for foreign tax where there are no double

taxation arrangements).

5

(3)   

If the individual’s entitlement to a tax reduction under this Chapter is

extinguished under section 423(4) (gift aid: restriction of reliefs) to any extent,

deduct from the amount calculated in accordance with subsections (1) and (2)

the amount by which the tax reduction is reduced.

(4)   

A notice under section 51 or 52

10

(a)   

must be given on or before the fifth anniversary of the normal self-

assessment filing date for the tax year to which it relates,

(b)   

must be in the form specified by the Commissioners for Her Majesty’s

Revenue and Customs, and

(c)   

cannot be withdrawn.

15

(5)   

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.

Supplementary

54      

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

20

(1)   

Subsection (2) applies if an individual—

(a)   

gets married or enters into a civil partnership in a tax year, and

(b)   

claims a tax reduction under section 45 or 46 for that tax year.

(2)   

In calculating the amount of the tax reduction (if any) to which the individual

is entitled under that section, the amounts specified in section 45(3) or 46(3) (as

25

applicable) are reduced by one twelfth for each month of the tax year which is

a month ending before the date on which—

(a)   

the marriage took place, or

(b)   

the civil partnership was formed.

(3)   

The reference in subsection (2) to the amounts specified in section 45(3) or 46(3)

30

is to those amounts after any reduction under section 45(4) or 46(4).

(4)   

But if—

(a)   

the individual has previously been married or in a civil partnership in

the same tax year, and

(b)   

the conditions in section 45(2) or 46(2) are met in relation to the earlier

35

marriage or civil partnership,

   

subsection (2) applies only if the claim is in respect of the later marriage or civil

partnership.

(5)   

If a claim under section 47, 48 or 49 is for the tax year in which the marriage

takes place, or the civil partnership is formed, the references in those sections

40

to the minimum amount are to be read as references to the minimum amount

reduced by one twelfth for each month of the tax year which is a month ending

before the date on which—

(a)   

the marriage took place, or

 
 

Income Tax Bill
Part 3 — Personal reliefs
Chapter 4 — General

26

 

(b)   

the civil partnership was formed.

(6)   

In this section, “month” means a period beginning with the sixth day of a

calendar month and ending with the fifth day of the next calendar month.

55      

Sections 45 to 53: supplementary

(1)   

An individual is not entitled to more than one tax reduction under sections 45

5

to 48 for a tax year (regardless of whether the individual is a party to more than

one marriage or civil partnership in the tax year).

(2)   

For the purposes of sections 45 and 46 an individual is treated as having

reached the age of 75 in a tax year if the individual was due to reach the age of

75 in the tax year, but dies in the tax year before reaching that age.

10

(3)   

Unless this Chapter provides otherwise, a tax reduction to which an individual

is entitled under this Chapter for a tax year, including the tax year in which the

individual dies, is given in full.

Chapter 4

General

15

56      

Residence etc of claimants

(1)   

This section applies in relation to an individual who claims—

(a)   

an allowance under Chapter 2 (personal allowance and blind person’s

allowance) for a tax year, or

(b)   

a tax reduction under Chapter 3 (tax reductions for married couples

20

and civil partners) 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).

(3)   

An individual meets the condition in this subsection if, at any time in the tax

25

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—

(i)   

the individual, or

30

(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

protection,

35

(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.

57      

Indexation of allowances

(1)   

This section provides for increases in the amounts specified in—

40

(a)   

section 35 (personal allowance for those aged under 65),

 
 

Income Tax Bill
Part 3 — Personal reliefs
Chapter 4 — General

27

 

(b)   

section 36(1) (personal allowance for those aged 65 to 74),

(c)   

section 37(1) (personal allowance for those aged 75 and over),

(d)   

section 38(1) (blind person’s allowance),

(e)   

section 43 (tax reductions for married couples and civil partners: the

minimum amount),

5

(f)   

section 45(3)(a) and (b) (marriages before 5 December 2005),

(g)   

section 46(3)(a) and (b) (marriages and civil partnerships on or after 5

December 2005), and

(h)   

sections 36(2), 37(2), 45(4) and 46(4) (adjusted net income limit).

(2)   

It applies if the retail prices index for the September before the start of a tax

10

year is higher than it was for the previous September.

(3)   

For the tax year—

(a)   

the allowances specified in sections 35, 36(1), 37(1), 38(1),

(b)   

the amounts specified in sections 45(3)(a) and (b) and 46(3)(a) and (b),

and

15

(c)   

the minimum amount specified in section 43,

   

are found as follows.

Step 1

   

Multiply the allowance, amount or (as the case may be) the minimum amount

for the previous tax year by the same percentage as the percentage increase in

20

the retail prices index.

Step 2

   

If the result of Step 1 is a multiple of £10, it is the increase for the tax year.

   

If the result of Step 1 is not a multiple of £10, round it up to the nearest amount

which is a multiple of £10.

25

   

That amount is the increase for the tax year.

Step 3

   

Add the increase for the tax year to the allowance, amount or (as the case may

be) the minimum amount for the previous tax year.

   

The result is the allowance, amount or (as the case may be) the minimum

30

amount for the tax year.

(4)   

For the tax year, the adjusted net income limits specified in sections 36(2), 37(2),

45(4) and 46(4) are found as follows.

Step 1

   

Increase the adjusted net income limit for the previous tax year by the same

35

percentage as the percentage increase in the retail prices index.

Step 2

   

If the result of Step 1 is a multiple of £100, it is the adjusted net income limit for

the tax year.

   

If the result of Step 1 is not a multiple of £100, round it up to the nearest amount

40

which is a multiple of £100.

   

That amount is the adjusted net income limit for the tax year.

 
 

Income Tax Bill
Part 4 — Loss relief
Chapter 1 — Introduction

28

 

(5)   

Subsections (1) to (4) do not require a change to be made in the amounts

deductible or repayable under PAYE regulations during the period beginning

on 6 April and ending on 17 May in the tax year.

(6)   

Before the start of the tax year the Treasury must make an order replacing the

amounts specified in the provisions listed in subsection (1) with the amounts

5

which, as a result of this section, are the allowances, amounts, the minimum

amount and the adjusted net income limits for the tax year.

58      

Meaning of “adjusted net income”

(1)   

For the purposes of Chapters 2 and 3, an individual’s adjusted net income for

a tax year is calculated as follows.

10

Step 1

   

Take the amount of the individual’s net income for the tax year.

Step 2

   

If in the tax year the individual makes, or is treated under section 426 as

making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part

15

8 (gift aid) deduct the grossed up amount of the gift.

Step 3

   

If the individual is given relief in accordance with section 192 of FA 2004 (relief

at source) in respect of any contribution paid in the tax year under a pension

scheme, deduct the gross amount of the contribution.

20

Step 4

   

Add back any relief under section 457 or 458 (payments to trade unions or

police organisations) that was deducted in calculating the individual’s net

income for the tax year.

   

The result is the individual’s adjusted net income for the tax year.

25

(2)   

The grossed up amount of a gift is the amount of the gift grossed up by

reference to the basic rate for the tax year.

(3)   

The gross amount of a contribution is the amount of the contribution before

deduction of tax under section 192(1) of FA 2004.

Part 4

30

Loss relief

Chapter 1

Introduction

59      

Overview of Part

(1)   

This Part provides for income tax relief for—

35

(a)   

losses in a trade, profession or vocation (and certain post-cessation

payments and events) (see Chapters 2 and 3),

(b)   

losses in a UK property business or overseas property business (and, in

the case of a UK property business, certain post-cessation payments

and events) (see Chapter 4),

40

 
 

Income Tax Bill
Part 4 — Loss relief
Chapter 2 — Trade losses

29

 

(c)   

losses in an employment or office (see Chapter 5),

(d)   

losses on a disposal of certain shares (see Chapter 6), and

(e)   

losses in certain miscellaneous transactions (see Chapter 7).

(2)   

This Part needs to be read with Chapter 3 of Part 2 (calculation of income tax

liability).

5

(3)   

For rules about the calculation of losses for the purposes of this Part, see—

(a)   

section 26 of ITTOIA 2005 (losses of a trade, profession or vocation

calculated on same basis as profits),

(b)   

section 272 of ITTOIA 2005 (which applies section 26 of that Act, so that

losses of a UK property business or overseas property business are

10

calculated on the same basis as profits),

(c)   

section 11 of ITEPA 2003 (calculation of “net taxable earnings”), and

(d)   

section 872 of ITTOIA 2005 (losses from miscellaneous transactions

calculated on same basis as miscellaneous income).

Chapter 2

15

Trade losses

Introduction

60      

Overview of Chapter

(1)   

This Chapter—

(a)   

provides for trade loss relief against general income (see sections 64 to

20

70),

(b)   

provides for early trade losses relief (see sections 72 to 74),

(c)   

contains provision restricting both those reliefs (see sections 75 to 82),

(d)   

provides for carry-forward trade loss relief (see sections 83 to 88),

(e)   

provides for terminal trade loss relief (see sections 89 to 94),

25

(f)   

contains restrictions on the above reliefs for trades, professions and

vocations carried on wholly outside the United Kingdom (see section

95), and

(g)   

provides for post-cessation trade relief (see sections 96 to 100).

(2)   

This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for

30

loss relief involving two or more years).

(3)   

For a rule treating an individual as starting or permanently ceasing to carry on

a trade, profession or vocation for income tax purposes (including those of this

Part), see—

(a)   

section 17 of ITTOIA 2005 (effect of becoming or ceasing to be a UK

35

resident), and

(b)   

section 852(6) and (7) of ITTOIA 2005 (corresponding rule in the case of

a trade or profession carried on by a firm).

(4)   

For the purposes of this Chapter sideways relief is—

(a)   

trade loss relief against general income, or

40

(b)   

early trade losses relief.

 
 

Income Tax Bill
Part 4 — Loss relief
Chapter 2 — Trade losses

30

 

(5)   

References in this Chapter to a firm are to be read in the same way as references

to a firm in Part 9 of ITTOIA 2005 (which contains special provision about

partnerships).

61      

Non-partners: losses of a tax year

(1)   

This section applies if a trade, profession or vocation is carried on by a person

5

otherwise than as a partner in a firm.

(2)   

For the purposes of this Chapter any reference to the person making a loss in

the trade, profession or vocation in a tax year is to the person making a loss in

the trade, profession or vocation in the basis period for the tax year.

(3)   

This section is subject to section 70 (restriction on trade loss relief against

10

general income in case of farming or market gardening).

(4)   

For the rules about basis periods, see Chapter 15 of Part 2 of ITTOIA 2005.

(5)   

In particular, see the rule in section 206 of ITTOIA 2005 (restriction on bringing

losses into account twice).

62      

Partners: losses of a tax year etc

15

(1)   

This section applies if a trade or profession is carried on by a person as a

partner in a firm.

(2)   

Any reference to a person making a loss in a trade or profession in a tax year is

to the partner making a loss in the partner’s notional trade in the basis period

for the tax year (as to which, see sections 852 and 853 of ITTOIA 2005).

20

(3)   

Further—

(a)   

any reference to a person making a claim for relief for a loss made in a

trade or profession is to the partner making a claim for relief for a loss

made in the partner’s notional trade,

(b)   

any reference to a basis period for a tax year is to the basis period for

25

the partner’s notional trade for the tax year,

(c)   

any reference to the profits or losses of a partner’s notional trade of a

tax year is to the partner’s share of the firm’s profits or losses of the

trade or profession treated for the purposes of Chapter 15 of Part 2 of

ITTOIA 2005 as the profits or losses of the partner’s notional trade in

30

the basis period for the tax year,

(d)   

any reference to a person starting to carry on a trade or profession is to

the partner starting to carry on the notional trade in accordance with

section 852(2) or (3) of ITTOIA 2005, and

(e)   

any reference to a person permanently ceasing to carry on a trade or

35

profession is to the partner permanently ceasing to carry on the

notional trade in accordance with section 852(4) to (6) of ITTOIA 2005.

(4)   

In this section a partner’s “notional trade” has the same meaning as in Part 9 of

ITTOIA 2005.

(5)   

This section applies for the purposes of this Chapter and Chapter 3, except that

40

it does not apply for the purposes of section 67(2) or sections 68 to 70

(restriction on trade loss relief against general income in case of farming or

market gardening).

 
 

 
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