Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

97
Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 1 — Amendments of ITA 2007

Schedules
Schedule 1
Section 3

Abolition of starting and savings rates and creation of starting rate for
savings
Part 1
5
Amendments of ITA 2007
1
ITA 2007 is amended as follows.
2
For section 7 (savings rate) substitute—
“7
The starting rate for savings
The starting rate for savings is 10%.”
10
3     (1)
Section 10 (income charged at main rates: individuals) is amended as
follows.
      (2)
Omit subsection (1).
      (3)
For subsection (2) substitute—
“(2)
Income tax on an individual’s income up to the basic rate limit is
15
charged at the basic rate (except to the extent that, in accordance with
section 12, it is charged at the starting rate for savings).”
      (4)
In subsection (4), omit the entry relating to section 12.
      (5)
For subsection (5) substitute—
“(5)
The basic rate limit is £36,000.
20
(6)
The basic rate limit is increased in some circumstances: see—
(a)
section 414(2) (gift aid relief), and
(b)
section 192(4) of FA 2004 (relief for pension contributions).
(7)
See section 21 for indexation of the basic rate limit.”
      (6)
Accordingly, in the heading, omit “starting,”.
25
4
In section 11(2) (income charged at the basic rate: persons other than
individuals), omit the reference to section 12.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 1 — Amendments of ITA 2007
98

5
For section 12 substitute—
“12
Income charged at the starting rate for savings
(1)
Income tax is charged at the starting rate for savings (rather than the
basic rate) on so much of an individual’s income up to the starting
rate limit for savings as is savings income.
5
(2)
This is subject to any provisions of the Income Tax Acts (apart from
section 10) which provide for income of an individual to be charged
at different rates of income tax in some circumstances.
(3)
The starting rate limit for savings is £2,320.
(4)
See section 21 for indexation of the starting rate limit for savings.
10
(5)
Section 16 has effect for determining the extent to which a person’s
income up to the starting rate limit for savings consists of savings
income.”
6
In section 13 (income charged at dividend ordinary and dividend upper
rates: individuals)—
15
(a)
in subsection (1)(b), omit “starting or”, and
(b)
in subsection (4), omit “starting,”.
7
In section 16(1) (savings and dividend income to be treated as highest part
of total income), for the words from “the rate” to the end substitute “—
(a)
the extent to which a person’s income up to the starting rate
20
limit for savings consists of savings income, and
(b)
the rate at which income tax would be charged on a person’s
dividend income apart from section 13.”
8     (1)
Section 17 (repayment: tax paid at basic rate instead of starting rate or
savings rate) is amended as follows.
25
      (2)
In subsection (1), for “starting or savings rate” substitute “starting rate for
savings”.
      (3)
Accordingly, in the heading, for “starting or savings rate” substitute
“starting rate for savings”.
9
For the heading before section 20 substitute—
30
          “Indexation of basic rate limit and starting rate limit for savings”.
10
Omit section 20 (starting rate limit and basic rate limit).
11    (1)
Section 21 (indexation of starting and basic rate limits) is amended as
follows.
      (2)
Omit subsection (2).
35
      (3)
After subsection (3) insert—
“(3A)
The starting rate limit for savings for the tax year is the amount
found as follows.

Step 1

Increase the starting rate limit for savings for the previous tax year
40
by the same percentage as the percentage increase in the retail prices
index.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 1 — Amendments of ITA 2007
99


Step 2

If the result of Step 1 is a multiple of £10, it is the starting rate limit
for savings 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.
5

That amount is the starting rate limit for savings for the tax year.”
      (4)
In subsection (4), for “(2) and (3)” substitute “(3) and (3A)”.
      (5)
In subsection (5)—
(a)
for “section 20” substitute “sections 10 and 12”,
(b)
for “(2) and (3)” substitute “(3) and (3A)”, and
10
(c)
for “starting rate limit and the basic rate limit” substitute “basic rate
limit and starting rate limit for savings”.
      (6)
Accordingly, in the heading, for “starting rate limit and the basic rate limit”
substitute “basic rate limit and starting rate limit for savings”.
12
In section 31(2), omit “or savings rate”.
15
13    (1)
Section 158 (form and amount of EIS relief) is amended as follows.
      (2)
In subsection (2), for “savings rate” substitute “EIS rate”.
      (3)
After that subsection insert—
“(2A)
In this Part “the EIS rate” means 20%.”
14
In section 209(3) (withdrawal or reduction of EIS relief: disposal of shares)—
20
(a)
in the formula, for “S” substitute “EISR”, and
(b)
for the definition of “S” substitute “EISR is the EIS rate.”
15
In section 210(1)(b) (cases where maximum EIS relief not obtained), for
“savings rate for that year” substitute “EIS rate”.
16
In section 213(2) (withdrawal or reduction of EIS relief: value received by
25
investor)—
(a)
in the formula, for “S” substitute “EISR”, and
(b)
for the definition of “S” substitute “EISR is the EIS rate.”
17
In section 220(1)(b) (cases where maximum EIS relief not obtained), for
“savings rate for that year” substitute “EIS rate”.
30
18
In section 224(2) (withdrawal or reduction of EIS relief: repayments etc of
share capital to other persons)—
(a)
in the formula, for “S” substitute “EISR”, and
(b)
for the definition of “S” substitute “EISR is the EIS rate.”
19
In section 229(1)(b) (cases where maximum EIS relief not obtained), for
35
“savings rate for that year” substitute “EIS rate”.
20
In section 414(2) (relief for gifts to charity), for “section 20” substitute
“section 10”.
21
In section 486(1) (how allowable expenses are to be set against trust rate
income), in Step 5, for “savings rate” substitute “basic rate”.
40
22    (1)
Section 498 (types of income tax for purposes of section 497) is amended as
follows.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 1 — Amendments of ITA 2007
100

      (2)
In subsection (1), in Type 3A, for “savings rate” substitute “basic rate”.
      (3)
In that subsection, in Type 4, omit “or at the savings rate”.
      (4)
In subsection (2A), for “savings rate” substitute “basic rate”.
23
In section 504(3) (treatment of income of unauthorised unit trust), omit “or
at the savings rate”.
5
24
In section 745(1) (rates of tax applicable to income charged under sections
720 and 727 etc), for “savings rate” substitute “starting rate for savings”.
25
In section 851(2) (deduction by deposit-takers and building societies), for
“savings rate” substitute “basic rate”.
26
In section 874(2) (deduction from payments of yearly interest), for “savings
10
rate” substitute “basic rate”.
27
In section 889(4) (deduction from payments in respect of building society
securities), for “savings rate” substitute “basic rate”.
28
In section 892(2) (deduction from UK public dividends), for “savings rate”
substitute “basic rate”.
15
29
In section 901(4) (deduction from annual payments made by other persons),
for “the applicable rate (see section 902)” substitute “the basic rate in force
for the tax year in which the payment is made”.
30
Omit section 902 (meaning of “applicable rate” in section 901).
31
In section 919(2) (manufactured interest on UK securities: payments by UK
20
residents etc), for “savings rate” substitute “basic rate”.
32
In section 939(2) (duty to retain bonds where issue treated as payment of
interest), for “savings rate” substitute “basic rate”.
33    (1)
Section 989 (definitions) is amended as follows.
      (2)
In the definition of “basic rate limit”, for “20(2)” substitute “10”.
25
      (3)
Omit the definition of “savings rate”.
      (4)
For the definitions of “starting rate” and “starting rate limit” substitute—
““starting rate for savings” has the meaning given by section 7,
“starting rate limit for savings” has the meaning given by
section 12,”.
30
34
In section 1014(5)(b)(i) (orders and regulations not subject to annulment), for
“starting rate limit and basic rate limit” substitute “basic rate limit and
starting rate limit for savings”.
35
In Schedule 1 (consequential amendments), omit paragraphs 85(2), 86, 112,
151, 152, 191, 244, 259, 279, 530, 535(2), 536(3), 537, 538, 564, 565 and 592(47)
35
and (49).
36    (1)
Schedule 4 (index of defined expressions) is amended as follows.
      (2)
After the entry relating to “EIS” insert—

“EIS rate (in Part 5)
section 158(2A)”.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 2 — Other amendments
101

      (3)
For the entries relating to “starting rate” and “starting rate limit”
substitute—

“starting rate for savings
section 7

starting rate limit for savings
section 12”.

      (4)
Omit the entry relating to “savings rate”.
5
Part 2
Other amendments
TMA 1970
37
TMA 1970 is amended as follows.
38
In section 7(6) (notice of liability to income tax and capital gains tax), for “,
10
the savings rate or the starting rate” substitute “or the starting rate for
savings”.
39
In section 91(3)(c) (effect of interest on reliefs), for “, the savings rate or the
starting rate” substitute “or the starting rate for savings”.
ICTA
15
40
ICTA is amended as follows.
41
In section 468(1A) (authorised unit trusts), for “savings rate” substitute
“basic rate”.
42
In section 468A(1) (open-ended investment companies), for “savings rate”
substitute “basic rate”.
20
43
In section 552(5)(f)(i) (information: duty of insurers), for “savings rate”
substitute “basic rate”.
44
In section 699A(4)(b) (untaxed sums comprised in the income of the estate),
for “savings rate” substitute “basic rate”.
45
In section 701(3A) (estates of deceased persons in administration), omit—
25
(a)
“, the savings rate” (in both places),
(b)
“at the savings rate or”, and
(c)
sub-paragraph (ii) of paragraph (b) and the “and” before it.
46
Omit section 789(2) (double taxation arrangements made under old law:
surtax).
30
FA 1989
47
In section 88(1) of FA 1989 (insurance companies: policy holders’ share of
profits), for “savings rate” substitute “basic rate”.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 2 — Other amendments
102

TCGA 1992
48
In section 150A(3)(b) of TCGA 1992 (enterprise investment schemes), for
“savings rate” substitute “basic rate”.
FA 1996
49
Omit paragraph 21 of Schedule 6 to FA 1996 (which amends section 789(2)
5
of ICTA).
ITTOIA 2005
50
ITTOIA 2005 is amended as follows.
51
In section 465A(1)(b) (gains from contracts for life insurance etc: amounts for
which individuals liable to be treated as highest part of total income), for
10
“savings rate” substitute “basic rate”.
52
In section 466(2) (gains from contracts for life insurance etc: personal
representatives), for “savings rate” substitute “basic rate”.
53
In section 467(7) (gains from contracts for life insurance etc: UK resident
trustees), for “savings rate” substitute “basic rate”.
15
54    (1)
Section 530 (gains from contracts for life insurance etc: income tax treated as
paid) is amended as follows.
      (2)
In subsection (1), for “starting rate” substitute “basic rate”.
      (3)
Omit subsection (6).
55
In section 535(3) (gains from contracts for life insurance etc: top slicing
20
relief)—
(a)
for “SRL” in both places substitute “BRL”, and
(b)
for “savings rate” substitute “basic rate”.
56
In section 536(1) (gains from contracts for life insurance etc: top slicing
relieved liability-one chargeable event), for “savings rate” substitute “basic
25
rate”.
57
In section 537 (gains from contracts for life insurance etc: top slicing relieved
liability-two or more chargeable events), for “savings rate” substitute “basic
rate”.
58
In section 539(5) (gains from contracts for life insurance etc: relief for
30
deficiencies)—
(a)
omit Step 2,
(b)
in Step 3, for “2” substitute “1” and omit “other”, and
(c)
in Step 5, omit the sentence relating to Step 2.
59
In section 669(3)(a)(i) (reduction in residuary income: inheritance tax on
35
accrued income), for “, at the savings rate” substitute “of an amount not
exceeding the starting rate limit for savings, at the starting rate for savings”.
60
In section 679(3) (income from which basic amounts are treated as paid),
omit paragraph (b) (apart from the “and” at the end).
61
In section 680(4) (income treated as bearing income tax), for “savings rate”
40
substitute “basic rate”.

Finance Bill
Schedule 1 — Abolition of starting and savings rates and creation of starting rate for savings
Part 3 — Commencement
103

62    (1)
Section 680A (income treated as savings income or dividend income) is
amended as follows.
      (2)
In subsection (1)—
(a)
for “Subsections (2) and (3) apply” substitute “Subsection (3)
applies”, and
5
(b)
omit “the savings rate or”.
      (3)
Omit subsection (2).
      (4)
In subsection (3), for the words from the beginning to “it” substitute “The
income”.
      (5)
In subsection (4)—
10
(a)
for “Subsections (5) and (6) apply” substitute “Subsection (6)
applies”, and
(b)
omit “the savings rate or”.
      (6)
Omit subsection (5).
      (7)
In subsection (6), for the words from the beginning to “it” substitute “The
15
income”.
      (8)
Accordingly, in the heading omit “savings income or”.
63    (1)
Schedule 4 (index of defined expressions) is amended as follows.
      (2)
For the entry relating to “starting rate” substitute—

“starting rate for savings
section 7 of ITA 2007 (as

20

applied by section 989 of that

Act)

starting rate limit for savings
section 12 of ITA 2007 (as

applied by section 989 of that

Act)”.

25
      (3)
Omit the entry relating to “savings rate”.
F(No.2)A 2005
64
In section 7(5) of F(No.2)A 2005 (charge to income tax on social security
pension lump sum)—
(a)
omit paragraph (b), and
30
(b)
in paragraph (c), for “exceeds the starting rate limit” substitute “is
greater than nil”.
Part 3
Commencement
65
Apart from the amendments made by paragraph 11, the amendments made
35
by this Schedule have effect for the tax year 2008-09 and subsequent tax
years.