PART III continued CHAPTER I continued
(2) This section applies to any annual payment made by an individual which would otherwise be within the charge to tax under Case III of Schedule D except—
(a) a payment of interest;
(b) a covenanted payment to charity (within the meaning given by section 434(2) below);
(c) a payment made for bona fide commercial reasons in connection with the individual’s trade, profession or vocation; and
(d) a payment to which section 48(1) of the [1977 c. 36.] Finance Act 1977 applies.
(3) This section applies to a payment made by personal representatives (within the meaning given in section 432(4) below) where—
(a) the deceased would have been liable to make the payment if he had not died, and
(b) this section would have applied to the payment if he had made it.
(4) A maintenance payment arising outside the United Kingdom shall not be within the charge to tax under Case V of Schedule D if, because of this section, it would not have been within the charge to tax under Case III had it arisen in the United Kingdom; and for this purpose “maintenance payment” means a periodical payment (not being an instalment of a lump sum) which satisfies the conditions set out in paragraphs (a) and (b) of section 51B(5) below.
(5) No deduction shall be made under section 122(1)(b) below on account of an annuity or other annual payment which would not have been within the charge to tax under Case III of Schedule D if it had arisen in the United Kingdom.
(6) References in subsection (2) above to an individual include references to a Scottish partnership in which at least one partner is an individual.
(1) In this section “qualifying maintenance payment” means a periodical payment which—
(a) is made under an order made by a court in the United Kingdom, or under a written agreement the proper law of which is the law of a part of the United Kingdom,
(b) is made by one of the parties to a marriage (including a marriage which has been dissolved or annulled) either—
(i) to or for the benefit of the other party and for the maintenance of the other party, or
(ii) to the other party for the maintenance by the other party of any child of the family,
(c) is due at a time when—
(i) the two parties are not a married couple living together, and
(ii) the party to whom or for whose benefit the payment is made has not remarried, and
(d) is not a payment in respect of which relief from tax is available to the person making the payment under any provision of the Income Tax Acts other than this section.
(2) Notwithstanding section 51A(1)(a) above but subject to subsections (3) and (4) below, a person making a claim for the purpose shall be entitled, in computing his total income for the year 1987-88, to deduct an amount equal to the aggregate amount of any qualifying maintenance payments made by him which fall due in that year.
(3) The amount which may be deducted under this section by a person in computing his total income for the year 1987-88 shall not exceed £1,370.
(4) Where qualifying maintenance payments falling due in the year 1987-88 are made by a person who also makes other maintenance payments attracting relief for that year, subsection (3) above shall apply as if the limit imposed by it were reduced by an amount equal to the aggregate amount of those other payments.
(5) The reference in subsection (4) above to other maintenance payments attracting relief for the year 1987-88 is a reference to periodical payments which—
(a) are made under an order made by a court (whether in the United Kingdom or elsewhere) or under a written or oral agreement, and
(b) are made by a person—
(i) as one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or for the benefit of the other party to the marriage and for the maintenance of the other party, or
(ii) to any person under 21 years of age for his own benefit, maintenance or education, or
(iii) to any person for the benefit, maintenance or education of a person under 21 years of age,
and in respect of which the person making them is entitled otherwise than under this section to make a deduction in computing his income for the year.
(6) The reference in subsection (1) above to a married couple living together shall be construed in accordance with section 42(1) above, but section 42(2) above shall not apply for the purposes of this section.
(7) In this section—
“child of the family”, in relation to the parties to a marriage, means a person under 21 years of age—
who is a child of both those parties, or
who (not being a person 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;
“periodical payment” does not include an instalment of a lump sum.”
(3) This section shall have effect in relation to any payment falling due on or after 15th March 1988 unless it is made in pursuance of an existing obligation.
(4) In subsection (3) above “existing obligation” means a binding obligation—
(a) under an order made by a court (whether in the United Kingdom or elsewhere) before 15th March 1988, or before the end of June 1988 on an application made on or before 15th March 1988;
(b) under a deed executed or written agreement made before 15th March 1988 and received by an inspector before the end of June 1988;
(c) under an oral agreement made before 15th March 1988, written particulars of which have been received by an inspector before the end of June 1988; or
(d) under an order made by a court (whether in the United Kingdom or elsewhere) on or after 15th March 1988, or under a written agreement made on or after that date, where the order or agreement replaces, varies or supplements an order or agreement within this subsection;
but subject to subsection (5) below.
(5) An obligation within subsection (4)(d) above is an existing obligation only if—
(a) it is an obligation to make periodical payments (not being instalments of a lump sum) which are made by a person—
(i) as one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or for the benefit of the other party to the marriage and for the maintenance of the other party, or
(ii) to any person under 21 years of age for his own benefit, maintenance or education, or
(iii) to any person for the benefit, maintenance or education of a person under 21 years of age, and
(b) the order or agreement replaced, varied or supplemented provided for such payments to be made for the benefit, maintenance or, as the case may be, education of the same person.
(6) Section 351 of the Taxes Act 1988 and section 65 of the Taxes Act 1970 shall not apply to any payment in relation to which this section has effect.
(1) This section applies to any annual payment due in the year 1988-89 which—
(a) is made in pursuance of an existing obligation under an order made by a court (whether in the United Kingdom or elsewhere) or under a written or oral agreement,
(b) is made by one of the parties to a marriage (including a marriage which has been dissolved or annulled) either—
(i) to or for the benefit of the other party and for the maintenance of the other party, or
(ii) to the other party for the maintenance by the other party of any child of the family,
(c) is due at a time when—
(i) the two parties are not a married couple living together, and
(ii) the party to whom or for whose benefit the payments are made has not remarried, and
(d) is within the charge to tax under Case III or Case V of Schedule D, and is not by virtue of Part XV of the Taxes Act 1988 treated for any purpose as the income of the person making it.
(2) On making a claim for the purpose a person chargeable to tax in respect of payments to which this section applies shall be entitled, in computing his total income for the year 1988-89, to deduct an amount equal to the aggregate amount of the payments, or £1,490, whichever is less.
(1) This section applies to any annual payment due in the year 1989-90 or any subsequent year of assessment which—
(a) is made in pursuance of an existing obligation under an order made by a court (whether in the United Kingdom or elsewhere) or under a written or oral agreement,
(b) is made by an individual—
(i) as one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or for the benefit of the other party to the marriage and for the maintenance of the other party, or
(ii) to any person under 21 years of age for his own benefit, maintenance or education, or
(iii) to any person for the benefit, maintenance or education of a person under 21 years of age, and
(c) is (apart from this section) within the charge to tax under Case III or Case V of Schedule D, and is not by virtue of Part XV of the Taxes Act 1988 treated for any purpose as the income of the person making it.
(2) A payment to which this section applies shall not be a charge on the income of the person liable to make it, but—
(a) that person shall be entitled, on making a claim for the purpose, to make a deduction of an amount determined in accordance with subsection (3) below in computing his total income for the year of assessment in which the payment falls due, and
(b) the payment shall form part of the income of the recipient, but subject to subsections (4) and (5) below.
(3) The amount which a person may deduct under subsection (2)(a) above in computing his total income for a year of assessment shall be equal to the aggregate amount of the payments made by him which fall due in that year and to which this section applies, except that it shall not in any event exceed the aggregate amount of any payments due in the year 1988-89—
(a) which satisfy the conditions in paragraphs (a), (b) and (c) of subsection (1) above, and
(b) in respect of which he was entitled to make a deduction in computing his income for that year.
(4) The amount which, by virtue of subsection (2)(b) above, is treated as forming part of a person’s income for a year of assessment by reason of payments made by another person (“the payer”) shall not exceed the aggregate amount of any payments made by the payer which—
(a) formed part of the same recipient’s income for the year 1988-89, and
(b) satisfy the conditions in paragraphs (a), (b) and (c) of subsection (1) above.
(5) The amount which, by virtue of subsection (2)(b) above, would apart from this subsection be treated as forming part of a person’s income for a year of assessment by reason of payments within subsection (6) below shall, if he makes a claim for the purpose, be reduced by the amount of the difference between the higher (married person's) relief and the lower (single person's) relief under subsection (1) of section 257 of the Taxes Act 1988 as it applies for that year to a person not falling within subsection (2) or (3) of that section.
(6) The payments referred to in subsection (5) above are payments which—
(a) are made by one of the parties to a marriage (including a marriage which has been dissolved or annulled) either—
(i) to or for the benefit of the other party and for the maintenance of the other party, or
(ii) to the other party for the maintenance by the other party of any child of the family, and
(b) are due at a time when—
(i) the two parties are not a married couple living together, and
(ii) the party to whom or for whose benefit the payments are made has not remarried.
(7) A payment to which this section applies shall be made without deduction of income tax.
(8) A payment to which this section applies shall be within the charge to tax under Case III or (if it arises outside the United Kingdom) Case V of Schedule D; and tax chargeable under Case III shall, notwithstanding anything in sections 64 to 67 of the Taxes Act 1988, be computed on the payments falling due in the year of assessment, so far as paid in that or any other year.
(9) No deduction shall be made under section 65(1)(b) of the Taxes Act 1988 on account of a payment to which this section applies.
(1) If an election is duly made for the purpose by any person, section 36 above shall have effect in relation to all payments made by him—
(a) to which section 37 or section 38 above would apply apart from the election, and
(b) which fall due in a year of assessment for which the election has effect;
and accordingly sections 37 and 38 shall not apply to the payments.
(2) An election under subsection (1) above—
(a) shall be made in such form and manner as the Board may prescribe,
(b) shall be made not later than twelve months after the end of the first year of assessment for which it is to have effect,
(c) shall have effect for any subsequent year of assessment, and
(d) shall be irrevocable.
(3) A person making an election under subsection (1) above shall, before the end of the period of 30 days beginning with the day on which it is made, give notice of it to every recipient of a payment affected by the election.
(1) In sections 37 to 39 above—
“child of the family”, in relation to the parties to a marriage, means a person under 21 years of age—
who is a child of both those parties, or
who (not being a person 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;
“existing obligation” has the same meaning as in section 36(3) above.
(2) The references in sections 38(2)(b) and (4) and 39(3) above to the recipient of a payment are, in a case of the kind described in sections 37(1)(b)(i) and 38(1)(b)(i), references to the other party there mentioned.
(3) The references in sections 37 and 38 above to a married couple living together shall be construed in accordance with section 282(1) of the Taxes Act 1988, but section 282(2) shall not apply for the purposes of those sections.
For the year 1988-89 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.
(1) The following sections shall be inserted after section 356 of the Taxes Act 1988—
(1) Where all the qualifying interest payable for any period in relation to a residence is payable by one person, it shall be eligible for relief only to the extent that the amount on which it is payable does not exceed the qualifying maximum during the period.
(2) Where qualifying interest is payable for any period in relation to a residence by more than one person, the interest paid by each of them shall be eligible for relief only to the extent that the amount on which it is payable by him does not exceed the sharer’s limit for the period in his case.
(3) Subject to the following provisions of this section and section 356B, in this section and section 356B “the sharer’s limit”, in relation to a person by whom qualifying interest is payable for a period in relation to a residence, means the amount arrived at by dividing the amount of the qualifying maximum during the period by the number of persons by whom qualifying interest is payable for the period in relation to the residence.
(4) Subsection (5) below applies where—
(a) in the case of any person by whom qualifying interest is payable for any period in relation to a residence the sharer’s limit for the period exceeds the amount on which the interest is payable by him, and
(b) the amount which (apart from that subsection) would be the sharer’s limit for the period in the case of any other person by whom qualifying interest is payable for the period in relation to the residence falls short of the amount on which qualifying interest is so payable by him.
(5) Where this subsection applies—
(a) the sharer’s limit for the period in the case of the person mentioned in subsection (4)(a) above shall be reduced by the amount of the excess, and
(b) the sharer’s limit for the period in the case of any person such as is mentioned in subsection (4)(b) above shall be increased in accordance with subsections (6) to (8) below.
(6) Where there is only one other person by whom qualifying interest is payable for the period in relation to the residence, the sharer’s limit in his case shall be increased by the amount of the excess.
(7) Where there is more than one other person by whom qualifying interest is payable for the period in relation to the residence, the sharer’s limit in the case of each of them shall be increased by such part of the excess as bears to the whole of it the same proportion as any shortfall in his case bears to the aggregate of any shortfalls in the case of each of them.
(8) In subsection (7) above “shortfall” means the amount by which what would be the sharer’s limit in the case of a person (apart from subsection (5) above) falls short of the amount on which qualifying interest is payable by him.
(1) Subject to subsections (2) and (4) below, qualifying interest payable or paid by a married woman who is not separated from her husband shall be treated for the purposes of sections 353 to 356A and 369 to 379 as payable or paid by her husband (and not by her).
(2) Where—
(a) qualifying interest is payable, or treated by subsection (1) above as payable, for a period in relation to a residence by a married man who is not separated from his wife, and
(b) qualifying interest is also payable for the period in relation to the residence by one or more persons other than the man and his wife,
then for the purposes of section 356A(2) and (3) qualifying interest shall be treated as payable by the wife for the period in relation to the residence (whether or not it actually is).
(3) The application of subsection (2) above in the case of a husband and wife shall not give rise to a separate sharer’s limit for the period in question in the case of the wife; but the limit arrived at under subsection (3) of section 356A for the period in the case of the husband shall be increased by the amount which (apart from this subsection) would be the limit arrived at under that subsection in the case of the wife.
(4) Where an application under section 283 or an election under section 287 is in force in relation to a husband and wife for a year of assessment, subsections (1) to (3) above shall not apply in relation to them for the year but they may jointly elect—
(a) that qualifying interest payable or paid by one of them for the year (or a period within the year), or such part of that interest as may be specified in the election, shall be treated for the purposes of sections 353 to 356A and 369 to 379 (and section 287(7)) as payable or paid by the other, and
(b) that the sharer’s limit under section 356A for the year (or period) in the case of one of them shall be reduced by such amount as may be specified in the election and the sharer’s limit under that section for the year (or period) in the case of the other shall be correspondingly increased.
(5) An election under subsection (4) above—
(a) shall be made before the end of the period of twelve months beginning with the end of the first year of assessment for which it is made or such longer period as the Board may in any particular case allow,
(b) shall, subject to subsection (6) below, have effect if made for the year 1988-89 not only for that year but also for the year 1989-90, and
(c) shall be in such form, and be made in such manner, as the Board may prescribe.
(6) Where a husband and wife have made an election under subsection (4) above for the year 1988-89 they may give, for the year 1989-90, a notice to withdraw that election; and, if they do so, the election shall not have effect for the year 1989-90.
(7) A notice of withdrawal under subsection (6) above—
(a) shall be in such form, and be given in such manner, as the Board may prescribe,
(b) shall not be given after 5th April 1991 or such later date as the Board may in any particular case allow, and
(c) shall not prejudice the making of a fresh election for 1989-90.
(8) Where—
(a) a husband and wife are not separated,
(b) the husband pays interest in relation to a residence used or to be used as his only or main residence, and
(c) his wife pays interest in relation to some other residence used or to be used as her only or main residence,
the residence which was purchased first shall be treated for the purposes of sections 355(1)(a) and 356 as used or to be used as the only or main residence of both of them and the other residence shall be treated as used or to be used as the only or main residence of neither.
(1) Subject to subsection (2) below, sections 356A and 356B shall have effect with respect to payments of qualifying interest made on or after 1st August 1988.
(2) Subject to subsection (5) below, those sections shall not have effect with respect to a payment of qualifying interest made by a person in relation to a residence if—
(a) the payment is made under a loan made before 1st August 1988,
(b) qualifying interest was payable in relation to the residence for 1st August 1988 by someone other than the person making the payment or his spouse,
(c) qualifying interest has been payable in relation to the residence by the person making the payment or his spouse throughout the time beginning with 1st August 1988 and ending with the date of the payment, and
(d) someone other than the person making the payment or his spouse owns an estate or interest or property in the residence at each point during that time and at each such point at least one such person is a person by whom qualifying interest is payable in relation to the residence at some point during that time.
(3) For the purposes of subsection (2) above a loan made on or after 1st August 1988 shall be treated as made before that date if it is proved by written evidence—
(a) that the loan was made in pursuance of an offer made before that date and that the offer either was in writing or was evidenced by a note or memorandum made by the lender before that date, and
(b) that the loan was used to defray money applied in pursuance of a binding contract entered into before that date;
and where a payment is made under such a loan the references in subsection (2) above to 1st August 1988 shall be treated as references to the first day for which qualifying interest is payable in relation to the residence under the loan (or where there is more than one such loan the latest such day).
(4) Subject to subsection (5) below, where by virtue of subsection (2) above sections 356A and 356B do not have effect with respect to payments of qualifying interest made by a person for any period in relation to a residence under one loan those sections shall not have effect with respect to payments of qualifying interest for that period in relation to the residence made by that person or his spouse under any other loan.
(5) Where all the persons by whom qualifying interest is payable in relation to a residence have made a joint election for the purpose, sections 356A and 356B shall have effect with respect to all payments of qualifying interest made by any person in relation to the residence notwithstanding that they would otherwise be payments with respect to which those sections would not have effect.
(6) An election under subsection (5) above—
(a) shall have effect for the period in which it is made and subsequent periods,
(b) shall be irrevocable, and
(c) shall be in such form, and be made in such manner, as the Board may prescribe.
(7) Sections 356A and 356B shall not have effect with respect to payments of qualifying interest if the interest is qualifying interest only by reason of its being paid in relation to a residence used or to be used as the only or main residence of a dependent relative or former or separated spouse of the person by whom the payment is made.
(8) In this section references to a spouse do not include references to a separated spouse.
(1) In sections 356A to 356C and this section “qualifying interest” means interest which (apart from those sections or section 357) is eligible for relief under section 353 by virtue of section 355(1)(a) or 356(1).
(2) In sections 356A to 356C and this section “residence” means a building, or part of a building, occupied or intended to be occupied as a separate residence, or a caravan or house-boat; but a building, or part of a building, which is designed for permanent use as a single residence shall be treated as a single residence notwithstanding that it is temporarily divided into two or more parts which are occupied or intended to be occupied as separate residences.
(3) In sections 356A to 356C and this section “period”, with respect to qualifying interest payable by a person in relation to a residence, means a period commencing with—
(a) any day which is the first day for which qualifying interest is payable in relation to the residence by that or any other person (whether or not qualifying interest was payable by any person in relation to the residence for any earlier day),
(b) any day immediately following a day which is the last day for which qualifying interest is payable in relation to the residence by any other person (whether or not qualifying interest is payable by any person in relation to the residence for any later day), or
(c) the first day of a year of assessment,
and ending with either the day immediately preceding the next day such as is mentioned in paragraph (a), (b) or (c) above or (if sooner) the day which is the last day for which qualifying interest is payable in relation to the residence by that person.
(4) In section 356A references to the qualifying maximum during a period are references to the qualifying maximum for the year of assessment in which the period falls.
(5) Where because of section 356A the full amount of qualifying interest paid by a person for a period is not eligible for relief, the part of that interest that is eligible for relief shall be such as bears to the whole of it the same proportion as the part of the amount on which qualifying interest is payable by him for the period that does not exceed the limit under that section in his case bears to the whole of that amount.
(6) Where a person pays qualifying interest on more than one loan, the limit under section 356A in his case shall have effect in relation to qualifying interest paid on a later loan as if that loan were reduced by the amount of any earlier loan; and if that amount is equal to or exceeds the limit, none of the interest paid on the later loan is eligible for relief.
(7) For the purposes of subsection (6) above, where interest is paid on more than one loan made simultaneously to one person it shall be treated as paid on one loan.
(8) Subject to section 356B, where a loan is made jointly to more than one person by whom qualifying interest is payable in relation to a residence under the loan, the amount on which qualifying interest is payable in relation to the residence under the loan by each of the persons shall be treated for the purposes of section 356A as being such amount as is produced by dividing the whole of the amount on which qualifying interest is payable in relation to the residence under the loan by the number of persons by whom qualifying interest is so payable.
(9) Where section 354 continues to apply to a loan by virtue of section 354(5)(a), then sections 356A to 356C and this section shall also continue to have effect as if section 354 applied to it by virtue of section 355(1)(a).
(10) In determining whether the amount on which interest is payable exceeds any limit under section 356A, no account shall be taken of so much (if any) of that amount as consists of interest which has been added to capital and which does not exceed £1,000.”
(2) In section 357 of the Taxes Act 1988 (limit on interest relief for home loans where residence basis does not apply)—
(a) in subsection (1)—
(i) for the word “Interest” there shall be substituted the words “Subject to subsection (1A) below, where section 356A does not have effect with respect to a payment of interest because of section 356C(2) or (7) and the payment is of interest”, and
(ii) after “356(1)” there shall be inserted the words “the payment of interest”, and
(b) the following subsections shall be inserted after that subsection—
“(1A) Where section 356A does not have effect with respect to a payment of interest made by a person in relation to land, or a caravan or house-boat, used or to be used as his only or main residence because of section 356C(2), subsection (1) above shall have effect with respect to the payment of interest as if the reference to the qualifying maximum for the year of assessment were a reference to the amount specified in subsection (1B) below.
(1B) The amount referred to in subsection (1A) above is the lesser of £30,000 and the amount on which interest was payable by the person in relation to the land, caravan or house-boat immediately before 1st August 1988.
(1C) Where subsection (2) of section 356C applies in the case of a person by virtue of subsection (3) of that section, for the purposes of subsection (1B) above the amount on which interest is payable by him under the loan referred to in section 356C(3) for the first day for which interest is so payable shall be treated as the amount on which interest is payable by him under the loan immediately before 1st August 1988.”
(3) In the Taxes Act 1988—
(a) in section 355(1) (requirement that interest be payable in relation to only or main residence of payer), before “357” there shall be inserted the words “356A or”,
(b) in section 367(5) (meaning of “qualifying maximum”), for “357(1)” there shall be substituted “356A to 357”,
(c) in section 370(2)(b) (MIRAS: meaning of “relevant loan interest”), before “357” there shall be inserted “356A,”, and
(d) in section 373 (MIRAS: large loans and joint borrowers)—
(i) in subsection (1), before “357(1)” there shall be inserted “356A, section”,
(ii) in subsection (3), after the word “applies” there shall be inserted the words “section 356D(6) or”, and
(iii) in subsection (4), after the words “by virtue of” there shall be inserted the words “section 356D(7) or”.
(4) This section shall come into force on 1st August 1988.