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(1) The following shall be substituted for section 1(2)(aa) of the Taxes Act 1988 (the charge to income tax: lower rate)—
“(aa) in respect of so much of an individual’s total income as does not exceed £1,500, at such rate as Parliament may determine to be the starting rate for that year;”.
(2) The following shall be substituted for section 1(2A) of that Act (lower rate limit)—
“(2A) The amount up to which an individual’s income is by virtue of subsection (2) above chargeable for any year at the starting rate shall be known as the starting rate limit.”
(3) In section 1(3) of that Act (basic rate limit), for “lower rate” there shall be substituted “starting rate”.
(4) In section 1(4) of that Act (indexation), for the words from “and, if the result is not a multiple of £100” to the end there shall be substituted “and—
(a) if the result in the case of the amount specified in subsection (2)(aa) above is not a multiple of £10, rounding it up to the nearest amount which is such a multiple, and
(b) if the result in the case of the amount specified in subsection (2)(b) above is not a multiple of £100, rounding it up to the nearest amount which is such a multiple.”
(5) Section 1(4) of that Act (indexation), so far as it relates to section 1(2)(aa), shall not apply for the year 1999-00.
(6) In section 1(6A) of that Act (repayment), for “lower rate” there shall be substituted “starting rate”.
(7) In section 1A of that Act (application of lower rate to income from savings and distributions)—
(a) the following shall be inserted before subsection (2)—
“(1B) In relation to any year of assessment for which income tax is charged the lower rate is 20 per cent. or such other rate as Parliament may determine.”, and
(b) the following shall be inserted after subsection (6)—
“(6A) Where income tax at the basic rate has been borne on income chargeable at the lower rate any necessary repayment of tax shall be made on the making of a claim.”
(8) In the following provisions of that Act, for “lower rate” there shall be substituted “starting rate”—
(a) section 547(5)(c) (life policies, etc.: method of charging gain to tax);
(b) section 550(3) (life policies, etc.: relief where gain charged at a higher rate).
(9) In the following provisions of that Act, for “at the lower rate by virtue of section 1(2)(aa)” there shall be substituted “at the starting rate”—
(a) section 549(2) (life policies, etc.: deficiencies allowable as deductions);
(b) section 699(2) (relief from higher rate for inheritance tax on accrued income);
(c) section 819(2) (old references to standard rate tax).
(10) In section 832(1) of that Act (interpretation of the Tax Acts)—
(a) the following shall be substituted for the definition of “lower rate”—
““lower rate”, in relation to the charging of income tax for any year of assessment, means the rate of income tax specified in or determined in pursuance of section 1A(1B);”, and
(b) the following shall be inserted after the definition of “Schedule A business”—
““starting rate”, in relation to the charging of income tax for any year of assessment, means the rate of income tax determined in pursuance of section 1(2)(aa), and any reference to the starting rate limit shall be construed in accordance with section 1(2A);”.
(11) In the following provisions of the [1970 c. 9.] Taxes Management Act 1970, for “or the lower rate” there shall be substituted “, the lower rate or the starting rate”—
(a) section 7(6) (notice of liability to income tax and capital gains tax);
(b) section 91(3)(c) (effect of reliefs on tax charged on income subject to deduction).
(12) Subsections (1) to (3) and (6) to (11) above apply for the year 1999-00 and subsequent years of assessment; and subsection (4) above applies for the year 2000-01 and subsequent years of assessment.
Income tax shall be charged for the year 1999-00, and for that year—
(a) the starting rate shall be 10 per cent.;
(b) the basic rate shall be 23 per cent.; and
(c) the higher rate shall be 40 per cent.
(1) For the year 1999-00 the amounts specified in subsections (2) and (3) of section 257 of the Taxes Act 1988 (personal allowances for those aged at least 65 but less than 75 and for those aged 75 or more) shall be taken to be £5,720 and £5,980, respectively.
(2) Accordingly, section 257C(1) of the Taxes Act 1988 (indexation), so far as it relates to the amounts so specified, shall not apply for the year 1999-00.
(1) The Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.
(2) In section 1 (charge to income tax), after subsection (4) there shall be inserted—
“(5A) Subsection (4) above shall not require any change to be made in the amounts deductible or repayable under section 203 during the period beginning with 6th April and ending with 17th May in the year of assessment.”
(3) In section 257C (indexation of allowances), after subsection (1) there shall be inserted—
“(2A) Subsection (1) above shall not require any change to be made in the amounts deductible or repayable under section 203 during the period beginning with 6th April and ending with 17th May in the year of assessment.”
(4) This section has effect for the year 1999-00 and subsequent years of assessment.
(1) Section 4 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (rates of capital gains tax) shall be amended as follows.
(2) In subsection (1) (link between rate of capital gains tax and rate of income tax), for “basic rate” there shall be substituted “lower rate”.
(3) In subsection (1AA) (rate for trusts etc.), for “applicable to trusts under section 686(1) of the Taxes Act” there shall be substituted “the rate applicable to trusts under section 686 of the Taxes Act”.
(4) Subsections (1A), (1B), (3A) and (3B) (charge at income tax lower rate in certain cases) shall cease to have effect.
(5) In subsection (4) (definition of “unused part of an individual’s basic rate band”), the words “(disregarding subsection (3B)(a) above)” shall cease to have effect.
(6) This section applies for the year 1999-00 and subsequent years of assessment.
Corporation tax shall be charged for the financial year 2000 at the rate of 30 per cent.
(1) After section 13 of the Taxes Act 1988 there shall be inserted the following section—
(1) Where in any accounting period the profits of a qualifying company do not exceed the first relevant amount, the company may, instead of making a claim under section 13(1), claim that the corporation tax charged on its basic profits for that period shall be calculated as if the rate of corporation tax were such rate (to be known as the “corporation tax starting rate”), lower than the small companies' rate, as Parliament may from time to time determine.
(2) Where in any accounting period the profits of a qualifying company exceed the first relevant amount but do not exceed the second relevant amount, the company may, instead of making a claim under section 13(1), claim that the corporation tax charged on its basic profits for that period shall be—
(a) calculated as if the rate of corporation tax were the small companies' rate; and
(b) then reduced by the sum specified in subsection (3) below.
(3) That sum is the sum equal to such fraction as Parliament may from time to time determine of the following amount—
where—
R2 is the second relevant amount;
P is the amount of the profits; and
I is the amount of the basic profits.
(4) The first and second relevant amounts mentioned above shall be determined as follows—
(a) where the company has no associated company in the accounting period, those amounts are £10,000 and £50,000 respectively;
(b) where the company has one or more associated companies in the accounting period—
(i) the first relevant amount is £10,000 divided by one plus the number of those associated companies, and
(ii) the second relevant amount is £50,000 divided by one plus the number of those associated companies.
(5) Subsections (4) and (5) of section 13 shall apply for the purposes of subsection (4) above as they apply for the purposes of subsection (3) of that section.
(6) For an accounting period of less than 12 months the relevant amounts determined in accordance with subsection (4) above shall be proportionately reduced.
(7) The profits and the basic profits of a company for an accounting period shall be determined for the purposes of this section as they are for the purposes of section 13.
(8) In this section “qualifying company”, in relation to an accounting period, means a company which—
(a) is resident in the United Kingdom;
(b) is not a close investment-holding company (as defined in section 13A) at the end of that period; and
(c) is not an investment trust which for that period has any eligible rental income (within the meaning of section 508A).”
(2) In section 13A(1) of the Taxes Act 1988 (close investment-holding companies), after “section 13(1)” there shall be inserted “or 13AA(8)”.
(3) In section 468(1A) of that Act (taxation of authorised unit trusts), at the end there shall be inserted “and sections 13 and 13AA shall not apply”.
(4) In paragraph 1(a) of Schedule 12 to the [1989 c. 26.] Finance Act 1989 (provision of information for the purposes of close companies provisions), for “13A” there shall be substituted “13 to 13A”.
(5) In paragraph 8(1) of Schedule 18 to the [1998 c. 36.] Finance Act 1998 (tax calculation in company tax return), after “section 13(2)” there shall be inserted “or 13AA(2)”.
(6) Subsections (1) to (5) above have effect, subject to subsection (7) below, in relation to corporation tax for the financial year 2000 or any subsequent financial year.
(7) In the case of an accounting period beginning before 1st April 2000 and ending on or after that date—
(a) section 13AA of the Taxes Act 1988 shall apply as if the different parts of that accounting period falling in the different financial years were separate accounting periods;
(b) where a claim is made under section 13AA in relation to the part of that period beginning with 1st April 2000, section 13 of that Act shall also so apply; and
(c) for the purposes of treating different parts of an accounting period as separate accounting periods in accordance with paragraphs (a) and (b) above, the profits and basic profits of the company for that period shall be attributed to the different parts of it according to the financial year in which, for the purposes of section 8 of that Act, they are taken to arise.
For the financial year 2000—
(a) the corporation tax starting rate shall be 10 per cent.; and
(b) the fraction mentioned in section 13AA(3) of the Taxes Act 1988 shall be one fortieth.
(1) The following section shall be inserted after section 257 of the Taxes Act 1988—
(1) If a qualifying child (or more than one) is resident with the claimant during the whole or part of the year of assessment, the claimant shall be entitled to an income tax reduction, to be known as a children’s tax credit.
(2) The reduction shall be calculated by reference to £4,160.
(3) Where any part of the claimant’s income for the year of assessment falls within section 1(2)(b), his children’s tax credit for the year shall be calculated as if the amount specified in subsection (2) above were reduced by £2 for every £3 of that part of his income.
(4) In this section “qualifying child” means, in relation to a person—
(a) a child of his who has not attained the age of 16, or
(b) a child who has not attained the age of 16 and who is maintained by, and at the expense of, the person for any part of the year of assessment;
and “child” includes illegitimate child and stepchild.
(5) Schedule 13B (which modifies this section where a child lives with more than one adult during a year of assessment) shall have effect.”
(2) The Schedule set out in Schedule 3 to this Act shall be inserted after Schedule 13A to the Taxes Act 1988.
(3) In section 257C(1) and (3) of the Taxes Act 1988 (indexation), for the words “sections 257 and 257A” there shall be substituted “sections 257, 257AA(2) and 257A”.
(4) The [1970 c. 9.] Taxes Management Act 1970 shall be amended as follows—
(a) in section 36(3A) (fraudulent or negligent conduct), there shall be inserted at the end “or under Schedule 13B to that Act (elections as to transfer of children’s tax credit)”,
(b) in section 37A (effect of assessment where allowances transferred)—
(i) after “spouse” there shall be inserted “or partner”, and
(ii) after “Act” there shall be inserted “or paragraph 4 of Schedule 13B to that Act”,
(c) in section 43A(2A) (further assessments), there shall be inserted at the end “or under Schedule 13B to that Act (elections as to transfer of children’s tax credit)”, and
(d) in section 58(3)(b) (proceedings in Northern Ireland), after “repealed by that Act)” there shall be inserted “, paragraph 6 of Schedule 13B to that Act”.
(5) Subsections (1), (2) and (4) above have effect for the year 2001-02 and subsequent years of assessment.
(6) Subsection (3) above has effect for the purposes of the application of section 257AA of the Taxes Act 1988 for the year 2002-03 and subsequent years of assessment.
(1) Section 257A of the Taxes Act 1988 (income tax reduction for married couples) shall be amended as follows.
(2) Subsection (1) (reduction where neither spouse is aged 65 or over) shall cease to have effect.
(3) In subsection (2) (reduction where either spouse is aged 65 or over)—
(a) for “is at any time within that year of the age of 65 or upwards” there shall be substituted “was born before 6th April 1935”;
(b) the words from “(instead of” to the end shall be omitted.
(4) In subsection (3) (reduction where either spouse is aged 75 or over)—
(a) after “either of them” there shall be inserted “(a)”;
(b) after “75 or upwards,” there shall be inserted “and
(b) was born before 6th April 1935,”;
(c) the words “(1) or” shall be omitted.
(5) In subsection (4) (rule where person dies in year of assessment)—
(a) for “subsections (2) and (3)” there shall be substituted “subsection (3)”;
(b) for “a specified age” there shall be substituted “the age of 75”.
(6) In subsection (5) (tapering of reduction where claimant’s total income exceeds specified amount), the words from “(but not” to the end shall be omitted.
(7) After that subsection there shall be inserted the following subsection—
“(5A) The amounts specified in subsections (2) and (3) above shall not by virtue of subsection (5) above be treated as reduced below £1,970.”
(8) In subsection (6) (rule where claimant marries in year of assessment, etc.), for “subsections (1) to (3)” there shall be substituted “subsections (2) and (3)”.
(9) After subsection (6) there shall be inserted the following subsections—
“(7) A man who is entitled for any year of assessment to an income tax reduction under this section, or to make a claim for such a reduction, shall not be entitled for that year to any income tax reduction under section 257AA.
(8) Where—
(a) a woman is married to and living with a man for the whole or any part of a year of assessment, and
(b) that man is entitled for that year to an income tax reduction under this section, or to make a claim for such a reduction,
no child shall be regarded for any of the purposes of section 257AA or Schedule 13B as resident with that woman at any time in that year when she is married to and living with that man.
(9) A person may, by notice to an officer of the Board, elect to give up his entitlement for any year of assessment to an income tax reduction under this section; and where he does so and the election is not subsequently revoked, that person shall be taken for the purposes of this section to have no entitlement for that year to a reduction under this section, or to make a claim for such a reduction.”
(10) Subsections (2) to (5) and (8) above have effect for the year 2000-01 and subsequent years of assessment.
(11) Subject to section 32(5) below, subsections (6) and (7) above have effect for the year 1999-00 and subsequent years of assessment.
(12) Subsection (9) above has effect for the year 2001-02 and subsequent years of assessment.
(1) In section 257BA of the Taxes Act 1988 (elections as to transfer of relief under section 257A)—
(a) in subsections (1)(a), (2)(a), (3)(a) and (6), for “section 257A(1)” there shall be substituted “section 257A(5A)”;
(b) in subsection (2), the words from “(to nil” to the end shall be omitted;
(c) in subsection (9), for “deduction” there shall be substituted “income tax reduction”.
(2) Sections 257D to 257F of that Act (transitional relief in connection with married couple’s allowance) shall cease to have effect.
(3) Subsection (1)(a) and (c) above has effect for the year 1999-00 and subsequent years of assessment.
(4) Subsections (1)(b) and (2) above have effect for the year 2000-01 and subsequent years of assessment.
(5) Section 257C of the Taxes Act 1988 (indexation) shall apply in relation to subsection (5A) of section 257A of that Act, but only for the year 2000-01 and subsequent years of assessment.
(1) Sections 259 to 261A of the Taxes Act 1988 (additional relief in respect of children) shall cease to have effect.
(2) This section has effect for the year 2000-01 and subsequent years of assessment.
(1) Section 262 of the Taxes Act 1988 (income tax reduction for widow in year of bereavement and following year) shall cease to have effect.
(2) Subsection (1) above has effect in relation to deaths occurring on or after 6th April 2000.
(3) Where a woman is entitled to an income tax reduction for the year 2000-01 by virtue of paragraph (b) of section 262(1) of the Taxes Act 1988, the reference in that paragraph to the amount specified in section 257A(1) for that year shall be read as a reference to the amount specified in section 257A(5A) for that year.
(1) In section 256(3) of the Taxes Act 1988 (order of income tax reductions etc.)—
(a) in paragraph (a), for “section 259 or 261A” there shall be substituted “section 257AA”;
(b) paragraph (b) shall cease to have effect;
(c) the words after paragraph (c) shall be omitted.
(2) Subsection (1)(a) and (b) above has effect for the year 2001-02 and subsequent years of assessment.
(3) Subsection (1)(c) above has effect for the year 2000-01 and subsequent years of assessment.
(4) For the year 2000-01, section 256(3) of the Taxes Act 1988 shall have effect with the omission of paragraph (a) and, in paragraph (b), of the words “except section 259 or 261A”.
(1) In subsection (1) of section 347B of the Taxes Act 1988 (income tax reduction in respect of qualifying maintenance payments), at the beginning there shall be inserted “Subject to subsection (1A) below”.
(2) After that subsection there shall be inserted the following subsection—
“(1A) A periodical payment is not a qualifying maintenance payment unless either of the parties to the marriage mentioned in subsection (1)(b) above was born before 6th April 1935.”
(3) In subsection (2) of that section, for “subsections (3) and (4)” there shall be substituted “subsection (3)”.
(4) In subsection (3) of that section, for “section 257A(1)” there shall be substituted “section 257A(5A)”.
(5) In subsection (5A) of that section, for “subsections (2) to (5)” there shall be substituted “subsections (2) and (3)”.
(6) In subsection (8) of that section, for “subsections (1)(a) and (5)(a)” there shall be substituted “subsection (1)(a)”.
(7) Sections 347A and 347B of the Taxes Act 1988 shall have effect, notwithstanding anything in subsection (3) of section 36 of the [1988 c. 39.] Finance Act 1988 (which provides for the application of those sections), in relation to a payment made in pursuance of an existing obligation (within the meaning of that subsection) as they have effect in relation to a payment made otherwise than in pursuance of such an obligation.
(8) This section has effect in relation to any payment falling due on or after 6th April 2000.
For the year 1999-00 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) A payment of interest falling within subsection (3) or (4) below shall not be eligible for relief under section 353 of the Taxes Act 1988 by virtue of section 354 of that Act (interest on loans to buy land etc.).
(2) Section 369(1) of that Act (mortgage interest payable under deduction of tax) shall not apply to any payment of interest falling within subsection (3) or (4) below which (apart from section 353(2) of that Act and subsection (1) above) would be eligible for relief under section 353 of that Act by virtue of section 354 of that Act.
(3) A payment of interest falls within this subsection if it is—
(a) a payment made on or after 6th April 2000 (whenever falling due); or
(b) a payment made before that date, but not before 9th March 1999, of any interest that was not due until on or after 6th April 2000.
(4) A payment of interest falls within this subsection if it is—
(a) made before 6th April 2000 but not before 9th March 1999; and
(b) made under or in accordance with any scheme made for a tax-avoidance purpose on or after 9th March 1999 (whether or not before the making of the payment).
(5) For the purposes of subsection (4) above, a scheme is made for a tax-avoidance purpose if its main purpose, or one of its main purposes, is to secure that a payment of one or more of the following descriptions is a relievable payment, that is to say—
(a) a payment discharging an obligation to make a payment which (but for the scheme) might have been expected to be a non-relievable payment;
(b) a payment made in pursuance of any obligation which has effect, directly or indirectly, in place of an obligation under which a payment which might have been expected to be a non-relievable payment would have become due;
(c) a payment made in pursuance of an obligation which (apart from the purpose of securing that it is a relievable payment) might have been expected to take the form of an obligation—
(i) to make a non-relievable payment, or
(ii) to make two or more payments at least one of which would have been a non-relievable payment.
(6) In subsection (5) above—
“non-relievable payment” means a payment falling within subsection (3) above; and
“relievable payment” means a payment which—
is eligible for relief under section 353 of the Taxes Act 1988, or
is a payment to which section 369(1) of that Act applies.
(7) The references in this section to a scheme are references to any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable.
(8) Schedule 4 to this Act (which contains amendments consequential on the preceding provisions of this section) shall have effect.
(1) In section 365 of the Taxes Act 1988 (relief for interest on loans to buy life annuities), in subsection (1), before paragraph (a) insert—
“(aa) that the loan was made before 9th March 1999;”.
(2) After subsection (1) of that section insert—
“(1AA) Where—
(a) a loan made on or after 9th March 1999 was made in pursuance of an offer made by the lender before that date, and
(b) the offer was either in writing or evidenced by a note or memorandum made by the lender before that date,
the loan shall be deemed for the purposes of subsection (1)(aa) above to have been made before that date.”
(3) This section has effect for the year 1998-99 and subsequent years of assessment.
(1) Section 365 of the Taxes Act 1988 (relief for interest on loans to buy life annuities) is amended as follows.
(2) In subsection (1)(d) (residence requirement for land on which loan is secured), for “uses the land on which it was secured as his only or main residence at the time the interest is paid” substitute “used the land on which it was secured as his only or main residence immediately before 9th March 1999”.
(3) After subsection (1AA) (inserted by section 39 of this Act) insert—
“(1AB) Subject to subsection (1AC) below, the conditions in paragraphs (aa) and (a) of subsection (1) above shall be treated as satisfied in relation to a loan (“the new loan”) if—
(a) the new loan was made on or after the day on which the Finance Act 1999 was passed;
(b) the new loan was made as part of a scheme (“the scheme”) under which the whole or any part of the proceeds of the loan was used to defray money applied in paying off another loan (“the old loan”); and
(c) the conditions in subsection (1) above were, or were treated by virtue of this subsection as, satisfied with respect to the old loan.
(1AC) If only part of the proceeds of the new loan was used to defray money applied in paying off the old loan, subsection (1AB) above applies only if, under the scheme, not less than nine-tenths of the remaining part of the proceeds of the new loan was applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons who include him.
(1AD) In subsection (1AC) above “the remaining part” means the part of the proceeds of the new loan that was not used to defray money applied in paying off the old loan.”
(4) For subsection (1A) substitute—
“(1A) The condition in subsection (1)(d) above shall be treated as satisfied in relation to a loan if—
(a) the person to whom the loan was made, or any of the annuitants, ceased to use the land as his only or main residence at a time falling within the period of twelve months ending with 8th March 1999, and
(b) the intention at that time of the person to whom the loan was made, or each of the annuitants owning an estate or interest in the land, was to take steps, before the end of the period of twelve months after the day on which the land ceased to be so used, with a view to the disposal of his estate or interest.”
(5) This section has effect in relation to any payment of interest (whenever falling due) made on or after the day on which this Act is passed.
Finance Act 1999