Office of Public Sector Information
(1) This Part provides for certain exemptions from charges to income tax under this Act.
(2) The exemptions are dealt with in—
(a) Chapter 2 (national savings income),
(b) Chapter 3 (income from individual investment plans),
(c) Chapter 4 (SAYE interest),
(d) Chapter 5 (venture capital trust dividends),
(e) Chapter 6 (income from FOTRA securities),
(f) Chapter 7 (purchased life annuity payments),
(g) Chapter 8 (other annual payments), and
(h) Chapter 9 (other income).
(3) Chapter 10 explains that, in general, the effect of the exemptions is that the exempt amounts are ignored for other income tax purposes.
(4) Other exemptions, such as exemptions relating to particular categories of persons, may also be relevant to the charges to income tax under this Act.
(5) And the exemptions dealt with in this Part may themselves be relevant to charges to income tax outside this Act.
(1) No liability to income tax arises for an individual in respect of interest on deposits in ordinary accounts with the National Savings Bank if the interest for the tax year does not exceed £70.
(2) If the interest for the tax year exceeds £70, the individual is only liable to income tax on the excess.
(1) No liability to income tax arises in respect of income from authorised savings certificates.
(2) A savings certificate is authorised so far as its acquisition was not prohibited by regulations made by the Treasury limiting a person’s holding.
(3) In this section “savings certificates” means—
(a) savings certificates issued under—
(i) section 12 of the National Loans Act 1968 (c. 13) (power of Treasury to borrow),
(ii) section 7 of the National Debt Act 1958 (c. 6) (power of Treasury to issue national savings certificates), or
(iii) section 59 of FA 1920 (power to borrow on national savings certificates),
(b) war savings certificates, as defined in section 9(3) of the National Debt Act 1972 (c. 65), or
(c) savings certificates issued under any enactment forming part of the law of Northern Ireland and corresponding to section 12 of the National Loans Act 1968.
(4) But subsection (3)(c) does not include Ulster Savings Certificates (for which there are special rules in section 693).
(1) No liability to income tax arises in respect of income from authorised Ulster Savings Certificates if condition A, B or C is met.
(2) Condition A is that —
(a) the holder purchased them, and
(b) at the time of the purchase the holder was resident and ordinarily resident in Northern Ireland.
(3) Condition B is that the holder is so resident and ordinarily resident when they are repaid.
(4) Condition C is that—
(a) they are repaid after the holder’s death, and
(b) at the time of the purchase the holder was so resident and ordinarily resident.
(5) An Ulster Savings Certificate is authorised so far as its acquisition was not prohibited by regulations made by the Department of Finance and Personnel limiting a person’s holding.
(6) The exemption under this section requires a claim.
(7) In this Act “Ulster Savings Certificates” means savings certificates issued or treated as issued under section 15 of the Exchequer and Financial Provisions Act (Northern Ireland) 1950 (c. 3 (N.I.)).
(1) The Treasury may by regulations provide that income of an individual from investments under a plan—
(a) is exempt from income tax, or
(b) is exempt from income tax to such extent as is specified in the regulations.
(2) In this Chapter such regulations are referred to as “investment plan regulations”.
(3) Investment plan regulations may, in particular, specify—
(a) the description of individuals who may invest, and
(b) maximum investment limits.
(4) They may provide for investment by an individual under more than one plan in the same tax year.
(5) They must set out conditions subject to which plans are to operate.
(6) The following provisions of this Chapter contain more particular provisions about the scope of investment plan regulations.
(1) Investment plan regulations may specify the kind of investments which may be made under a plan or which may be made by particular descriptions of individuals under a plan.
(2) They may—
(a) provide for a plan in the form of an account, and
(b) authorise the ways in which the subscriptions to an account are to be invested.
(3) They may—
(a) provide that plans are to be such as are approved by the Board of Inland Revenue, and
(b) specify the circumstances in which approval may be granted and withdrawn.
(4) They may—
(a) provide for plans to be treated as being of different kinds, according to criteria set out in the regulations,
(b) provide for the Board to register a plan as being of a particular kind, and
(c) make different provision about different kinds of plan.
(1) Investment plan regulations may provide that investments are to be held by persons on behalf of investors.
(2) In this Chapter those persons, including the managers of any such account as is specified in section 695(2), are referred to as “plan managers”, and references to “plan managers” in any other enactment are to be read accordingly.
(3) Investment plan regulations may—
(a) provide that plan managers are to be such as are approved by the Board of Inland Revenue, and
(b) specify the circumstances in which approval may be granted and withdrawn.
(1) Investment plan regulations may provide that a foreign institution may only be a plan manager if one of the requirements set out in section 698(2), (3) and (4) about the discharge of such of the institution’s duties as are specified in the regulations is met.
(2) In this section “foreign institution” means—
(a) an EEA firm of the kind mentioned in paragraph 5(a), (b) or (c) of Schedule 3 to FISMA 2000 which is an authorised person for the purposes of that Act as a result of qualifying for authorisation under paragraph 12 of that Schedule,
(b) a firm which is an authorised person for those purposes as a result of qualifying for authorisation under paragraph 2 of Schedule 4 to that Act, or
(c) an insurance company which is non-UK resident.
(3) Different duties may be specified under subsection (1) for different institutions or different descriptions of institution.
(4) In this section—
“insurance company” means an undertaking carrying on the business of effecting or carrying out contracts of insurance, and
“contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).
(1) The requirements about the discharge of an institution’s duties which are referred to in section 697(1) (one of which may be imposed in the case of certain foreign managers) are requirements A, B and C.
(2) Requirement A is that—
(a) a person is currently appointed by the institution to be responsible for securing the discharge of the duties,
(b) that person either—
(i) is an individual who is a UK resident, or
(ii) is not an individual and has a business establishment in the United Kingdom, and
(c) the institution has notified the Board of Inland Revenue of that person’s identity and appointment.
(3) Requirement B is that there are other current arrangements with the Board for a person other than the institution to secure the discharge of the duties.
(4) Requirement C is that there are other current arrangements with the Board designed to secure the discharge of the duties.
(5) Investment plan regulations may provide—
(a) that requirement A or B is only met if the person concerned is of a description specified in the regulations as respects that requirement,
(b) that appointments made for the purposes of requirement A or arrangements made for the purposes of requirement B are treated as terminated in circumstances specified in the regulations as respects that requirement.
(6) Investment plan regulations may provide that a person currently appointed as mentioned in subsection (2) or as to whom there is a current arrangement within subsection (3)—
(a) may act on the institution’s behalf for any of the purposes of the provisions relating to the duties,
(b) is to secure the institution’s compliance with, and discharge of, the duties, where appropriate by acting on its behalf,
(c) is personally liable for the institution’s failure to comply with or discharge any of the duties, as if they were imposed on the person and the institution jointly and severally.
(1) Investment plan regulations may—
(a) provide that in circumstances specified in the regulations an investor ceases to be entitled to the exemption given by regulations made under section 694(1) and is treated as not having been entitled to it,
(b) adapt or modify the effect of any enactment relating to income tax for that purpose, and
(c) provide that in those circumstances the investor or the plan manager (depending on the terms of the regulations) is to account to the Board of Inland Revenue for income tax from which exemption has already been given on the basis that the investor was entitled to the exemption.
(2) They may provide that an investor or the plan manager (depending on the terms of the regulations) is to account to the Board—
(a) for income tax from which the exemption has been given in circumstances where the investor was not entitled to it, or
(b) for an amount determined in accordance with the regulations to be the amount to be taken as representing that tax.
(3) They may modify the effect of or adapt any enactment relating to income tax for the purposes of securing that investors or plan managers account for the tax and other amounts mentioned in subsections (1) and (2).
(4) They may also modify the provisions of or adapt Chapter 9 of Part 4 of this Act (gains from contracts for life insurance etc.) or Chapter 2 of Part 13 of ICTA (life policies, life annuities and capital redemption policies) for cases where an investor—
(a) ceases to be entitled to the exemption given by regulations made under section 694(1) and is treated as not having been entitled to it, or
(b) has been given the exemption on the basis of an entitlement to it when there was no such entitlement.
(5) They may provide for plan managers (as well as investors) to be liable to account for amounts becoming due from investors as a result of regulations made under subsection (4).
(6) They may provide that, instead of having to account as mentioned in subsection (2) or (5), an investor or a plan manager is liable to a penalty of an amount specified in the regulations if—
(a) an exemption has been given to which there was no entitlement, and
(b) the circumstances are such as are specified in the regulations.
(7) They may provide that liabilities are imposed in cases which—
(a) are not cases in which liabilities may be imposed under subsections (1) to (6) where relief has been given to which there was no entitlement, but
(b) are cases where—
(i) a contravention or failure to comply with investment plan regulations that is specified in the regulations, or
(ii) the existence of such other circumstances as are so specified,
would have the effect of excluding or limiting an entitlement to exemption, apart from the regulations under this subsection.
(8) Regulations under subsection (7)—
(a) may only provide for the imposition of liabilities equivalent to those which may be imposed under subsections (1) to (6), and
(b) must provide for those liabilities to replace the liabilities to tax which would otherwise arise.
(1) Investment plan regulations may impose a duty on any current or former investor or plan manager—
(a) to comply within the period specified by the regulations with any documents notice served by the Board of Inland Revenue, or
(b) to comply within the period specified by the regulations with any information request made by the Board.
(2) In this section “documents notice” means a notice requiring a person to make available for the Board’s inspection documents relating to a plan or investments held or formerly held under it.
(3) The regulations must specify the kind of documents to which a documents notice may relate.
(4) A documents notice must specify the period for compliance with it.
(5) In this section “information request” means a request to give the Board information about a plan or investments held or formerly held under it.
(6) The regulations must specify—
(a) the kind of information to which an information request may relate, and
(b) the period from the making of the request for compliance with it.
(1) Investment plan regulations may make provision generally for the purpose of—
(a) the establishment and administration of plans, and
(b) the administration of income tax in relation to them.
(2) They may adapt or modify the effect of any enactment relating to income tax for the purpose of securing that investors are entitled to exemption from income tax in respect of investments.
(3) They may specify how exemption from tax is to be claimed by, and granted to, investors or plan managers on behalf of investors.
(1) No liability to income tax arises in respect of interest payable under a certified SAYE savings arrangement.
(2) In this section “certified SAYE savings arrangement” has the meaning given in section 703(1).
(3) Subsection (1) is subject to—
(a) section 707(1) (which requires the providers of certain arrangements to be authorised), and
(b) paragraph 7 of Schedule 12 to FA 1988 (application of exemption on change of status of building society).
(4) In this Chapter “interest” includes any bonus.
(1) In this Chapter “certified SAYE savings arrangement” means a linked savings arrangement which is certified under section 705.
(2) In this Chapter “linked savings arrangement” means an arrangement—
(a) which is of a kind specified in section 704(1), and
(b) under which an individual who is eligible to participate in an approved SAYE option scheme enters into a contract to make periodical contributions for a specified period for the purpose of being able to participate in that scheme.
(3) In subsection (2)—
“to participate” means to obtain and exercise rights under the scheme, and
“SAYE option scheme” has the meaning given by section 516(4) of ITEPA 2003, and such a scheme is “approved” if it is approved under Schedule 3 to ITEPA 2003.
(1) A linked savings arrangement may be—
(a) a national savings arrangement, or
(b) an institutional arrangement.
(2) In this Chapter “national savings arrangement” means an arrangement which—
(a) provides for contributions to be paid to raise money under section 12 of the National Loans Act 1968 (c. 13) (power of Treasury to borrow),
(b) is governed by regulations made under section 11 of the National Debt Act 1972 (c. 65) (power of Treasury to make regulations as to raising of money under auspices of Director of Savings), and
(c) provides for the repayment of those contributions, together with interest, in accordance with those regulations.
(3) In this Chapter “institutional arrangement” means—
(a) a bank arrangement,
(b) a building society arrangement, or
(c) a European authorised institution arrangement.
(4) In this Chapter—
(a) “bank arrangement” means an arrangement which provides for contributions to be paid to a person within section 840A(1)(b) of ICTA (banks), and
(b) “provider”, in relation to such an arrangement, means that person.
(5) In this Chapter—
(a) “building society arrangement” means an arrangement which provides for contributions to be paid by way of investment in shares in a building society, and
(b) “provider”, in relation to such an arrangement, means that society.
(6) In this Chapter—
“European authorised institution” means an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to FISMA 2000 which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12 of that Schedule) to accept deposits,
“European authorised institution arrangement” means an arrangement which provides for contributions to be paid to such a firm, and
“provider”, in relation to such an arrangement, means that firm.
(1) A linked savings arrangement is certified under this section if it is certified by the Treasury—
(a) as a linked savings arrangement, and
(b) in the case of an institutional arrangement, as meeting such requirements as the Treasury may specify for the purposes of this Chapter.
(2) The requirements which may be specified under subsection (1)(b) are such requirements as the Treasury consider appropriate.
(3) They may, in particular, relate to—
(a) the descriptions of individuals who may enter into contracts under an arrangement,
(b) the contributions to be paid by them, and
(c) the sums to be paid or repaid to them.
(4) Different requirements may be specified for—
(a) bank arrangements,
(b) building society arrangements, and
(c) European authorised institution arrangements.
(1) The Treasury may—
(a) withdraw the requirements specified under section 705(1)(b) for any description of arrangements and any certification made by reference to those requirements, or
(b) vary those requirements and withdraw any certification made by reference to them.
(2) The withdrawal, or variation and withdrawal, is only effective if the Treasury—
(a) specify the date on which it is to take effect, and
(b) give notice of it by post at least 28 days before that date to the provider authorised under section 707 to enter into contracts under the arrangement concerned.
(3) The withdrawal, or variation and withdrawal, does not affect the operation of the arrangement concerned before that date or contracts made under that arrangement before it.
(1) In the case of an institutional arrangement, section 702(1) (exemption of interest payable under certified SAYE savings arrangements) only applies if, at the time the contract under the arrangement is made, the provider is authorised by the Treasury to enter into contracts under it.
(2) If the authorisation is conditional, the conditions must be met at that time.
(3) Authorisation may be given for arrangements generally or a particular arrangement.
(4) More than one authorisation may be given to the same provider.
(1) The Treasury may withdraw the authorisation of a provider or vary it by imposing, varying or removing conditions.
(2) The withdrawal or variation is only effective if the Treasury—
(a) specify the date on which it is to take effect, and
(b) except in the case of a variation removing all conditions, give notice of it by post to the provider at least 28 days before that date.
(3) The withdrawal or variation does not affect contracts made before that date.
(4) The fact that a provider has had its authorisation withdrawn or varied does not affect the later exercise by the Treasury of its powers under section 707 or this section as respects the provider.
(1) No liability to income tax arises in respect of a venture capital trust dividend if—
(a) conditions A and B are met, and
(b) where the dividend is paid in respect of shares acquired after 8th March 1999, condition C is met.
(2) In subsection (1) a “venture capital trust dividend” means a dividend paid in respect of ordinary shares in a company which—
(a) is a venture capital trust—
(i) at the end of the accounting period in which the profits or gains in respect of which it is paid arose or accrued, and
(ii) when the dividend is paid, and
(b) was such a trust when the person to whom it is paid acquired the shares.
(3) Condition A is that the person beneficially entitled to the dividend—
(a) is an individual of at least 18 years, and
(b) is beneficially entitled to it as the holder of the shares or as the person for whom, or for whose benefit, they are held by a nominee.
(4) Condition B is that—
(a) in the tax year in which the shares were acquired the market value of all the shares acquired by the individual or any nominee of the individual in companies which were venture capital trusts at the time of acquisition did not exceed £200,000, or
(b) in that year that market value exceeded £200,000, but the shares are treated under section 710 as having been acquired within that limit.
(5) For the purposes of subsection (4), the market value of a share is determined as at the time of its acquisition.
(6) Condition C is that the shares were acquired for genuine commercial reasons and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, was the avoidance of tax.
(7) Shares that were not so acquired are ignored for the purposes of subsection (4) and section 710 (whether or not they were acquired after 8th March 1999).
(8) In this section and in sections 710 and 711—
“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273),
“nominee”, in relation to an individual, includes the trustees of a bare trust of which the individual is the only beneficiary, and
“ordinary shares” means shares forming part of the company’s ordinary share capital.
(1) This section sets out the rules for determining which shares whose market value is relevant for the limit in section 709(4) are treated as shares acquired within that limit (“exempt shares”) where that limit is exceeded in a tax year.
(2) Shares are treated as exempt shares so far as their acquisition does not cause the limit to be exceeded at the time they are acquired.
(3) Subsection (2) is subject to subsection (4).
(4) If shares of different descriptions acquired on the same day cause the limit to be exceeded on that day, shares of each description are treated as exempt shares so far as their market value does not exceed the appropriate proportion of the available value.
(5) In subsection (4)—
“the appropriate proportion”, in relation to shares of a particular description, means the proportion which their market value bears to the market value of all the shares acquired on that day, and
“available value” means the maximum value of shares which could be acquired on that day without exceeding the limit.
(1) In determining whether a disposal relates to shares in a company which were acquired when it was a venture capital trust or others, it is assumed that the others are disposed of first.
(2) In determining whether a disposal of shares in a company which were acquired when it was a venture capital trust relates to shares which meet the condition in section 709(4) (annual acquisition limit) or others (“excess shares”), assumptions A and B are to be made.
(3) Assumption A is that shares acquired on an earlier day are disposed of before those acquired on a later day.
(4) Assumption B is that where the shares were acquired on the same day, excess shares are disposed of first.
(5) For the purposes of this section, acquisitions and disposals by an individual’s nominee are treated as made by the individual, and acquisitions and disposals between them are ignored.
Income Tax (Trading and Other Income) Act 2005