Office of Public Sector Information
PART 8 continued CHAPTER 1 continued
(1) Interest on a loan within section 401 to an individual is eligible for relief only if conditions A to C are met.
(2) Condition A is that when the interest is paid the body continues to be a co-operative.
(3) Condition B is that in the period from the use of the loan to the payment of the interest the greater part of the individual’s time has been spent working as an employee of the body or of a subsidiary of the body.
(4) Condition C is that in that period the individual has not recovered any capital from the body, apart from any taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).
(1) This section applies to a loan to the personal representatives of a deceased person if the loan is used—
(a) in paying inheritance tax that meets the condition specified in subsection (2), or
(b) in repaying another loan to which this section applies.
(2) The condition is that the personal representatives are obliged to pay the tax under section 226(2) of IHTA 1984 (obligation of personal representatives to pay tax on delivery of their account).
(3) A written statement appearing to be from an officer of Revenue and Customs is sufficient evidence—
(a) of the amount of inheritance tax that meets the condition specified in subsection (2), and
(b) of any statements relevant to its calculation.
(4) In this section references to inheritance tax include interest payable on that tax.
Interest on a loan within section 403(1) is eligible for relief only so far as it is paid in respect of a period ending within 12 months from the making of the loan used as mentioned in section 403(1)(a).
(1) This section applies if relief for any interest on a loan within section 403(1) that is eligible for relief cannot be given for the tax year in which the interest is paid because there is not enough income in that year.
(2) The person paying the interest is entitled to relief for that interest—
(a) for the preceding tax year, or
(b) if there is not enough income in that year, for the tax year preceding it,
and so on.
(3) If relief cannot be given under subsection (2), it may instead be given—
(a) for the tax year following that in which the interest is paid, or
(b) if there is not enough income in that year, for the tax year following it,
and so on.
(1) This section applies if the individual to whom a loan is made to which section 392, 396, 398 or 401 applies recovers any amount of capital from the company, partnership or co-operative concerned at any time after the loan is used.
(2) The individual is treated for the purposes of this Chapter as having repaid that amount out of the loan at that time, whether or not such a repayment occurred.
(3) Accordingly, only part of the interest that, apart from any such repayment, would be payable on the loan for any period after that time and eligible for relief is so eligible.
(4) That part is so much of that interest as is attributable to the amount of the loan after the repayment.
(5) In the case of a loan to which section 386 applies (loans partly meeting requirements), subsection (3) applies instead of section 386(3) (under which repayments are apportioned between the qualifying and non-qualifying parts of such loans).
(6) The cases in which an individual is treated as having recovered an amount of capital for the purposes of this section are set out in section 407(1) to (3).
(1) An individual is treated as having recovered an amount of capital from a company for the purposes of section 406 if—
(a) the individual receives consideration of that amount or value—
(i) for the sale, exchange or assignment of part of the ordinary share capital of the company,
(ii) by way of repayment of part of that ordinary share capital, or
(iii) for assigning a debt due to the individual from the company, or
(b) the company repays that amount of a loan or advance from the individual.
(2) An individual is treated as having recovered an amount of capital from a partnership for those purposes if—
(a) the individual receives consideration of that amount or value—
(i) for the sale, exchange or assignment of part of the individual’s interest in the partnership, or
(ii) for assigning a debt due to the individual from the partnership, or
(b) the partnership repays that amount of a loan or advance from the individual, or
(c) the partnership returns that amount of capital to the individual.
(3) An individual is treated as having recovered an amount of capital from a co-operative for those purposes if—
(a) the individual receives consideration of that amount or value—
(i) for the sale, exchange or assignment of part of the individual’s shares in the co-operative,
(ii) by way of repayment of part of the individual’s shares in the co-operative, or
(iii) for assigning a debt due to the individual from the co-operative, or
(b) the co-operative repays that amount of a loan or advance from the individual.
(4) A sale or assignment that is not a bargain made at arm’s length is treated for the purposes of this section as being made for a consideration of an amount equal to the market value of what is disposed of.
(1) This section applies to a replacement loan.
(2) In subsection (1) “replacement loan” means a loan to which section 392, 396, 398 or 401 applies because the loan is used in repaying another loan (“the replaced loan”) to which that section applies.
(3) This Chapter, except for sections 385 and 386, applies to the replacement loan as if that loan and the replaced loan were a single loan (subject to subsection (5)).
(4) Accordingly, any restriction under section 406 (effect of recovery of capital in the case of some loans) which applies to the replaced loan applies to the replacement loan.
(5) But this Chapter, except for sections 385 and 386, applies as if references to the use of the loan were references to the use of the original loan.
(1) This section applies if—
(a) a loan to which section 398 applies is made to an individual,
(b) the partnership in question (“the old partnership”) is dissolved,
(c) on its dissolution another partnership of which the individual is a member (“the new partnership”) is formed to carry on the whole or part of the undertaking carried on by the old partnership, and
(d) interest payable on the loan for the period ending with the dissolution of the old partnership was eligible for relief (or would have been had any been payable).
(2) This Chapter applies as if the old partnership and the new partnership were the same partnership.
(3) Section 399(5) (salaried partners etc treated as partners) applies for the purposes of subsection (1)(c) as it applies for the purposes of section 399(2).
(1) This subsection applies if—
(a) a loan to which one of the business loan provisions or section 398 (loan to invest in partnership) applies is made to an individual (“the original loan”),
(b) the company, partnership or co-operative in question is involved in a transaction as a result of which the individual acquires shares in or makes a loan to another company or a body that is a co-operative,
(c) interest payable on the original loan for the period ending with the time of the transaction was eligible for relief (or would have been had any been payable), and
(d) had the original loan been made at the time of the transaction and applied in acquiring the shares in or making the loan to the other company or the co-operative, the original loan would have fallen within one of the business loan provisions.
(2) If subsection (1) applies, from the time of the transaction referred to in subsection (1)(b) the original loan is treated as if it had been made and applied as mentioned in subsection (1)(d).
(3) In this section “the business loan provisions” means—
(a) section 392 (loan to buy interest in close company),
(b) section 396 (loan to buy interest in employee-controlled company), and
(c) section 401 (loan to invest in co-operative).
(1) Interest that would be eligible for relief under this Chapter apart from this section is not eligible if—
(a) the interest is on a loan to which section 392, 396 or 398 applies, and
(b) the business carried on by the close company, employee-controlled company or partnership concerned consists of the occupation of commercial woodlands.
(2) If only part of the business consists in such occupation, only part of the interest is ineligible for the relief.
(3) That part is such part of the interest as it is just and reasonable to attribute to that part of the business having regard to all the relevant circumstances and, in particular, to the extent of the other part of the business.
(4) For the purposes of this section two or more businesses carried on by a company or partnership are to be regarded as a single business.
(5) In this section “commercial woodlands” means woodlands in the United Kingdom which are managed on a commercial basis and with a view to the realisation of profits.
(1) A person (“the payer”) who claims relief under this Chapter for a payment of interest made in a tax year is entitled to request the person to whom the interest is paid to give the payer a statement in writing about that interest containing the information specified in subsection (3).
(2) That request must be in writing.
(3) The information is—
(a) the date when the debt was incurred,
(b) the amount of the debt when incurred,
(c) the interest paid in the tax year, and
(d) the name and address of the debtor.
(4) The person to whom the interest is paid has a duty to comply with a request under subsection (1) and that duty is enforceable by the payer.
(5) This section does not apply if the interest is paid to a building society or to a local authority.
(1) This Chapter gives relief for some gifts of money to charities by individuals.
(2) The relief is set out in section 414.
(3) The Chapter contains provisions under which, in some circumstances—
(a) the individual’s entitlement to some other reliefs may be restricted (see section 423), and
(b) the individual may be charged to income tax (see section 424).
(4) See section 430 for bodies that are treated as charities for the purposes of this Chapter.
(5) For related reliefs for charities see Part 10 of this Act, section 25(10) of FA 1990 and section 505 of ICTA.
(1) An individual who makes a gift to a charity which is a qualifying donation is entitled to the relief set out in subsection (2).
(2) The Income Tax Acts have effect in their application to the individual for the tax year in which the gift is made as if—
(a) the gift had been made after deduction of income tax at the basic rate, and
(b) the basic rate limit (see section 20) were increased by an amount equal to the grossed up amount of the gift.
(3) See subsection (7) of section 535 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief) for provision about how relief under this Chapter is to be ignored for the purpose of calculating relief under that section.
In this Chapter references to the grossed up amount of a gift are to the amount of the gift grossed up by reference to the basic rate for the tax year in which the gift is made.
(1) A gift made to a charity by an individual is a qualifying donation for the purposes of this Chapter if—
(a) conditions A to G are met, and
(b) the individual gives the charity a gift aid declaration relating to the gift (see section 428).
(2) Condition A is that the gift takes the form of a payment of a sum of money.
(3) Condition B is that the payment is not subject to any condition as to repayment.
(4) Condition C is that the payment is not a sum falling within section 713(3) of ITEPA 2003 (payroll deduction scheme).
(5) Condition D is that the payment is not deductible in calculating the individual’s income from any source.
(6) Condition E is that the payment is not conditional on, associated with or part of an arrangement involving, the acquisition of property by the charity from the individual or a person connected with the individual.
An acquisition by way of gift is ignored for the purposes of this condition.
(7) Condition F is that—
(a) there are no benefits associated with the gift, or
(b) there are benefits associated with the gift but the restrictions on those benefits are not breached.
See sections 417 to 421 for provision about benefits associated with gifts.
(8) Condition G is that the gift is not a disqualified overseas gift (see section 422).
A benefit is associated with a gift for the purposes of this Chapter if it is received by the individual who makes the gift, or a person connected with the individual, in consequence of making the gift.
(1) For the purposes of section 416(7), the restrictions on benefits associated with a gift are breached if condition A or B is met.
(2) Condition A is that the total value of the benefits associated with the gift exceeds the variable limit, which is—
(a) 25% of the amount of the gift, if the amount of the gift is £100 or less,
(b) £25, if the amount of the gift is more than £100 but not more than £1,000,
(c) 2.5% of the amount of the gift, if the amount of the gift is more than £1,000.
(3) Condition B is that the sum of—
(a) the total value of the benefits associated with the gift, and
(b) the total value of the benefits (if any) associated with each relevant prior gift,
is more than £250.
(4) “Relevant prior gift” means a gift—
(a) which has already been made by the individual to the charity in the tax year, and
(b) which is a qualifying donation.
(5) This section needs to be read with sections 419 to 421.
(1) This section modifies the application of section 418(2) in relation to a gift if condition A, B, C or D is met.
(2) Condition A is that a benefit associated with the gift relates to a period of less than 12 months.
(3) Condition B is that a benefit associated with the gift consists of a right to receive benefits at intervals over a period of less than 12 months.
(4) Condition C is that a benefit associated with the gift is one of a series of benefits which are—
(a) received at intervals, and
(b) associated with a series of gifts made at intervals of less than 12 months.
(5) Condition D is that—
(a) a benefit associated with the gift is not one of a series of benefits received at intervals, and
(b) the gift is one of a series of gifts made at intervals of less than 12 months.
(6) If condition A, B or C is met, then for the purposes of section 418(2)—
(a) the value of the benefit is taken to be the annual equivalent of its actual value, and
(b) the amount of the gift is taken to be the annual equivalent of its actual amount.
(7) If condition D is met, the amount of the gift is taken for the purposes of section 418(2) to be the annual equivalent of its actual amount.
(8) The annual equivalent of the value of a benefit, or of the amount of a gift, is calculated as follows.
Step 1
Multiply the value or amount by 365.
Step 2
If condition A or B is met in relation to the benefit (and neither condition C nor condition D is met in relation to it), divide the result by the number of days in the period of less than 12 months referred to in subsection (2) or (as the case may be) subsection (3).
If condition C or D is met in relation to the benefit, divide the result by the average number of days in the intervals of less than 12 months referred to in subsection (4)(b) or (as the case may be) subsection (5)(b).
(1) A benefit associated with a gift is ignored for the purposes of this Chapter if the benefit consists of a relevant right of admission.
(2) “Right of admission” means a right which—
(a) benefits the individual who makes the gift or that individual and one or more members of that individual’s family (whether or not the right must be exercised by all of them at the same time),
(b) authorises admission to premises or property to which the public are admitted on payment of an admission fee, and
(c) authorises admission to those premises or that property without payment of the admission fee or on payment of a reduced fee.
(3) A right of admission is a relevant right of admission if—
(a) conditions A and B are met in relation to it, and
(b) either condition C or condition D is met in relation to it.
(4) Condition A is that the opportunity to make a gift and to receive the right of admission in consequence is available to the public.
(5) Condition B is that the right of admission is a right granted by the charity for the purpose of viewing property preserved, maintained, kept or created by a charity for its charitable purposes.
(6) The property mentioned in subsection (5) includes, in particular—
(a) buildings,
(b) grounds or other land,
(c) plants,
(d) animals,
(e) works of art (but not performances),
(f) artefacts, and
(g) property of a scientific nature.
(7) Condition C is that the right of admission applies, during a period of at least 12 months, at all times at which the public can obtain admission.
(8) Condition D is that—
(a) a member of the public could purchase the same right of admission, and
(b) the amount of the gift is greater by at least 10% than the amount the member of the public would have to pay.
(9) This section needs to be read with section 421.
(1) This section applies for the purposes of section 420.
(2) Condition C is to be treated as met even if the right does not apply on days which are specified by the charity as event days, provided no more than 5 days are so specified in relation to the applicable period.
(3) The applicable period is—
(a) the period during which the right applies, in the case of a right which applies for a period of 12 months, or
(b) each calendar year during all or part of which the right applies, in the case of a right which applies for a period of more than 12 months.
(4) An “event day” is a day on which an event is to take place on the premises to which the right relates.
(5) In condition D the “same right of admission” means a right relating to the same property, classes of persons and periods of time as the right received in consequence of the gift.
(1) This section applies for the purposes of section 416(8).
(2) A gift is an “overseas gift” if—
(a) it is made by an individual to a charity at a time when the individual is neither UK resident nor in Crown employment, and
(b) ignoring condition G in section 416(8), it is a qualifying donation.
(3) An overseas gift made by an individual in a tax year is a “disqualified overseas gift” if, as a result of the gift, the overseas gifts total is more than the individual’s charged amount (see section 427).
(4) In subsection (3) “overseas gifts total” means the sum of the grossed up amounts of all overseas gifts made by the individual in the tax year.
(5) In this section “Crown employment” means employment under the Crown—
(a) which is of a public nature, and
(b) the earnings from which are payable out of the public revenue of the United Kingdom or of Northern Ireland.
(1) This section applies if—
(a) an individual makes one or more gifts to charities in a tax year which are qualifying donations, and
(b) amount A is greater than amount B.
(2) In this section—
“amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and
“amount B” means the total amount of income tax and capital gains tax to which the individual is charged for the tax year (before applying this section).
(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425.
(4) The individual’s entitlement to the reliefs mentioned in subsection (5) is extinguished, so far as is necessary to ensure that the total amount of income tax and capital gains tax to which the individual is charged for the tax year (after applying this section)—
(a) is equal to amount A, or
(b) if that is not possible, falls short of amount A by as little as possible.
(5) The reliefs are—
(a) an allowance under Chapter 2 of Part 3 of this Act or section 257 or 265 of ICTA (personal allowance and blind person’s allowance),
(b) a tax reduction under Chapter 3 of Part 3 of this Act or section 257A, 257AB, 257BA or 257BB of ICTA (tax reductions for married couples and civil partners),
(c) relief under section 457 or 458 of this Act or section 266(7) of ICTA (payments to trade unions and police organisations), and
(d) a tax reduction under section 459 of this Act or section 273 of ICTA (payments for benefit of family members).
(1) Income tax is charged under this section if—
(a) an individual makes one or more gifts to charity in a tax year which are qualifying donations, and
(b) amount A is greater than amount C.
(2) In this section—
“amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and
“amount C” means the sum of—
the amount of income tax to which the individual is charged for the tax year, and
the amount of capital gains tax to which the individual is charged for the tax year.
(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425, after taking into account any restriction of relief under section 423.
(4) The amount of the tax charged under this section is equal to the difference between amount A and amount C.
(5) Tax charged under this section is charged for the tax year in which the gift or gifts are made.
(6) The person liable for any tax charged under this section is the individual.
(1) For the purposes of sections 423 and 424, the total amount of income tax to which an individual is charged for a tax year is the amount calculated as follows.
(2) Calculate the individual’s liability to income tax for the tax year in accordance with section 23, as modified by subsection (3).
(3) In applying section 23—
(a) at Step 6, ignore any tax reductions to which the individual is entitled for the tax year under a provision listed in subsection (4), and
(b) ignore Step 7.
(4) The tax reductions to be ignored are tax reductions under—
(a) section 453 (qualifying maintenance payments),
(b) section 788 of ICTA (double taxation arrangements: relief by agreement), or
(c) section 790(1) of ICTA (relief for foreign tax where no double taxation arrangements).
(5) From the amount calculated in accordance with subsections (2) to (4) deduct—
(a) any tax treated as having been paid under—
(i) section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK resident companies etc on which there is no tax credit),
(ii) section 414(1) of that Act (stock dividend income),
(iii) section 421(1) of that Act (release of loan to participator in close company),
(iv) section 530(1) of that Act (gains from contracts for life insurance), or
(v) section 685A(3) of that Act (settlor-interested settlements), and
(b) any tax treated as deducted from estate income under section 656(3) or 657(4) of ITTOIA 2005, so far as that income is treated under section 679 of that Act as paid from sums within section 680(3)(b) or (4) of that Act.
(6) For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 of ICTA if the person is entitled to credit against income tax under double taxation arrangements.
Income Tax Act 2007