Office of Public Sector Information
Section 1027
1 The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
2 Omit sections 1 to 2 (the charge to income tax, application of lower rate to income from savings and distributions, rates of tax applicable to distribution income etc, and fractions of a pound and yearly assessments).
3 Omit section 3 (certain income charged at basic rate).
4 Omit section 4 (construction of references in Income Tax Acts to deduction of tax).
5 Omit section 7(1) (deduction of income tax from payments to companies).
6 (1) Amend section 9 (computation of income: application of income tax principles) as follows.
(2) In subsection (2)—
(a) after “except that it does not include” insert “— (a)”, and
(b) after “subsection (1) above” insert “, or
(b) ITA 2007”.
(3) In subsection (4) after “ITTOIA 2005” insert “and ITA 2007”.
(4) In subsection (6) omit the words from the beginning to “this Act; and”.
7 Omit section 42A (non-resident landlords and their representatives).
8 Omit sections 50, 51 and 51AA (United Kingdom securities: Treasury directions for payment without deduction of tax etc).
9 In section 56(3)(c) (transactions in deposits with and without certificates or in debts) for “charity” substitute “charitable company”.
10 In section 105(2) (allowable deductions) omit “or by virtue of section 90(4) of the Finance Act 1995”.
11 Omit section 109A (relief for post-cessation expenditure).
12 In section 110(1) (interpretation of sections 103 to 109A) for “sections 103 to 109A” substitute “sections 103 to 106”.
13 Omit section 117 (restriction on relief for limited partners: individuals).
14 (1) Amend section 118 (restriction on relief for limited partners: companies) as follows.
(2) In subsection (2) before the definition of “relevant accounting period” insert—
““limited partner” means—
(a) a company which is carrying on a trade as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907;
(b) a company which—
is carrying on a trade as a general partner in a partnership;
is not entitled to take part in the management of the trade; and
is entitled to have its liabilities, or its liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade discharged or reimbursed by some other person; or
(c) a company which carries on a trade jointly with others and which, under the law of any territory outside the United Kingdom—
is not entitled to take part in the management of the trade; and
is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;”.
(3) In subsection (2) in the definition of “relevant accounting period” omit “(within the meaning of section 117(2))”.
(4) In subsection (2) in the definition of “the relevant sum” omit “(within the meaning of section 117(3))”.
(5) After that subsection insert—
“(3) A partner company’s contribution to a trade at any time is the aggregate of—
(a) the amount which the partner company has contributed to the trade as capital and has not, directly or indirectly, drawn out or received back (other than anything which it is or may be entitled so to draw out or receive back at any time when it carries on the trade as a limited partner or which it is or may be entitled to require another person to reimburse to it), and
(b) the amount of any profits of the trade to which the partner company is entitled but which it has not received in money or money’s worth.”
15 For section 118ZB substitute—
Section 118 has effect in relation to a member of a limited liability partnership as in relation to a limited partner, but subject to sections 118ZC and 118ZD.”
16 (1) Amend section 118ZC (member’s contribution to trade) as follows.
(2) In subsection (1) for “section 117” substitute “section 118”.
(3) In subsection (2)—
(a) omit “that section and”,
(b) for “him” substitute “it”, and
(c) for “his” substitute “its”.
(4) In subsection (3)—
(a) for “he”, in each place where it occurs, substitute “it”, and
(b) for “him” substitute “it”.
(5) In subsection (4)—
(a) for “he”, in both places where it occurs, substitute “it”,
(b) for “its” substitute “the partnership's”, and
(c) for “it” substitute “the partnership”.
(6) Omit subsection (5).
17 (1) Amend section 118ZD (carry forward of unrelieved losses) as follows.
(2) In subsection (1)—
(a) for “chargeable periods” substitute “accounting periods”,
(b) omit “117 or”,
(c) for “his”, in both places where it occurs, substitute “the member's”,
(d) for “chargeable period” substitute “accounting period”, and
(e) for “he” substitute “the member”.
(3) In subsection (2)—
(a) for the words from the beginning to “as they apply” substitute “Sections 393A(1) and 403 (and section 118 as it applies”,
(b) for “chargeable period”, in both places where it occurs, substitute “accounting period”, and
(c) for “his” substitute “the member's”.
(4) In subsection (3)—
(a) for “chargeable period”, in each place where it occurs, substitute “accounting period”,
(b) for “his”, in each place where it occurs, substitute “the member's”, and
(c) for “the Tax Acts” substitute “the Corporation Tax Acts”.
18 Omit sections 118ZE to 118ZK (restriction on reliefs for non-active general partners and non-active members of LLPs).
19 Omit sections 118ZL and 118ZM (restriction on reliefs for partnerships exploiting films).
20 Omit sections 118ZN and 118ZO (partners: meaning of “contribution to the trade”).
21 (1) Amend section 125 (annual payments for dividends or non-taxable consideration) as follows.
(2) In subsection (1)—
(a) omit “shall be made without deduction of income tax and”, and
(b) for “or total income of the person by whom” substitute “of the company by which”.
(3) In subsection (2)(b) omit “income tax or”.
(4) In subsection (3)—
(a) insert “or” at the end of paragraph (b), and
(b) omit paragraph (d) and the “or” immediately before it.
22 In section 209A(4) (section 209(3AA): link to shares of company or associated company) for “section 349(5) and (6)” substitute “section 984 of ITA 2007”.
23 Omit section 214(1)(b) (chargeable payments connected with exempt distributions: deduction of tax at source).
24 (1) Amend section 231AA (no tax credit for borrower under stock lending arrangement or interim holder under repurchase agreement) as follows.
(2) In subsection (1) omit “above or section 397(1) of ITTOIA 2005”.
(3) Omit subsection (1A).
25 (1) Amend section 231AB (no tax credit for original owner under repurchase agreement in respect of certain manufactured dividends) as follows.
(2) In subsection (1) omit “above or section 397(1) of ITTOIA 2005”.
(3) Omit subsection (1A).
26 In section 231B(12) (consequences of certain arrangements to pass on the value of a tax credit) for the definition of “tax advantage” substitute—
““tax advantage” has the meaning given by section 840ZA”.
27 (1) Amend section 256 (personal reliefs: general) as follows.
(2) In subsection (1) for “sections 275 to 278” substitute “section 278”.
(3) In subsection (2)—
(a) for “an income tax reduction” substitute “a tax reduction”, and
(b) for the words from “the effect of that relief” to the end of the subsection substitute “the amount of the tax reduction is equal to 10 per cent. of the specified amount”.
(4) Omit subsection (3).
28 After section 256 insert—
(1) For the purposes of this Chapter an individual’s adjusted net income for a year of assessment is calculated as follows.
Step 1
Take the amount of the individual’s net income for the year of assessment.
Step 2
If in the year of assessment the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid) deduct the grossed up amount of the gift.
Step 3
If the individual is given relief in accordance with section 192 of FA 2004 (relief at source) in respect of any contribution paid in the year of assessment under a pension scheme, deduct the gross amount of the contribution.
Step 4
Add back any relief under section 266 of this Act given by virtue of subsection (7) of that section (payments for life insurance etc) that was deducted in calculating the individual’s net income for the year of assessment.
The result is the individual’s adjusted net income for the year of assessment.
(2) The grossed up amount of a gift is the amount of the gift grossed up by reference to the basic rate for the year of assessment.
(3) The gross amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004.
In this Chapter “the minimum amount” means £2,350.”
29 (1) Amend section 257 (personal allowance) as follows.
(2) In subsection (1) for “deduction from his total income” substitute “personal allowance”.
(3) In subsection (2)—
(a) for “deduction from his total income” substitute “personal allowance”, and
(b) for “the deduction” substitute “the allowance”.
(4) In subsection (3)—
(a) for “deduction from his total income” substitute “personal allowance”, and
(b) for “the deduction” substitute “the allowance”.
(5) In subsection (5) for “total income” substitute “adjusted net income”.
(6) After subsection (5) insert—
“(6) An allowance under this section is given effect at Step 3 of the calculation in section 23 of ITA 2007.”
30 (1) Amend section 257A (married couple’s allowance: pre-5 December 2005 marriages) as follows.
(2) In subsections (2) and (3) for “an income tax reduction” substitute “a tax reduction”.
(3) In subsection (5) for “total income” substitute “adjusted net income”.
(4) In subsection (5A) for “£2,350” substitute “the minimum amount”.
(5) In subsection (6) for “income tax reduction” substitute “tax reduction”.
(6) After subsection (6) insert—
“(6A) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”
31 (1) Amend section 257AB (married couple’s allowance: post-5 December 2005 marriages and civil partnerships etc) as follows.
(2) In subsection (1)(d) for “total income” (in both places it occurs) substitute “net income”.
(3) In subsection (2) for “an income tax reduction” substitute “a tax reduction”.
(4) In subsection (4) for “total income” substitute “adjusted net income”.
(5) In subsection (5) for “£2,350” substitute “the minimum amount”.
(6) In subsection (6) for “income tax reduction” substitute “tax reduction”.
(7) After subsection (9) insert—
“(10) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”
32 (1) Amend section 257BA (elections as to transfer of relief under section 257A or 257AB) as follows.
(2) For subsections (1) to (3) substitute—
“(1) An individual may elect that for any year of assessment for which the individual’s spouse or civil partner is entitled to a tax reduction under section 257A or 257AB—
(a) the individual shall be entitled (on making a claim) to a tax reduction calculated by reference to half the minimum amount, and
(b) the spouse or civil partner’s appropriate amount shall be reduced by half the minimum amount.
(2) An individual and the individual’s spouse or civil partner may jointly elect that for any year of assessment for which the individual is entitled to a tax reduction under section 257A or 257AB—
(a) the individual’s spouse or civil partner shall be entitled (on making a claim) to a tax reduction calculated by reference to the minimum amount, and
(b) the individual’s appropriate amount shall be reduced by the minimum amount.
(3) An individual may elect that for any year of assessment for which the individual’s spouse or civil partner is entitled to a tax reduction by virtue of an election under subsection (2) above—
(a) the individual shall be entitled (on making a claim) to a tax reduction calculated by reference to half the minimum amount (in addition to any tax reduction to which the individual is already entitled under section 257A or 257AB), and
(b) the tax reduction to which the spouse or civil partner is entitled by virtue of that election shall be calculated by reference to half the minimum amount (instead of by reference to the minimum amount).”
(3) After subsection (3) insert—
“(3A) In this section “the appropriate amount” means the amount by reference to which the calculation of the tax reduction is to be made.”
(4) Omit subsection (6).
(5) In subsection (9) for “income tax reduction” substitute “tax reduction”.
(6) After subsection (9) insert—
“(10) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”
33 (1) Amend section 257BB (transfer of relief under section 257A or 257AB where relief exceeds income) as follows.
(2) For subsection (1) substitute—
“(1) Where—
(a) an individual is entitled to a tax reduction under section 257A or 257AB, but
(b) the amount of the tax reduction to which the individual is entitled is greater than the individual’s comparable tax liability,
the individual’s spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of an election under section 257BA) to a tax reduction equal to the unused part of the individual’s MCA tax reductions.”
(3) After subsection (1) insert—
“(1A) The individual’s MCA tax reductions are the sum of—
(a) the tax reduction to which the individual is entitled under section 257A or 257AB, and
(b) any tax reduction to which the individual is entitled by virtue of an election under section 257BA(3).
(1B) The unused part of the individual’s MCA tax reductions is equal to—
(a) the individual’s MCA tax reductions, less
(b) the individual’s comparable tax liability.”
(4) For subsection (3) substitute—
“(3) Where—
(a) an individual is entitled to a tax reduction by virtue of an election under section 257BA, but
(b) the amount of the tax reduction to which the individual is entitled is greater than the individual’s comparable tax liability,
the individual’s spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of section 257A or 257AB) to a tax reduction equal to the unused part of the individual’s tax reduction.”
(5) After subsection (3) insert—
“(3AA) The unused part of the individual’s tax reduction is equal to—
(a) the tax reduction to which the individual is entitled by virtue of the election under section 257BA, less
(b) the individual’s comparable tax liability.”
(6) Omit subsection (3A).
(7) After subsection (5) insert—
“(5A) For the purposes of this section, the comparable tax liability of an individual is the amount of the individual’s tax left after Step 6 of the calculation in section 23 of ITA 2007, making that calculation with the modifications set out in subsections (5B) and (5C).
(5B) In making that calculation, do not deduct any tax reduction under—
(a) section 788 (double taxation arrangements: relief by agreement), or
(b) section 790(1) (relief for foreign tax where there are no double taxation arrangements).
(5C) If the individual’s entitlement to a tax reduction under section 257A, 257AB, 257BA or this section is extinguished under section 423(4) of ITA 2007 (gift aid: restriction of reliefs) to any extent, deduct from the amount calculated in accordance with subsections (5A) and (5B) the amount by which the tax reduction is reduced.
(5D) For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 if the person is entitled to credit against income tax under arrangements which have effect under that section.
(5E) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”
34 (1) Amend section 257C (indexation of amounts) as follows.
(2) In subsections (1) and (3) for “sections 257” substitute “sections 256B, 257”.
(3) In the sidenote for “sections 257” substitute “sections 256B, 257”.
35 (1) Amend section 265 (blind person’s allowance) as follows.
(2) In subsection (1)—
(a) for “deduction” substitute “blind person’s allowance”, and
(b) omit “from his total income”.
(3) In subsection (2)—
(a) in paragraph (a) for “relief under subsection (1) above” substitute “an allowance under subsection (1) above”,
(b) for paragraph (b) substitute—
“(b) the amount to which the person is entitled exceeds the person’s remaining relievable income,”, and
(c) for “a deduction from total income” substitute “an allowance”.
(4) After subsection (2) insert—
“(2A) The person’s remaining relievable income is the amount found by—
(a) taking the amount of the individual’s net income, and
(b) subtracting any personal allowance to which the person is entitled.”
(5) Omit subsection (3).
(6) In subsection (5)—
(a) for “Subsections (2) and (3)” substitute “Subsection (2)”,
(b) for “relief” substitute “an allowance”, and
(c) for “they are” substitute “it is”.
(7) After subsection (7) insert—
“(8) An allowance under this section is given effect at Step 3 of the calculation in section 23 of ITA 2007.”
36 (1) Amend section 266 (life assurance premiums) as follows.
(2) In subsection (3)(c) omit the words from “, except” to “subsection (6) below”.
(3) In subsection (4) for “subsections (6) to (8)” substitute “subsections (7) and (8)”.
(4) Omit subsections (6) and (6A).
(5) In subsection (7)(b) for “there shall be deducted from his total income” substitute “in calculating his net income there shall be deducted”.
(6) In subsection (8)—
(a) for “but is entitled” substitute “and is entitled”,
(b) after “section 278(2)” insert “or (2ZA)”, and
(c) omit “(subject to section 278(3))”.
(7) In subsection (13) omit “this section and”.
37 (1) Amend section 273 (payments securing annuities) as follows.
(2) In subsection (1) for “deduction from the amount of income tax on which he or she is chargeable” substitute “tax reduction”.
(3) In subsection (2) for “No deduction may be made” substitute “There is no entitlement to a tax reduction”.
(4) After subsection (2) insert—
“(3) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”
38 Omit section 276 (effect on relief of charges on income).
39 Omit section 277 (partners).
40 (1) Amend section 278 (non-residents) as follows.
(2) Omit subsection (1).
(3) In subsection (2)—
(a) for the words from the beginning to “individual” substitute “Subject to subsection (2ZA) below, relief under this Chapter shall be given only to an individual”,
(b) before paragraph (a) insert—
“(za) is not resident in the United Kingdom,
(zb) does not meet the condition in section 56(3) of ITA 2007, and”, and
(c) omit paragraphs (b) to (e) and the “or” immediately before paragraph (b).
(4) After subsection (2) insert—
“(2ZA) Relief under section 266 above (except relief given by virtue of subsection (7) of that section) may also be given to an individual who—
(a) is resident in the United Kingdom, or
(b) meets the condition in section 56(3) of ITA 2007.”
41 Omit section 282 (construction of references to spouses or civil partners living together).
42 Omit sections 282A and 282B (jointly held property).
43 Omit section 305A (relief for loss on disposal of shares).
44 In section 312(2A) (interpretation of Chapter 3), as it applies in relation to shares issued before 6 April 2007, for paragraph (a) substitute—
“(a) references to a company being “in administration” are to—
(i) it being in administration within the meaning of Schedule B1 to the Insolvency Act 1986 (c. 45) or Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
(ii) there being in force in relation to it, under the law of a country or territory outside the United Kingdom, any appointment corresponding to an appointment of an administrator under either of those Schedules;”.
45 Omit section 320 (Commonwealth Agents-General and official agents etc).
46 Omit section 323 (visiting forces).
47 Omit section 332A (venture capital trusts: relief).
48 Omit section 334 (Commonwealth and Irish citizens temporarily abroad).
49 Omit section 335 (residence of persons working abroad).
50 Omit section 336 (temporary residents in the United Kingdom).
51 (1) Amend section 339 (charges on income: donations to charity) as follows.
(2) For subsection (4) substitute—
“(4) Where a company gives a sum of money to a charity—
(a) if the charity is a charitable company, a body mentioned in section 507 or an Association of a description specified in section 508, the gift shall in the hands of the charitable company be treated for the purposes of this Act as if it were an annual payment, and
(b) if the charity is a trust established for charitable purposes only, see section 522 of ITA 2007 (gifts of money from companies).”
(3) After subsection (9) insert—
Income Tax Act 2007