Finance Act 1999

Section 30.

SCHEDULE 3 New Schedule 13B to the Taxes Act 1988

The Schedule inserted after Schedule 13A to the Taxes Act 1988 is as follows—

“Schedule 13B Children’s Tax Credit

Child living with more than one adult: married and unmarried couples

1 (1) Paragraphs 2 to 5 below apply where at any time in a year of assessment—

(a) a husband and wife are living together or a man and a woman are living together as husband and wife, and

(b) a relevant child is resident with them.

(2) In those paragraphs—

(a) the husband and wife, or the man and the woman, are referred to as the partners,

(b) “the higher-earning partner” means the partner who has the higher total income for the year of assessment,

(c) “the lower-earning partner” means the partner who has the lower total income for the year of assessment, and

(d) “relevant child” means a child who is a qualifying child in relation to both partners.

(3) If the partners have the same total income for the year—

(a) they may elect that one of them be treated for the purposes of paragraphs 2 to 5 below as the lower-earning partner, and

(b) if they do not make an election, neither shall be entitled to a children’s tax credit for the year in respect of a relevant child.

2 Subject to paragraph 3 below, the lower-earning partner shall not be entitled to a children’s tax credit for the year in respect of a relevant child.

3 (1) This paragraph applies if no part of either partner’s income for the year falls within section 1(2)(b).

(2) If the lower-earning partner makes a claim for a children’s tax credit for the year in respect of a relevant child—

(a) paragraph 2 above shall not apply, and

(b) in calculating the credit for each partner, the amount mentioned in section 257AA(2) shall be halved.

(3) If the partners make an election under this sub-paragraph—

(a) paragraph 2 above shall not apply, and

(b) the higher-earning partner shall not be entitled to a children’s tax credit for the year in respect of a relevant child.

4 (1) This paragraph applies where—

(a) a partner is entitled to a children’s tax credit for a year of assessment,

(b) the amount by reference to which his credit falls to be calculated (Amount A) exceeds the amount which would be necessary, in accordance with section 256(2), to reduce his liability for the year to income tax on his total income to nil (Amount B), and

(c) he gives notice to an officer of the Board under this paragraph.

(2) Where the other partner would not, by virtue of paragraph 2 or 3 above, be entitled to a children’s tax credit for the year in respect of a relevant child—

(a) he shall be entitled to a children’s tax credit in respect of a relevant child notwithstanding that paragraph, and

(b) the amount by reference to which his credit shall be calculated shall be the amount of the difference between Amount A and Amount B.

(3) In any other case, the difference between Amount A and Amount B shall be added to the amount by reference to which children’s tax credit would otherwise be calculated for the other partner in respect of a relevant child.

(4) A notice under this paragraph—

(a) must be given on or before the fifth anniversary of the 31st January next following the end of the year of assessment to which it relates,

(b) shall be in such form as the Board may determine, and

(c) shall be irrevocable.

5 (1) This paragraph applies to elections under paragraph 3 above.

(2) An election—

(a) shall be made by giving notice to an officer of the Board in such form as the Board may determine, and

(b) may be made so as to have effect for a single year of assessment or for two or more consecutive years.

(3) Subject to sub-paragraph (4) below, an election must be made before the first year of assessment for which it is to have effect and on the basis of assumptions about the partners' incomes for that year.

(4) An election may be made, on the basis of such assumptions, at a time during the first year for which it is to have effect if—

(a) the election is made within the first 30 days of that year and an officer of the Board has been given written notification before that year that the election will be made, or

(b) the partners marry in that year, or

(c) the partners start to live together as man and wife in that year, or

(d) a relevant child becomes resident with the partners in that year and no relevant child has previously in that year been resident with the partners, or

(e) it is assumed that the partner who was the higher-earning partner in the previous year will be the lower-earning partner in that year.

(5) An election may be withdrawn—

(a) by the making of another election which supersedes the first, or

(b) by notice given to an officer of the Board, in such form as the Board may determine, by either partner.

(6) A withdrawal shall have effect for the year of assessment in which it is given and subsequent years.

(7) If the higher-earning partner for one year of assessment (Year 1) is the lower-earning partner for the next year (Year 2), an election having effect for Year 1 shall not have effect for Year 2 or subsequent years.

Child living with more than one adult: other cases

6 (1) This paragraph applies to a child for a year of assessment if—

(a) he is resident with two or more persons at the same time or at different times during the year,

(b) he is a qualifying child in relation to two or more of those persons, and

(c) paragraphs 2 to 5 above do not apply in relation to him in that year.

(2) The persons in relation to whom the child is a qualifying child are referred to in this paragraph as the taxpayers.

(3) None of the taxpayers shall be entitled to a children’s tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies except in accordance with the following provisions of this paragraph.

(4) If a taxpayer claims a children’s tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies, for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted his allotted proportion of that amount.

(5) A taxpayer’s allotted proportion is—

(a) such proportion as may be agreed between him and the other taxpayers, or

(b) in default of agreement, a proportion which is assigned to him by the Commissioners.

(6) For the purposes of sub-paragraph (5) above—

(a) a proportion may be 100 per cent.,

(b) the sum of the proportions shall not exceed 100 per cent., and

(c) “the Commissioners” means such body of General Commissioners, being the General Commissioners for a division in which one of the taxpayers resides, as the Board may direct or, if none of the taxpayers resides in the United Kingdom, the Special Commissioners.

(7) Where a person—

(a) is a member of more than one set of taxpayers in relation to whom this paragraph applies for a year of assessment,

(b) has more than one allotted proportion under this paragraph for the year, and

(c) claims a children’s tax credit for the year,

for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted the aggregate of his allotted proportions of that amount (not exceeding 100 per cent.).

(8) Where—

(a) a taxpayer makes a claim under section 257AA, and

(b) it appears that an allotted proportion will need to be assigned to him under sub-paragraph (5)(b) above for that purpose,

the Board may direct that the claim shall be dealt with, and the assignment shall be made, by a specified body of Commissioners which could be directed under sub-paragraph (6)(c) above to make the assignment; and where a direction is given no other body of Commissioners shall have jurisdiction to determine the claim.

(9) For the purposes of any assignment to a taxpayer under sub-paragraph (5)(b) above—

(a) the Commissioners shall hear and determine the case in the same manner as an appeal, and

(b) any of the taxpayers shall be entitled to appear and be heard by the Commissioners or to make representations to them in writing.

Combined cases

7 (1) This paragraph applies where a child is a relevant child for the purposes of paragraphs 2 to 5 above in a year of assessment and—

(a) he is a relevant child for the year in relation to more than one pair of partners, or

(b) paragraph 6 above would apply to him for the year but for the fact that he is a relevant child for the purposes of paragraphs 2 to 5 above.

(2) Where this paragraph applies—

(a) paragraph 6 above shall apply, but with each pair of partners for the purposes of paragraphs 2 to 5 above being treated as a single taxpayer, and

(b) paragraphs 2 to 5 above shall apply in relation to each pair of partners, taking for the amount mentioned in section 257AA(2) (before any reduction) the amount substituted by virtue of paragraph 6 above.

Change of circumstances

8 (1) For the purposes of this paragraph a change of circumstances occurs in relation to a child in a year of assessment if a relevant event takes place in that year and—

(a) as a result of the event the child becomes a qualifying child in relation to any person or stops being a qualifying child in relation to any person, or

(b) the child is, immediately before the event, a qualifying child in relation to both parties to the event.

(2) The following are relevant events—

(a) a marriage or a man and a woman starting to live together as husband and wife;

(b) a separation.

(3) A separation occurs when—

(a) a husband and wife cease to live together, or

(b) a man and a woman cease to live together as husband and wife, having been living together as husband and wife without being married.

(4) In a year of assessment in which a change of circumstances (or more than one) occurs in relation to a child, section 257AA and paragraphs 2 to 7 above shall apply in relation to the child’s residence as if each of the following were a separate year of assessment—

(a) the period ending with the day before the first (or only) change of circumstances,

(b) the period starting with the day of the last (or only) change of circumstances, and

(c) any period starting with the day of one change of circumstances and ending with the day before the next.

(5) For the purposes of sub-paragraph (4) above the amount specified in section 257AA(2) (before any reduction or substitution) shall be taken to be the result of the following formula—

(6) In applying sub-paragraph (4) above a reference in section 257AA or this Schedule to a person’s income for the year shall be taken as a reference to his income for the year and not his income for the period.”