Finance Act 1976

Section 34.

SCHEDULE 4 Life Policies, Etc

Preliminary

1 In this Schedule references to any sections not otherwise identified are to sections of the Taxes Act and " Schedule 1 " means Schedule 1 to that Act.

Short-term assurances

2 A policy which secures a capital sum payable only on death or payable either on death or on earlier disability shall not be a qualifying policy within the meaning of Schedule 1 if the capital sum is payable only if the event in question happens before the expiry of a specified term ending less than one year after the making of the insurance.

Relief by deduction from premiums

3 (1) In section 19(1) for the words " if the claimant " to the end there shall be substituted the words " an individual who pays any such premium as is specified in subsection (2) below shall (without making any claim) be entitled to relief under this section, and Schedule 4 to the Finance Act 1976 shall apply with respect to that relief. "

(2) In section 19(2)—

(a) for the words from " by the claimant" to " (ii) with under writers " there shall be substituted the words " by an individual under a policy of insurance or contract for a deferred annuity, where—

(a) the payments are made to—

(i) any insurance company legally established in the United Kingdom or any branch in the United Kingdom of an insurance company lawfully carrying on in the United Kingdom life assurance business (as denned in section 323(2) of this Act); or

(ii) underwriters; "

(b) in sub-paragraphs (iii) and (iv) of paragraph (a) the word " with " shall be omitted ;

(c) in paragraph (b) for the word " claimant" there shall be substituted the word " individual "; and

(d) at the end of paragraph (c) there shall be added the words " or his spouse ".

4 (1) Relief under section 19 in respect of any premiums paid by an individual in a year of assessment shall be given by making good to the person to whom they are paid any deficiency arising from the deductions authorised under paragraph 5 below.

(2) Where the individual is not resident in the United Kingdom but is entitled to relief by virtue of subsection (2) of section 27, sub-paragraph (1) above shall not apply but (subject to the proviso to that subsection) the like relief shall be given to him under paragraph 15 below.

5 Subject to the following provisions of this Schedule,—

(a) an individual resident in the United Kingdom who is entitled to relief under section 19 in respect of any premium may deduct from any payment in respect of the premium and retain an amount equal to 17 ½ per cent. thereof ; and

(b) the person to whom the payment is made shall accept the amount paid after the deduction in discharge of the individual's liability to the same extent as if the deduction had not been made and may recover the deficiency from the Board.

Limit on deductions authorised under paragraph 5

6 (1) Where the premiums payable in any year in respect of any policy or contract exceed £1,500 the percentage mentioned in paragraph 5(a) above is a percentage of such part only of any payment as bears to the whole thereof the same proportion as £1,500 bears to the total amount of the premiums so payable ; but without prejudice to the operation of paragraph 15 below in any case where by virtue of this paragraph the relief given under section 19 is reduced below the limit specified in section 21.

(2) In this paragraph " year " means the twelve months beginning with the making of the assurance or contract and any subsequent period of twelve months.

Husband and wife

7 Subsection (7) of section 19 shall be omitted.

8 The references in section 19 to an individual's spouse shall include any person who was that individual's spouse at the time the insurance or contract was made, unless the marriage was dissolved before 6th April 1979.

9 Where an election under section 23 of the [1971 c. 68.] Finance Act 1971 is in force, the relief to which either the husband or the wife is entitled under section 19 in respect of an insurance or contract on the life of the other or made by the other shall not be affected by paragraph 3 of Schedule 4 to that Act (which requires relief to be determined as if the husband and the wife were not married).

10 Where, throughout a year of assessment, a woman is a married woman living with her husband, then—

(a) if no election under section 38 is in force, section 21 and paragraph 15 below shall apply as if any relief to which the wife is entitled under section 19 were relief to which the husband is entitled ; and

(b) if an election under section 38 is in force, section 21 and paragraph 15 below shall apply separately to the amounts paid by each of them, but as if for the limit specified in section 21 there were substituted, in relation to each of them, a limit of £750 or one-twelfth of their total income, whichever is the greater, plus any amount by which the payments in respect of which relief can be given to the other fall short of the limit so substituted.

Industrial assurance policies

11 (1) This paragraph applies to—

(a) a policy issued in the course of an industrial assurance business as denned in section 1(2) of the [1972 c. 8.] Industrial Assurance Act 1923 or the [1924 c. 21 (N.I.).] Industrial Assurance Act (Northern Ireland) 1924; and

(b) a policy issued by a registered friendly society in the course of tax exempt life or endowment business (as denned in section 337(3)).

(2) If a policy to which this paragraph applies was issued before the passing of this Act section 19 shall have effect in relation to it as if subsections (2)(b), (3) and (4) were omitted ; and if a policy to which this paragraph applies was issued after the passing of this Act, paragraph (b) of section 19(2) shall have effect in relation to it as if it permitted the insurance to be on the life of the individual's parent or grandparent or, subject to sub-paragraph (3) below, on the life of the individual's child or grandchild.

(3) Relief may be given in respect of premiums under a policy of insurance on the life of an individual's child or grandchild which is issued after the passing of this Act as if paragraph (b) of section 19(3) were omitted, but may be given only if the annual amount of the premiums, together with that of any relevant premiums, does not exceed £52 ; and for this purpose a relevant premium, in relation to an insurance made at any time on the life of an individual's child or grandchild, is any premium under a policy of insurance on the same life, where the insurance is made at the same time or earlier, whether it is made by the individual or any other person.

(4) In this paragraph " child " has the same meaning as in section 10 and " grandchild ", " parent" and " grandparent " have corresponding meanings.

12 In paragraph 4(1) of Schedule 1, sub-paragraph (iii) of paragraph (d) shall be omitted, together with the " and " preceding it, and after paragraph (d) there shall be inserted the words " or if the policy was issued before 6th April 1976, or was issued before 6th April 1979 and is in substantially the same form as policies so issued before 6th April 1976. ".

Premiums payable to friendly societies and industrial assurance companies

13 (1) Where a policy is issued by a registered friendly society or a policy to which paragraph 11 above applies is issued by an industrial assurance company, paragraphs 4 and 5 above shall apply in relation to premiums payable under the policy subject to the following modifications.

(2) References to the deductions authorised under paragraph 5 shall be construed as including references to any amount retained by or refunded to the person paying the premium under any scheme made by the society or company in accordance with regulations made under this paragraph.

(3) The appropriate authority may make regulations authorising—

(a) the adoption by registered friendly societies and industrial assurance companies of any prescribed scheme for securing that in the case of policies or contracts to which the scheme applies amounts equal to 17 ½ per cent. of the premiums payable are retained by or refunded to the person paying the premiums or that, in the case of such policies or contracts issued or made before 6th April 1979, the amounts expressed as the amounts of the premiums payable are treated as amounts arrived at by deducting 17 ½ per cent. from the amounts payable and that the amounts of the capital sums assured or guaranteed are treated as correspondingly increased ; or

(b) the adoption by any such society or company of any special scheme for that purpose which may, in such circumstances as may be prescribed, be approved by the appropriate authority.

(4) Increases treated as made in pursuance of regulations under this paragraph shall not be treated as variations of a policy or contract and shall be disregarded for the purposes of section 332 of and paragraph 4 of Schedule 1 to the Taxes Act and section 7(6) of the [1975 c. 7.] Finance Act 1975 ; and the regulations may include such adaptations and modifications of the enactments relating to friendly societies or industrial assurance companies and such other incidental and supplementary provisions as appear to the appropriate authority necessary or expedient for the purpose of enabling such societies or companies to adopt the schemes authorised by the regulations.

(5) Subsections (4), (5) and (7) to (11) of section 6 of the [1969 c. 19.] Decimal Currency Act 1969 shall, with the necessary modifications, apply in relation to regulations made under this paragraph.

Supplementary provisions as to relief under section 19

14 Where it appears to the Board that the relief (if any) to which a person is entitled under section 19 has been exceeded or might be exceeded unless the premiums payable by him under any policy were paid in full, they may by notice in writing to that person and to the person to whom the payments are made exclude the application of paragraph 5 above in relation to any payments due or made after such date as may be specified in the notice and before such date as may be specified in a further notice in writing to those persons.

15 (1) Where in any year of assessment the relief to which a person is entitled under section 19 has not been fully given in accordance with the preceding provisions of this Schedule, he may claim relief for the difference, and relief for the difference shall then be given by a payment made by the Board or by discharge or repayment of tax or partly in one such manner and partly in another; and where the relief given to any person in accordance with the preceding provisions of this Schedule exceeds that to which he is entitled under section 19, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.

(2) The [1970 c. 9.] Taxes Management Act 1970 shall apply to any assessment under this paragraph as if it were an assessment to tax for the year of assessment in which the relief was given and as if—

(a) the assessment were among those specified in sections 55(1) (recovery of tax not postponed) and 86(2) (interest on overdue tax) of that Act; and

(b) the sum charged by the assessment were tax specified in paragraph 3 of the Table in section 86(4) of that Act (reckonable date).

16 (1) The Board may make regulations for carrying the preceding provisions of this Schedule into effect.

(2) Without prejudice to the generality of sub-paragraph (1) above, regulations under this paragraph may provide—

(a) for the manner in which claims for the recovery of any sum under paragraph 5(b) above may be made ;

(b) for the furnishing of such information by persons by or to whom premiums are payable as appears to the Board necessary for deciding such claims and for exercising their powers under paragraph 14 or paragraph 15 above ; and

(c) for requiring persons to whom premiums are paid to make available for inspection by an officer authorised by the Board such books and other documents in their possession or under their control as may reasonably be required for the purpose of determining whether any information given by those persons for the purposes of this Schedule is correct and complete.

(3) In section 98 of the Taxes Management Act 1970 (penalty for failure to furnish information etc.) the following shall be added in the second column of the Table:

“Regulations under paragraph 16 of Schedule 4 to the Finance Act 1976”.

(4) The following provisions of the Taxes Management Act 1970, that is to say—

(a) section 29(3)(c) (excessive relief);

(b) section 30 (recovery of tax repaid in consequence of fraud or negligence);

(c) section 88 (interest); and

(d) section 95 (incorrect return or accounts);

shall apply in relation to the payment of a sum claimed under paragraph 5(b) above to which the claimant was not entitled as if it had been income tax repaid as a relief which was not due.

17 A notice given to a person under section 8 of the [1970 c. 9.] Taxes Management Act 1970 may require him to include in the return of his income particulars of premiums paid by him or his wife living with him under policies of life insurance or contracts for deferred annuities and of deductions made from the premiums payable.

Consequential amendments

18 (1) In section 5 after the words "who makes a claim in that behalf " there shall be inserted the words " (or, in the case of relief under section 19 below, who satisfies the conditions of that section) ".

(2) In section 25(2) the words " section 19 or " shall be omitted.

(3) The proviso to section 27(2) shall have effect as if the amount of any relief to which an individual is entitled under section 19 were an amount by which his liability to income tax is reduced.

(4) In section 39(1)(c) the words " 19 or " shall be omitted.

19 (1) In section 7(5) of the [1975 c. 7.] Finance Act 1975 for the words " the basic rate of income tax in force " there shall be substituted the words " the percentage found by doubling that mentioned in paragraph 5(a) of Schedule 4 to the Finance Act 1976 as in force ".

(2) In section 8(2) of the Finance Act 1975 for the words " one half of the basic rate of income tax in force " there shall be substituted the words " that mentioned in paragraph 5(a) of Schedule 4 to the Finance Act 1976 as in force ".

(3) In paragraph (b) of section 9(4) of the Finance Act 1975 for the words from " income tax " where they first occur to " liability " there shall be substituted " section 19 of the Taxes Act as a sum paid by that person in satisfaction of his liability " and in the words following the paragraph the words " increase in " shall be omitted.

(4) In paragraph 7(1) of Schedule 2 to the Finance Act 1975 there shall be substituted—

(a) for the words " the conditions of paragraphs (a) and (d)(iii) of that sub-paragraph are satisfied " the words " the condition of paragraph (a) of that sub-paragraph is satisfied " ",

(b) for the words " they are not " the words " it is not" ; and

(c) for the words " those conditions " the words " that condition ".

20 In section 20 the following shall be omitted:—

(a) in subsection (1), paragraph (a) and the words " on the amount of the premium paid by him or " ;

(b) subsection (2) ;

(c) in subsection (4), the words " premiums or other " ;

(d) in subsection (5), the words " premiums or" and the proviso; and

(e) subsection (6).

21 (1) Section 21 shall be amended as follows.

(2) In subsection (1) for the words " sections 19 and 20 " there shall be substituted the words " section 19 " and for the words " one-sixth of that person's total income" there shall be substituted the words " £1,500 in any year of assessment or one-sixth of that person's total income, whichever is the greater ".

(3) Subsection (1A) shall be omitted.

(4) In subsection (3) for the words " the said sections " there shall be substituted the words " sections 19 and 20 above ".

(5) In subsection (4) for the words " one-half of the basic rate " there shall be substituted " 17 ½ per cent. " and the words " premiums or " in paragraph (b) and the words following that paragraph shall be omitted.