Income and Corporation Taxes Act 1988

Section 39(3).

SCHEDULE 2 PREMIUMS ETC. TAXABLE UNDER SCHEDULES A AND D: SPECIAL RELIEF FOR INDIVIDUALS

1 A claim for relief under this Schedule shall be made to the Board if the claimant is not resident in the United Kingdom.

2 The relief shall be computed in accordance with paragraphs 3 to 6 below, and in those paragraphs—

• “chargeable sum” means an amount to which under section 34(1), (2), (3), (4) or (5), the claimant is treated as becoming entitled in the year of assessment, or in respect of which he is by virtue of section 34(6) or (7) or 35 or 36, chargeable to income tax for the year under Case VI of Schedule D;

• “relevant period”, in relation to any chargeable sum, means the period treated in computing the amount of the sum as being the duration of the lease in respect of which it arises or where it arises (by virtue of section 36) in connection with the sale of an estate or interest in land, means the period mentioned in subsection (1) of that section;

• “yearly equivalent”, in relation to any chargeable sum, means the amount which bears to that sum the same proportion as one bears to the number of years and fractions of years in the relevant period.

3 There shall be computed—

(a) the amount of the tax which, in respect of the chargeable sum or the aggregate of the chargeable sums, as the case may be, would be chargeable if—

(i) the relief were not given, and

(ii) that sum or aggregate were treated as the highest part of the claimant’s total income, and

(iii) amounts deductible in computing the tax were so far as possible deducted from other sums from which they are deductible in the year rather than from that sum or aggregate, and

(b) the amount of the tax which, in respect of that sum or aggregate, would be chargeable if calculated in accordance with paragraph 4 below by reference to the yearly equivalent of that sum or, as the case may be, of each sum comprised in that aggregate,

and the relief shall consist of a reduction or repayment of tax equal to the difference between those amounts.

4 (1) Where the relief is to be given in respect of one chargeable sum only, the tax shall be calculated for the purposes of paragraph 3(b) above as follows—

(a) from the yearly equivalent of that sum there shall be deducted such amounts as, following the principle set out in paragraph 3(a)(iii) above, are deductible from that sum;

(b) if any balance of the yearly equivalent remains, the tax in respect of the chargeable sum shall be calculated at the rate which, apart from the relief, would apply if the amount of the sum were reduced to the amount of that balance and were then treated as the highest part of the claimant’s total income or, if two or more rates would then apply, at those rates in corresponding proportions;

(c) if no such balance remains, the tax shall be calculated at the rate applicable to the highest part of the remainder of the claimant’s total income for the year of assessment,

and, whether or not any such balance remains, the tax shall be arrived at by applying that rate, or those rates, to so much of the chargeable sum as remains after deducting such amounts as, following the principle set out in paragraph 3(a)(iii) above, are deductible from that sum.

(2) Where the relief is to be given in respect of two or more chargeable sums, the tax for each shall be calculated for the purposes of paragraph 3(b) above as provided by sub-paragraph (1) above, but so that—

(a) the rate of tax on a sum arising in respect of any relevant period shall be calculated before the rate of tax on any sum arising in respect of a shorter relevant period, and

(b) in calculating the rate of tax on a sum arising in respect of any relevant period and the deductions from that sum, an amount deducted in respect of a sum tax for which has already been calculated shall not again be deducted, and in calculating a rate of tax—

(i) any chargeable sum tax for which has not already been calculated, or in respect of which no balance of the yearly equivalent remains, shall be disregarded, and

(ii) as respects any other chargeable sum, the total income of the claimant shall be taken to include the sum, but on the assumption that the amount of it was only that of the balance remaining of the yearly equivalent.

(3) Where two or more chargeable sums arise in respect of relevant periods of equal duration they shall be treated for the purposes of this paragraph as a single chargeable sum of an amount equal to the aggregate of those sums and arising in respect of a relevant period of like duration.

5 A provision of paragraph 3 or 4 above requiring tax to be calculated as if an amount were treated as the highest part of the claimant’s total income shall apply notwithstanding any provision of the Income Tax Acts directing other income to be treated as the highest part of his total income, but for the purposes of those paragraphs his total income shall be deemed—

(a) not to include any amount in respect of which he is chargeable to tax under section 148, and

(b) to include, in respect of any amount which would otherwise be included therein by virtue of section 547(1)(a), no greater amount than the appropriate fraction thereof within the meaning of section 550.

6 A provision of paragraph 3 or 4 above shall apply in relation to any part of the claimant’s total income (as computed for the purposes of that provision) as respects which he would be entitled under Chapter I of Part VII to a deduction equal to that part as if that part were subject to a nil rate of tax.