Finance Act 1994

2 (1) Section 54 of the 1989 Act (relief on premiums for medical insurance) shall be amended as follows.

(2) In subsection (3) (relief by deduction from income) for the words from “it shall be deducted” to the end of the subsection there shall be substituted “the individual shall be entitled to relief under this subsection in respect of the payment; and (except where subsections (4) to (6) below apply) relief under this subsection shall be given—

(a) in accordance with subsections (3A) to (3C) below, and

(b) only on a claim made for the purpose.”

(3) The following subsections shall be inserted after subsection (3)—

“(3A) Where an individual is entitled to relief under subsection (3) above in respect of one or more payments made in a given year of assessment, the amount of his liability for that year of assessment to income tax on his total income shall be the amount to which he would be liable apart from this section less whichever is the smaller of—

(a) the amount found under subsection (3B) below, and

(b) the amount which reduces his liability to nil.

(3B) The amount referred to in subsection (3A)(a) above is an amount found by—

(a) taking the amount of the payment referred to in subsection (3A) above or (as the case may be) the aggregate amount of the payments there referred to, and

(b) finding an amount equal to tax on the amount taken under paragraph (a) above at the basic rate for the year of assessment concerned.

(3C) In determining for the purposes of subsection (3A) above the amount of incomerson would be liable apart from this section, no account shall be taken of—

(a) any income tax reduction under Chapter I of Part VII of the Taxes Act 1988 or under section 347B of that Act;

(b) any income tax reduction under section 353(1A) of the Taxes Act 1988;

(c) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 of the Taxes Act 1988 or by way of a credit under section 790(1) of that Act;

(d) any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.”

(4) This paragraph shall apply in relation to payments made on or after 6th April 1994.