Finance Act 1994

Section 77.

SCHEDULE 8 U.K. Supplemental provisions relating to personal reliefs

The Taxes Act 1988 U.K.

1 U.K. In section 257A(6) of the Taxes Act 1988 (relief confined to one deduction), for “deduction” there shall be substituted “ income tax reduction ”.

2 (1) In subsections (1) and (2) of section 257BA of that Act (elections as to transfer of relief under section 257A)— U.K.

(a) for the words “to deduct from her total income”, in each place where they occur, there shall be substituted “ to an income tax reduction calculated by reference to ”; and

(b) for the words “that he is entitled to deduct under section 257A”, in each place where they occur, there shall be substituted “ by reference to which the calculation of the income tax reduction to which he is entitled under section 257A is to be made ”.

(2) In subsection (3) of that section—

(a) for “to deduct from his total income” there shall be substituted “ to an income tax reduction calculated by reference to ”;

(b) for “the amount, if any, that he is already entitled to deduct” there shall be substituted “ any income tax reduction to which he is already entitled ”; and

(c) for “that she is entitled to deduct by virtue of that election” there shall be substituted “ by reference to which the calculation of the income tax reduction to which she is entitled by virtue of that election is to be made ”.

(3) Any election made for the purposes of section 257BA of the Taxes Act 1988 which—

(a) has been made before the coming into force of this paragraph, and

(b) apart from this paragraph, would have effect in accordance with that section for the year 1994-95 or any subsequent year,

shall so have effect as if it were an election for the purposes of that section as amended by this paragraph.

3 (1) In subsection (1) of section 257BB of that Act (transfer of relief where it is not all used), for paragraph (b) and the words after that paragraph there shall be substituted— U.K.

“(b) the amount of the reduction to which he is entitled is determined in accordance with section 256(2)(b) or, by virtue of his having no income tax liability to which that reduction is applicable, is nil,

his wife shall be entitled (in addition to any reduction to which she is entitled by virtue of an election under section 257BA) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which her husband’s income tax reduction fell to be calculated in pursuance of section 257A and any election under section 257BA. ”

(2) In subsection (3) of that section, for paragraph (b) and the words after that paragraph there shall be substituted—

“(b) the amount of the reduction to which she is entitled is determined in accordance with section 256(2)(b) or, by virtue of her having no income tax liability to which that reduction is applicable, is nil,

her husband shall be entitled (in addition to any other reduction to which he is entitled by virtue of section 257A) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which his wife’s income tax reduction fell to be calculated in pursuance of that election. ”

(3) After that subsection there shall be inserted the following subsection—

“(3A) In this section references, in relation to such an amount as is mentioned in subsection (1)(b) or (3)(b), to the unused part of an amount by reference to which any income tax reduction fell to be calculated are references to so much of it (including, where the amount so mentioned is nil, all of it) as has no practical effect on the determination of the amount so mentioned.”

(4) Subsection (6) of that section (calculation of amount left after deductions of a person’s total income) shall cease to have effect.

4 (1) Where the year in question for the purposes of subsection (5) of section 257D of the Taxes Act 1988 (transitional relief in the case of a husband with excess allowances) is the year 1994-95, deductions by virtue of any of sections 257A to 262 of that Act shall be disregarded in determining the deductions which a wife is taken for the purposes of paragraph (c) of that subsection to have been entitled to make from her total income for the year immediately preceding the year in question.

(2) In section 257D(5)(d) of that Act, the words “section 257A and” shall be omitted.

5 In section 257F(c) of that Act, after “257A” there shall be inserted “ or, as the case may be, an income tax reduction under that section ”.

6 (1) In subsection (1)(b) of section 259 of that Act (additional personal allowance not available to a person entitled to the married couple’s allowance), for “to a deduction from his total income” there shall be substituted “ to an income tax reduction ”.

(2) In subsection (3) of that section (entitlement confined to only one deduction), for “deduction” there shall be substituted “ income tax reduction ”.

(3) In subsection (4A) of that section—

(a) for the words “a deduction”, in the first and third places where they occur, there shall be substituted “ an income tax reduction ”; and

(b) for the words “a deduction”, in the second place where they occur, there shall be substituted “ a reduction ”.

7 (1) In subsection (1)(b) of section 260 of that Act (apportionment of relief under section 259), for the words from “the deduction” to “equal” there shall be substituted “ the income tax reduction to which each of them is entitled under that section shall be calculated, subject to subsection (2) below, by reference ”.

(2) In subsection (2) of that section, for the words from “the deduction” to “equal” there shall be substituted “ the income tax reduction to which he is entitled for that year under section 259 shall be calculated by reference ”.

8 (1) In subsection (2) of section 261A of that Act (additional personal allowance for a year in which spouses separate), for the words from “that he is entitled to deduct” onwards there shall be substituted “ by reference to which the income tax reduction to which he is entitled under subsection (1) above is calculated shall be treated as reduced by the amount by reference to which the income tax reduction in which that relief consists is, or but for section 256(2)(b) would be, calculated (or to nil where the latter amount is equal to or exceeds the amount which is to be treated as reduced). ”

(2) In subsection (4) of that section, for “deduction” there shall be substituted “ income tax reduction ”.

(3) In subsection (5) of that section —

(a) in paragraph (a), for “relief to which those persons are entitled shall not exceed” there shall be substituted “ income tax reductions to which those persons are entitled shall not exceed an amount equal to an income tax reduction calculated (in accordance with section 256(2)(a)) by reference to ”; and

(b) in paragraph (c), for the words from “the deduction” to “equal” there shall be substituted “ the income tax reduction to which each of them is entitled under section 259 or this section shall be calculated by reference ”.

9 (1) In subsection (2) of section 262 of that Act (widow’s bereavement allowance)—

(a) for the words “a deduction from her total income”, where they occur in paragraphs (a) and (b), there shall be substituted “ an income tax reduction ”; and

(b) for the words after paragraph (b) there shall be substituted— “ the income tax reduction mentioned in paragraph (b) above shall instead be made (without a claim being made and in accordance with section 257A) in relation to her late husband’s liability to tax for that year as if there had been no such election. ”

(2) For subsections (3) and (4) of that section (cases where allowance transferred back to deceased would be unused) there shall be substituted the following subsections—

“(3) If the amount of an income tax reduction falling to be made by virtue of subsection (2) above in relation to the liability of a widow’s late husband—

(a) is less by virtue of section 256(2)(b) than the income tax reduction which, but for subsection (2) above, would have been made in her case by virtue of the election mentioned in that subsection, or

(b) by virtue of his having no income tax liability to which that reduction is applicable, is nil,

the widow shall be entitled (in addition to any reduction to which she is entitled by virtue of subsection (1) above and without making a further claim) to an income tax reduction calculated by reference to an amount equal to the unused part of the amount by reference to which the income tax reduction transferred to the late husband in pursuance of subsection (2) above would have fallen to be calculated.

(3A) In subsection (3) above the references, in relation to an amount to which paragraph (a) or (b) of that subsection applies, to the unused part of an amount by reference to which any income tax reduction would have fallen to be calculated are references to so much of it (including, where paragraph (b) of that subsection applies, all of it) as has no practical effect on the determination of the amount to which that paragraph applies.”

10 U.K. In section 265(3)(b) of that Act (blind person’s allowance), the words from “section 257A” to “or under” shall be omitted.

11 U.K. In section 276 of that Act (effect of relief on charges on income), after subsection (1) there shall be inserted the following subsection—

“(1A) In subsection (1) above the references to relief under this Chapter do not include references to relief consisting in such an income tax reduction as is mentioned in section 256(2).”

12 U.K. In section 796(1) of that Act (limits on credit for foreign tax), after the words “foreign tax”, in the second place where they occur, there shall be inserted “ but allowing for the making of any other income tax reduction under the Income Tax Acts ”.

The Taxes Management Act 1970 (c. 9) U.K.

13 U.K. In section 37A of the Taxes Management Act 1970 (effect of assessment where allowances transferred)—

(a) after the word “person’s”, in the first place where it occurs, there shall be inserted “ liability to income tax or ”;

(b) for the words from “any deduction made” to “spouse” there shall be substituted “ any income tax reduction or deduction from total income made in the case of that person’s spouse ”; and

(c) for the words from “and where” onwards there shall be substituted “ and the entitlement in that case of the first-mentioned person for the year in question to any income tax reduction or deduction from total income shall be treated as correspondingly reduced. ”