Income Tax (Trading and Other Income) Act 2005

535 Top slicing relief

(1) An individual is entitled to relief under this section for a tax year if—

(a) the individual’s liability for the tax year, as calculated under subsection (3), exceeds

(b) the individual’s relieved liability for the tax year, as calculated under—

• section 536 (top slicing relieved liability: one chargeable event), or

• section 537 (top slicing relieved liability: two or more chargeable events).

(2) The relief is given by a reduction in or repayment of income tax equal to the excess.

(3) An individual’s liability for a tax year for the purposes of subsection (1)(a) equals TL — LRL, where—

• TL is the amount of the individual’s total liability to income tax on income charged to tax under this Chapter for the tax year, calculated on the basis that no relief is available under this section and the highest part assumptions apply, and

• LRL is the amount of income tax at the lower rate that the individual is treated as having paid under section 530(1) for the tax year.

(4) For the purposes of subsection (3) and sections 536 and 537, the highest part assumptions, in calculating liability to income tax on an amount, are that—

(a) the amount is the highest part of the individual’s total income for the tax year, and

(b) any provision directing any other amount to be treated as the highest part is ignored.

(5) For the purposes of this section and sections 536 and 537, an individual’s total income is treated as not including any amount which—

(a) is charged to tax under Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.) as the profits of a UK property business, or

(b) counts as employment income under section 403 of ITEPA 2003 (payments and benefits on termination of employment etc.).

(6) For the purposes of this section and sections 536 and 537—

(a) any chargeable event under section 525(2) (chargeable events where annual personal portfolio bond calculations show gains),

(b) any gain treated as arising on the occurrence of such an event, and

(c) the amount of any liability to income tax arising on such a gain,

are ignored.