Income Tax Act 2007

33 (1) Amend section 257BB (transfer of relief under section 257A or 257AB where relief exceeds income) as follows.

(2) For subsection (1) substitute—

“(1) Where—

(a) an individual is entitled to a tax reduction under section 257A or 257AB, but

(b) the amount of the tax reduction to which the individual is entitled is greater than the individual’s comparable tax liability,

the individual’s spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of an election under section 257BA) to a tax reduction equal to the unused part of the individual’s MCA tax reductions.”

(3) After subsection (1) insert—

“(1A) The individual’s MCA tax reductions are the sum of—

(a) the tax reduction to which the individual is entitled under section 257A or 257AB, and

(b) any tax reduction to which the individual is entitled by virtue of an election under section 257BA(3).

(1B) The unused part of the individual’s MCA tax reductions is equal to—

(a) the individual’s MCA tax reductions, less

(b) the individual’s comparable tax liability.”

(4) For subsection (3) substitute—

“(3) Where—

(a) an individual is entitled to a tax reduction by virtue of an election under section 257BA, but

(b) the amount of the tax reduction to which the individual is entitled is greater than the individual’s comparable tax liability,

the individual’s spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of section 257A or 257AB) to a tax reduction equal to the unused part of the individual’s tax reduction.”

(5) After subsection (3) insert—

“(3AA) The unused part of the individual’s tax reduction is equal to—

(a) the tax reduction to which the individual is entitled by virtue of the election under section 257BA, less

(b) the individual’s comparable tax liability.”

(6) Omit subsection (3A).

(7) After subsection (5) insert—

“(5A) For the purposes of this section, the comparable tax liability of an individual is the amount of the individual’s tax left after Step 6 of the calculation in section 23 of ITA 2007, making that calculation with the modifications set out in subsections (5B) and (5C).

(5B) In making that calculation, do not deduct any tax reduction under—

(a) section 788 (double taxation arrangements: relief by agreement), or

(b) section 790(1) (relief for foreign tax where there are no double taxation arrangements).

(5C) If the individual’s entitlement to a tax reduction under section 257A, 257AB, 257BA or this section is extinguished under section 423(4) of ITA 2007 (gift aid: restriction of reliefs) to any extent, deduct from the amount calculated in accordance with subsections (5A) and (5B) the amount by which the tax reduction is reduced.

(5D) For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 if the person is entitled to credit against income tax under arrangements which have effect under that section.

(5E) A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.”