1.—(1) This Order may be cited as the Scottish Rates of Income Tax (Consequential Amendments) Order 2018 and comes into force on the day after the day on which it is made.
(2) The amendments made by this Order have effect in relation to the tax year commencing on 6th April 2018 and subsequent tax years.
2.—(1) The Taxes Management Act 1970(1) is amended as follows.
(2) In section 7(6)(2) (notice of liability to income tax and capital gains tax), after “the Scottish basic rate,” insert “a Scottish rate below the Scottish basic rate, the Scottish intermediate rate,”.
(3) In section 91(3)(c)(3) (effect on interest of reliefs), after “the basic rate,” insert “the Scottish basic rate, a Scottish rate below the Scottish basic rate, the Scottish intermediate rate,”.
3.—(1) Section 192 (relief at source) of the Finance Act 2004(4) is amended as follows.
(2) In subsection (4A), after “in the individual’s case” insert “that is above the Scottish basic rate limit”.
4.—(1) Section 669 (reduction in residuary income: inheritance tax on accrued income) of the Income Tax (Trading and Other Income) Act 2005(5) is amended as follows.
(2) In subsection (3A)(c)(6) for “any Scottish rate above the Scottish basic rate” substitute—
“any Scottish rate that—
(i)is above the Scottish basic rate, but
(ii)is not the Scottish intermediate rate”.
5.—(1) Section 7 of the Finance (No. 2) Act 2005(7) is amended as follows.
(2) In subsection (5A)(8) (charge to income tax on lump sum)—
(a)omit paragraph (b), and
(b)in paragraph (c)—
(i)for “exceeds the Scottish basic rate limit for that year” substitute “is greater than nil”, and
(ii)for “applicable to P” substitute “applicable to P’s Step 3 income for that year”.
6.—(1) The Income Tax Act 2007(9) is amended as follows.
(2) In sections 55B(2)(b)(10) and 55C(1)(c)(11) (entitlement to transferable tax allowance for married couples and civil partners), after “the Scottish basic rate,” insert “a Scottish rate below the Scottish basic rate, the Scottish intermediate rate,”.
(3) In section 58(2)(12) (meaning of “adjusted net income”), omit the words after “by reference to the basic rate for the tax year”.
(4) In section 414(2)(13) (gift aid: relief for gifts to charity) —
(a)in paragraph (a), for the words after “deduction of” substitute “income tax at the basic rate, and”, and
(b)in paragraph (b) for “the Scottish basic rate limit and any other Scottish rate limit,” substitute “the upper limit for the Scottish basic rate and the limits for any Scottish rates above the Scottish basic rate,”.
(5) In section 415(14) (gift aid: meaning of “grossed up amount”) omit the words after “by reference to the basic rate for the tax year in which the gift is made”.
(6) In section 745(15) (rates of tax applicable to income charged under sections 720 and 727 etc)—
(a)after subsection (1) insert—
“(1A) Income tax at a Scottish rate above 0% and below, or equal to, the basic rate is not charged under section 720 or 727 in respect of any income if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) has borne tax at the basic rate.”,
(b)in subsection (2) for “Subsection (1) does” substitute “Subsections (1) and (1A) do”, and
(c)in subsection (3) for “subsection (1) does not apply” substitute “neither of subsections (1) and (1A) applies”.
(7) In section 828B(5)(16) (conditions to be met)—
(a)before “the Scottish basic rate” insert “a Scottish rate below the Scottish basic rate,”, and
(b)after “the Scottish basic rate” insert “, the Scottish intermediate rate”.
(8) In section 989(17) (definitions for the purposes of the Income Tax Acts), before the definition of “Scottish rate” insert—
““Scottish intermediate rate”, in relation to a tax year, means any Scottish rate for that year which is named “intermediate” by the Scottish rate resolution setting it,”.
(9) In Schedule 4(18) (index of defined expressions), before the definition of “Scottish rate” insert—
“Scottish intermediate rate section 989”.
7.—(1) The Finance Act 2016(19) is amended as follows.
(2) Omit section 6(17) to (19) (structure of income tax rates).
8.—(1) The Scottish Rate of Income Tax (Consequential Amendments) Order 2015(20) is amended as follows.
(2) Omit article 14(5) to (7) (amendments to the Income Tax Act 2007).
Craig Whittaker
Andrew Stephenson
Two of the Lords Commissioners of Her Majesty’s Treasury
29th March 2018