PART VII GENERAL PROVISIONS RELATING TO TAXATION OF INCOME OF INDIVIDUALS
CHAPTER I PERSONAL RELIEFS
The reliefs
256 General.
F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
256AF64Meaning of “adjusted net income”
F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
256BMeaning of “the minimum amount”
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257 Personal allowance.
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257AAF65 Children’s tax credit.
F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257A Married couple’s allowanceF6(pre-5th December 2005 marriages).
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257ABF66Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257BAF9 Elections as to transfer of relief under section 257A F10or 257AB.
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13257BB Transfer of relief under section 257A where relief exceeds incomeF12 or 257AB.
F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F72257B Transfer of relief under section 257A.
1
Where—
a
a man is entitled to relief under section 257A, but
b
the amount which he is entitled to deduct from his total income by virtue of that section exceeds what is left of his total income after all other deductions have been made from it,
his wife shall be entitled to a deduction from her total income of an amount equal to the excess.
2
In determining for the purposes of subsection (1)(b) above the amount that is left of a person’s total income for a year of assessment after other deductions have been made from it, there shall be disregarded any deduction made—
a
on account of any payments of relevant loan interest which become due in that year and to which section 369 applies, or
b
under section 289 F73or
c
on account of any payments to which section 593(2) or 639(3) applies,F74or
d
on account of any payments to which section 54(5) of the Finance Act 1989 applies.
F75, or
e
on account of any payments to which section 32(4) of the Finance Act 1991 applies.
C23
This section shall not apply for a year of assessment unless the claimant’s husband has given to the inspector written notice that it is to apply; and any such notice—
a
shall be given not later than six years after the end of the year of assessment to which it relates,
b
shall be in such form as the Board may determine, and
c
shall be irrevocable.
257C Indexation of amounts in F15sections 256B, 257F16, 257A and 257AB.
F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257D Transitional relief: husband with excess allowances.
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257E Transitional relief: the elderly.
F19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257F Transitional relief: separated couples.
F20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F21258 Widower’s or widow’s housekeeper.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
259 Additional relief in respect of children.
F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
260 Apportionment of relief under section 259.
F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261 Claims under section 259 for year of marriage.
F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261AF25 Additional relief in respect of children for year of separation.
F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
262 Widow’s bereavement allowance.
F27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F28263 Dependent relatives.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29264 Claimant depending on services of a son or daughter.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
265 Blind person’s allowance.
F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C1266 Life assurance premiums.
1
M1Subject to the provisions of this section, F31section 274 and Schedules 14 and 15 and sections 192 to 194 of the Finance Act 2004, an F32eligible individual who pays any such premium as is specified in subsection (2) below F33. . . shall (without making any claim) be entitled to relief under this section.
F341A
For the purposes of subsection (1) above an individual is an eligible individual if the individual—
a
is resident in the United Kingdom, or
b
meets the conditions in section 56(3) of ITA 2007.
2
M2The premiums referred to in subsection (1) above are any premiums paid by an individual under a policy of insurance or contract for a deferred annuity, where—
a
the payments are made to —
F35i
a person who has permission under Part 4 of the Financial Services and Markets Act 2000 or under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of long-term insurance; or
ii
a member of the Society who effects or carries out contracts of long-term insurance in accordance with Part 19 of the Financial Services and Markets Act 2000;
iv
in the case of a deferred annuity, the National Debt Commissioners; and
b
the insurance or, as the case may be, the deferred annuity is on the life of the individual or on the life of his spouse F36or civil partner; and
c
the insurance or contract was made by him or his spouse F36or civil partner.
3
Subject to subsections F37. . . (10) and (11) below, no relief under this section shall be given—
a
M3except in respect of premiums payable under policies for securing a capital sum on death, whether in conjunction with any other benefit or not;
b
M4in respect of premiums payable under any policy issued in respect of an insurance made after 19th March 1968 unless the policy is a qualifying policy;
c
d
M6in respect of premiums payable during the period of deferment in respect of a policy of deferred assurance.
4
M7Subject to F39subsection (8) below, relief under this section in respect of any premiums paid by an individual in a year of assessment shall be given by making good to the person to whom they are paid any deficiency arising from the deductions authorised under subsection (5) below; and this section and Schedule 14 shall have effect in relation to any premium or part of a premium which is paid otherwise than in the year of assessment in which it becomes due and payable as if it were paid in that year.
5
Subject to the provisions of Schedule 14—
a
an individual resident in the United Kingdom who is entitled to relief under this section in respect of any premium may deduct from any payment in respect of the premium and retain an amount equal to F4012.5 per cent of the payment; and
b
the person to whom the payment is made shall accept the amount paid after the deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made and may recover the deficiency from the Board.
6
F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6A
F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
10
M10Subsection (3)(b) above shall not apply—
a
to any policy of life insurance having as its sole object the provision on an individual’s death or disability of a sum substantially the same as any amount then outstanding under a mortgage of his residence, or of any premises occupied by him for the purposes of a business, being a mortgage the principal amount secured by which is repayable by instalments payable annually or at shorter regular intervals; or
b
to any policy of life insurance issued in connection with an approved scheme as defined in Chapter I of Part XIV.
In the application of this subsection to Scotland, for any reference to a mortgage there shall be substituted a reference to a heritable security within the meaning of the M11Conveyancing (Scotland) Act 1924 (but including a security constituted by ex facie absolute disposition or assignation).
11
M12Subsection (3)(a) and (d) above shall not affect premiums payable—
a
under policies or contracts made in connection with any superannuation or bona fide pension scheme for the benefit of the employees of any employer, or of persons engaged in any particular trade, profession, vocation or business, or for the benefit of the F47spouse, F48civil partner, widow, widower F49, surviving civil partner or children or other dependants of any such employee or person, or
b
under policies taken out by teachers in the schools known in the year 1918 as secondary schools, pending the establishment of a superannuation or pension scheme for those teachers.
12
Schedule 14 shall have effect for the purpose of modifying, for certain cases, and supplementing the provisions of this section.
F5013
In F51. . . Schedule 14, “friendly society” means the same as in the Friendly Societies Act 1992 (and includes any society that by virtue of section 96(2) of that Act is to be treated as a registered friendly society within the meaning of that Act).
F5214
In subsection (2)(a)—
“contracts of long-term insurance” means contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; and
“member of the society” has the same meaning as in Lloyd’s Act 1982 M13.
F67266ALife assurance premiums paid by employer
1
This section applies if—
a
pursuant to F53an employer-financed retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for or in respect of any employee of that employer, and
b
the payment is made under such an insurance or contract as is mentioned in section 266.
This section applies whether or not the accrual of the relevant benefits is dependent on any contingency.
2
Relief, if not otherwise allowable, shall be given to that employee under section 266 in respect of the payment to the extent, if any, to which such relief would have been allowable to him if—
a
the payment had been made by him, and
b
the insurance or contract under which the payment is made had been made with him.
F543
For the purposes of subsection (1)(a) benefits are provided in respect of an employee if they are provided for the employee’s spouse, widow or widower, children, dependants or personal representatives.
4
If a sum within subsection (1) is paid with a view to the provision of benefits for or in respect of more than one employee of the employer, part of it is to be treated as paid for or in respect of each of them.
5
The amount treated as paid for or in respect of each employee is—
where—
A is the sum paid,
B is the amount which would have had to be paid to secure the benefits to be provided for or in respect of the employee in question, and
C is the total amount which would have had to be paid to secure the benefits to be provided for or in respect of all the employees if separate payments had been made in the case of each of them.
6
This section does not apply if—
a
in the year of assessment in which the sum is paid the earnings from the employee’s employment are (or, if there are none, would be if there were any) earnings charged on remittance, or
b
the employee is not domiciled in the United Kingdom in the tax year in which the sum is paid and the conditions in subsection (7) are met.
7
Those conditions are—
a
that the employment is with a foreign employer, and
b
that, on a claim made by the employee, the Board are satisfied that the pension scheme corresponds to a registered pension scheme.
8
In subsection (6)(a) “earnings charged on remittance” means earnings which are taxable earnings under—
a
section 22 of ITEPA 2003 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK), or
b
section 26 of that Act (foreign earnings for year when employee resident, but not ordinarily resident, in UK).
9
In this section—
“employer-financed retirement benefits scheme”, and
“relevant benefits”,
have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see sections 393A and 393B of that Act).
267 Qualifying policies.
Schedule 15, Part I of which contains the basic rules for determining whether or not a policy is a qualifying policy, Part II of which makes provision for the certification etc. of policies as qualifying policies and Part III of which modifies Parts I and II in their application to certain policies issued by non-resident companies, shall have effect for the purpose of determining whether or not a policy is a qualifying policy; and, accordingly, any reference in this Act to a qualifying policy shall be construed in accordance with that Schedule.
268 Early conversion or surrender of life policies.
M171
Where a policy of life insurance to which this section applies has been issued and, within four years from the making of the insurance in respect of which it was issued, any of the following events happens, that is to say—
a
the surrender of the whole or part of the rights conferred by the policy;
b
the falling due (otherwise than on death) of a sum payable in pursuance of a right conferred by the policy to participate in profits; and
c
the conversion of the policy into a paid-up or partly paid-up policy;
the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender or, as the case may be, out of the sum falling due or out of the fund available to pay the sums which will be due on death or on the maturity of the policy, a sum determined in accordance with the following provisions of this section, unless the body is wound up and the event is a surrender or conversion effected in connection with the winding-up.
2
The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the lower of the following, that is to say—
a
the appropriate percentage of the premiums payable under the policy up to the happening of the event; and
b
the surrender value of the policy at the time of the happening of the event less the complementary percentage of the premiums mentioned in paragraph (a) above.
3
If the event is one of those mentioned below, the sum payable to the Board shall not exceed the following limit, that is to say—
a
if it is the surrender of part of the rights conferred by the policy, the value of the rights surrendered at the time of the surrender;
b
if it is the conversion of the policy into a partly paid-up policy, the surrender value at the time of the conversion, of so much of the policy as is paid up; and
c
if it is the falling due of a sum, that sum.
4
If the event was preceded by the happening of such an event as is mentioned in subsection (1) above, subsection (2) above shall apply—
a
as if the lower of the amounts mentioned therein were reduced by the sum paid under this section in respect of the earlier event; and
b
if the earlier event was such an event as is mentioned in paragraph (a) or (c) of subsection (3) above, as if the surrender value of the policy were increased by the amount which, under that paragraph, limited or might have limited the sum payable under this section in respect of the earlier event.
5
For the purposes of this section the appropriate percentage, in relation to any event, is the percentage equal to the following fraction of the percentage found by doubling that mentioned in section 266(5)(a) as in force for the year of assessment in which the event happened, that is to say—
a
if the event happens in the first two of the four years mentioned in subsection (1) above, three-sixths;
b
if it happens in the third of those years, two-sixths; and
c
if it happens in the last of those years, one-sixth;
and the complementary percentage, in relation to any event, is 100 per cent. less the appropriate percentage.
6
Where the annual amount of the premiums payable under a policy of life insurance is at any time increased (whether under the policy or by any contract made after its issue) so as to exceed by more than 25 per cent.—
a
if the insurance was made on or before 26th March 1974, the annual amount as at that date, or
b
in the case of any other insurance, the first annual amount so payable,
the additional rights attributable to the excess shall be treated for the purposes of this section as conferred by a new policy issued in respect of an insurance made at that time, and the excess shall be treated as premiums payable under the new policy.
7
This section applies to any policy of life insurance which is a qualifying policy unless—
a
it is a policy in respect of the premiums on which relief under section 266 is not available by virtue of subsection (3)(c) of that section; or
b
it is a policy of life insurance issued in connection with F76a registered pension scheme;
and in relation to a policy of life insurance issued in respect of an insurance made before 27th March 1974 applies only in accordance with subsection (6) above.
269 Surrender etc. of policies after four years.
M181
Where a policy of life insurance to which this section applies has been issued and, in the fifth or any later year from the making of the insurance in respect of which it was issued, either of the following events happens, that is to say—
a
the surrender of the whole or part of the rights conferred by the policy; and
b
the falling due (otherwise than on death or maturity) of a sum payable in pursuance of a right conferred by the policy to participate in profits;
then, if either of those events has happened before, the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender, or, as the case may be, out of the sum falling due, a sum determined in accordance with the following provisions of this section.
2
The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the applicable percentage of the lower of the following—
a
the total of the premiums which are payable in that year under the policy; and
b
the sums payable by reason of the surrender or, as the case may be, the sum falling due;
and the percentage to be applied for this purpose shall be a percentage equal to that mentioned in section 266(5)(a) as in force for the year of assessment in which the event happens.
3
Where, after a sum has become payable under subsection (1) above, and within the same year from the making of the insurance, another such event happens as is mentioned therein, the sums payable under that subsection in respect of both or all of the events shall not exceed the applicable percentage of the total mentioned in subsection (2)(a) above.
4
Where, on the happening of an event in the fifth or any later year from the making of the insurance, any sum is payable under subsection (1) of section 268 as applied by subsection (6) of that section as well as under subsection (1) above, subsection (2) above shall apply as if the sums or sum mentioned in paragraph (b) thereof were reduced by the sum payable under that section.
5
This section applies to any policy of life insurance which is a qualifying policy unless—
a
it is a policy in respect of the premiums on which relief under section 266 is not available by virtue of subsection (3)(c) of that section; or
b
it is a policy issued in the course of an industrial insurance business; or
c
it was issued in respect of an insurance made before 27th March 1974.
270 Provisions supplementary to sections 268 and 269.
M191
Where on the happening of an event in relation to a policy of life insurance a sum is payable under section 268 or 269, relief under section 266 in respect of the relevant premiums paid under the policy shall be reduced by the sum so payable or, as the case may be, by so much of the sum as does not exceed the amount of that relief (or as does not exceed so much of that amount as remains after any previous reduction under this section).
2
For the purposes of this section the relevant premiums are—
a
in relation to a sum payable under section 268, the premiums payable under the policy up to the happening of the event by reason of which the sum is payable; and
b
in relation to a sum payable under section 269, the premiums payable in the year (from the making of the insurance) in which the event happens by reason of which the sum is payable.
3
Where the relevant premiums are payable in more than one year of assessment the reduction in relief under this section shall, so far as possible, reduce relief for an earlier year of assessment before reducing relief for a later one.
4
Any sum paid under section 268 or 269 by reason of any event shall be treated—
a
as between the parties, as received by the person by whom the premiums under the policy were paid; and
b
for the purposes of section 266, as a sum paid by that person in satisfaction of his liability resulting from the reduction of relief under this section;
and where that sum exceeds that liability he shall be entitled, on a claim made by him not later than F774 years after the end of the year of assessment in which the event happens, to repayment of the excess.
271 Deemed surrender in cases of certain loans.
M201
Where—
a
b
the policy was issued in respect of an insurance made after 26th March 1974 F79. . .; and
c
then, subject to subsection (2) below, the same results shall follow under sections 268 to 270 as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy F78. . . and the sum had been paid as consideration for the surrender (and if the policy is a qualifying policy, whether or not the premiums under it are eligible for relief under section 266, those results shall follow under section 269, whether or not a gain would be treated as arising on the surrender).
2
Subsection (1) above does not apply—
a
in relation to a policy if—
i
it is a qualifying policy; and
ii
either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence; F81. . .
F81b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
272 Collection of sums payable under sections 268 and 269.
M211
Any body by whom a policy to which section 268 or 269 applies has been issued shall, within 30 days of the end of each period of 12 months ending with 31st March in every year, make a return to the collector of the sums which, in that period, have become payable by it under either of those sections.
2
Any sum which is to be included in a return made under subsection (1) above shall be due at the time by which the return is to be made and shall be paid without being demanded.
3
Where any sum which was or ought to have been included in such a return is not paid by the end of the period for which the return was to be made, it may be recovered by an assessment as if it were income tax for the year of assessment in which that period ends; and where it appears to the inspector that a sum which ought to have been so included had not been included or that a return is not correct he may make such an assessment to the best of his judgment.
4
All the provisions of the Income Tax Acts relating to the assessment and collection of tax, interest on unpaid tax, appeals and penalties shall, with the necessary modifications, apply in relation to sums due under this section; and for the purposes of those provisions so far as they relate to interest on unpaid tax, a sum assessed in pursuance of this section shall be treated as having been payable when it would have been payable had it been included in a return under subsection (1) above.
5
Where, on an appeal against an assessment made in pursuance of this section, it is determined that a greater sum has been assessed than was payable, the excess, if paid, shall be repaid.
6
Where a body has paid a sum which is payable under section 268 or 269 it shall give within 30 days to the person by whom the sum is, under section 270(4), treated as received a statement specifying that sum and showing how it has been arrived at.
7
F83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
273 Payments securing annuities.
F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274 Limits on relief under F56section 266.
1
2
3
F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
M16War insurance premiums shall not be taken into account in calculating the limits of one-sixth of total income or of £100 mentioned in this section.
In this subsection “war insurance premiums” means any additional premium F62. . . paid in order to extend an existing life insurance policy to risks arising from war or war service abroad, and any part of any premium F62. . . paid in respect of a life insurance policy covering those risks, or either of them, which F63is attributable to those risks, or either of them.
Supplemental
F68275 Meaning of “relative”.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276 Effect on relief of charges on income.
F69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
277 Partners.
F70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
278 Non-residents.
F71. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .