Income and Corporation Taxes Act 1988

[F1 1A Application of lower rate to income from savings and distributions. U.K.

(1) Subject to sections 469(2) [F2 , 686 and 720(5),] so much of any person’s total income for any year of assessment as—

(a) comprises income to which this section applies, and

(b) in the case of an individual, is not

[F3 (i) savings income falling within section 1(2)(aa), or

(ii)] income falling within section 1(2)(b),

shall, by virtue of this section, be charged for that year at the [F4 rate applicable in accordance with subsection (1A) below], instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).

[F5 (1AA) In subsection (1)(b)(i) above “savings income” means income to which this section applies other than—

(a) income chargeable under Schedule F, or

(b) equivalent foreign income falling within subsection (3)(b) below and chargeable under Case V of Schedule D.]

[F6 (1A) The rate applicable in accordance with this subsection is—

(a) in the case of income chargeable under Schedule F, the Schedule F ordinary rate;

(b) in the case of equivalent foreign income falling within subsection (3)(b) below and chargeable under Case V of Schedule D, the Schedule F ordinary rate; and

(c) in the case of any other income, the lower rate.]

[F7 (1B) In relation to any year of assessment for which income tax is charged the lower rate is 20 per cent. or such other rate as Parliament may determine.]

(2) Subject to subsection (4) below, this section applies to the following income—

(a) any income chargeable under Case III of Schedule D other than—

(i) relevant annuities and other annual payments that are not interest; and

(ii) amounts so chargeable by virtue of section 119 F8 . . . ;

[F9 (aa) any amount chargeable to tax under Case VI of Schedule D by virtue of section 714, 716 or 723;]

(b) any income chargeable under Schedule F; and

(c) subject to subsection (4) below, any equivalent foreign income.

(3) The income which is equivalent foreign income for the purposes of this section is any income chargeable under Case IV or V of Schedule D which—

(a) is equivalent to a description of income falling within subsection (2)(a) above but arises from securities or other possessions out of the United Kingdom; or

(b) consists in any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable under Schedule F if the company were resident in the United Kingdom.

(4) This section does not apply to—

(a) any income chargeable to tax under Case IV or V of Schedule D which is such that section 65(5)(a) or (b) provides for the tax to be computed on the full amount of sums received in the United Kingdom; or

(b) any amounts deemed by virtue of section 695(4)(b) or 696(6) to be income chargeable under Case IV of Schedule D.

[F10 (5) For the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts—

(a) so much of any person’s income as comprises income to which this section applies shall be treated as the highest part of his income; and

(b) so much of that part as consists of—

(i) income chargeable under Schedule F (if any), and

(ii) equivalent foreign income falling within subsection (3)(b) above and chargeable under Case V of Schedule D (if any),

shall be treated as the highest part of that part.]

(6) Subsection (5) above shall have effect subject to section 833(3) but shall otherwise have effect notwithstanding any provision requiring income of any description to be treated for the purposes of the Income Tax Acts (other than section 550) as the highest part of a person’s income.

[F11 (6A) Where income tax at the basic rate has been borne on income chargeable at the lower rate any necessary repayment of tax shall be made on the making of a claim.]

(7) In this section “relevant annuity” means any annuity other than a purchased life annuity to which section 656 applies or to which that section would apply but for section 657(2)(a).]

Textual Amendments

F1 S. 1A inserted (with effect in accordance with s. 73(3) of the amending Act) by Finance Act 1996 (c. 8), s. 73(1)

F2 Words in s. 1A(1) substituted (with effect in accordance with s. 100(3) of the amending Act) by Finance Act 1998 (c. 36), s. 100(1)

F3 Words in s. 1A(1)(b) inserted (with effect in accordance with s. 32(4) of the amending Act) by Finance Act 2000 (c. 17), s. 32(2)

F4 Words in s. 1A(1) substituted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(2)

F5 S. 1A(1AA) inserted (with effect in accordance with s. 32(4) of the amending Act) by Finance Act 2000 (c. 17), s. 32(3)

F6 S. 1A(1A) inserted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(3)

F7 S. 1A(1B) inserted (with application in accordance with s. 22(12) of the amending Act) by Finance Act 1999 (c. 16), s. 22(7)(a)

F8 Words in s. 1A(2)(a)(ii) repealed (with effect in accordance with Sch. 18(2) Note in the amending Act) by Finance Act 1997 (c. 16), s. 113, Sch. 18(2)

F9 S. 1A(2)(aa) inserted (with effect in accordance with s. 100(3) of the amending Act) by Finance Act 1998 (c. 36), s. 100(2)

F10 S. 1A(5) substituted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(4)

F11 S. 1A(6A) inserted (with application in accordance with s. 22(12) of the amending Act) by Finance Act 1999 (c. 16), s. 22(7)(b)

Modifications etc. (not altering text)

C1 S. 1A extended (27.7.1999) Commonwealth Development Corporation Act 1999 (c. 20), s. 20, Sch. 3 para. 6(4) (with Sch. 3 para. 1)