Finance Act 1994

Section 83.

SCHEDULE 10 Medical insurance

Introductory

1 In this Schedule “the 1989 Act” means the [1989 c. 26.] Finance Act 1989.

Reduction of relief

2 (1) Section 54 of the 1989 Act (relief on premiums for medical insurance) shall be amended as follows.

(2) In subsection (3) (relief by deduction from income) for the words from “it shall be deducted” to the end of the subsection there shall be substituted “the individual shall be entitled to relief under this subsection in respect of the payment; and (except where subsections (4) to (6) below apply) relief under this subsection shall be given—

(a) in accordance with subsections (3A) to (3C) below, and

(b) only on a claim made for the purpose.”

(3) The following subsections shall be inserted after subsection (3)—

“(3A) Where an individual is entitled to relief under subsection (3) above in respect of one or more payments made in a given year of assessment, the amount of his liability for that year of assessment to income tax on his total income shall be the amount to which he would be liable apart from this section less whichever is the smaller of—

(a) the amount found under subsection (3B) below, and

(b) the amount which reduces his liability to nil.

(3B) The amount referred to in subsection (3A)(a) above is an amount found by—

(a) taking the amount of the payment referred to in subsection (3A) above or (as the case may be) the aggregate amount of the payments there referred to, and

(b) finding an amount equal to tax on the amount taken under paragraph (a) above at the basic rate for the year of assessment concerned.

(3C) In determining for the purposes of subsection (3A) above the amount of incomerson would be liable apart from this section, no account shall be taken of—

(a) any income tax reduction under Chapter I of Part VII of the Taxes Act 1988 or under section 347B of that Act;

(b) any income tax reduction under section 353(1A) of the Taxes Act 1988;

(c) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 of the Taxes Act 1988 or by way of a credit under section 790(1) of that Act;

(d) any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.”

(4) This paragraph shall apply in relation to payments made on or after 6th April 1994.

3 (1) In sections 257D(8) and 265(3) of the Taxes Act 1988 (total income after deductions) paragraph (d) (deduction on account of payments to which section 54(5) of the 1989 Act applies to be disregarded) shall be omitted.

(2) This paragraph shall apply in relation to payments made on or after 6th April 1994.

Surviving spouse

4 (1) In section 54 of the 1989 Act the following subsection shall be inserted after subsection (2)—

“(2A) In a case where—

(a) a payment is made in respect of a premium under a contract at a time when the contract meets the requirement in subsection (2) above by virtue of paragraph (c) of that subsection, and

(b) a payment is made under the same contract at a time after one of the individuals has died and when the contract does not (apart from this subsection) meet the requirement in subsection (2) above by virtue only of the fact that the surviving spouse is not aged 60 or over at the time,

for the purposes of subsection (2) above in its application to the contract the surviving spouse shall be deemed to be aged 60 or over at the time mentioned in paragraph (b) above.”

(2) This paragraph shall apply where the first or only payment to be made in respect of a premium under the contract after the death occurs is made on or after 6th April 1994.

Small benefits and abolition of certification

5 (1) Section 55 of the 1989 Act (eligible contracts) shall be amended as follows.

(2) In subsection (2) (conditions for contract’s being eligible) the following paragraphs shall be inserted after paragraph (b)—

“(ba) at the relevant time the contract satisfies the conditions set out in subsection (2A) below,

(bb) the contract is not one in the case of which subsection (2D) below applies,”.

(3) Also in subsection (2)—

(a) after paragraph (c) there shall be inserted “and”, and

(b) paragraph (e) and the word “and” immediately preceding it shall be omitted.

(4) The following subsections shall be inserted after subsection (2)—

“(2A) The conditions referred to in subsection (2)(ba) above are that—

(a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

(b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

(c) the premium under the contract is reasonable, and

(d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

(2B) In a case where—

(a) at the relevant time the contract confers a material right, or more than one such right, but

(b) the total cost to the insurer of providing benefits in pursuance of the material right or (as the case may be) in pursuance of all the material rights would not exceed the prescribed sum,

the contract shall not thereby be regarded as failing to satisfy at the relevant time the condition set out in subsection (2A)(b) above.

(2C) For the purposes of subsection (2B) above a material right is a right which—

(a) is not a right such as is mentioned in subsection (2A)(a) above or such as is for the time being specified in regulations made under subsection (2A)(b) above, and

(b) is not a right to a cash benefit.

(2D) This subsection applies in the case of a contract (the main contract) if—

(a) at least one other contract is entered into which is a contract (a collateral contract) under which a benefit is provided in consideration of the insured’s entering into the main contract, and

(b) the cost to the insurer of fulfilling his obligations under the collateral contract (or, if there is more than one collateral contract, of fulfilling his obligations under all of them) exceeds the prescribed sum.”

(5) Subsections (3) to (6) shall be omitted.

(6) In subsection (9) (approved benefit) for “mentioned in section 56(3)(a) below” there shall be substituted the following paragraphs—

“(a) mentioned in subsection (2A)(a) above, or

(b) for the time being specified in regulations made under subsection (2A)(b) above.”

(7) The following subsections shall be inserted after subsection (9)—

“(10) For the purposes of this section a benefit is also an approved benefit if it is not a cash benefit and—

(a) it is a single benefit provided otherwise than as mentioned in subsection (9) above and the cost to the insurer of providing it does not exceed the prescribed sum, or

(b) it is one of a number of benefits provided otherwise than as mentioned in subsection (9) above and the total cost to the insurer of providing the benefits does not exceed the prescribed sum.

(11) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

(12) For the purposes of this section the prescribed sum is £30.

(13) The Treasury may by order substitute for the sum for the time being specified in subsection (12) above such sum as may be specified in the order; and any such substitution shall have effect in relation to cases where the relevant time falls on or after such date as is specified in the order.”

(8) This paragraph shall apply where the time which is the relevant time for the purposes of section 55 falls on or after 1st July 1994.

6 The Board shall not certify a contract under section 56 of the 1989 Act in such a way that the certification is expressed to take effect on or after 1st July 1994.