Finance Act 2003

Section 173

SCHEDULE 35 U.K. Gains on policies of life insurance etc: rate of tax

Application of the lower rate U.K.

1 (1) Section 1A of the Taxes Act 1988 (application of lower rate to income from savings and distributions) is amended as follows. U.K.

(2) In subsection (2) (which specifies the income to which the lower rate applies) omit the word “and” immediately preceding paragraph (c) and at the end of that paragraph insert “; and

(d) any amount included in an individual’s total income by virtue of section 547(1)(a) (chargeable event gains on life policies etc).”.

(3) In subsection (5) (ordering rule for highest part of income for the purposes of the Income Tax Acts) after “the Income Tax Acts” insert “ (other than section 550) ”.

Method of charging gains from policies of life insurance etc to tax U.K.

2 (1) Section 547 of the Taxes Act 1988 is amended as follows. U.K.

(2) In subsection (5)(a) (individual to be treated as having paid income tax at the basic rate on a sum included in his income by virtue of subsection (1)(a)) for “the basic rate” substitute “ the lower rate ”.

(3) In subsection (9A)(a) (definition of “the appropriate rate” where charitable trustees are liable to income tax on a gain by virtue of subsection (9)) for “the basic rate for that year” substitute “ the lower rate ”.

Relief where gain charged at a higher rate U.K.

3 U.K. In section 550(3) of the Taxes Act 1988 (rates of tax to be applied in calculating tax which would be chargeable on gain if calculated by reference to the appropriate fraction) for “the basic rate” substitute “ the lower rate ”.

Gains included in aggregate income of estate of deceased U.K.

4 U.K. In section 699A(4)(b) of the Taxes Act 1988 (sums included in aggregate income of estate of the deceased by virtue of section 547(1)(c) to be assumed to bear tax at the basic rate) for “the basic rate” substitute “ the lower rate ”.

Income to be disregarded in determining highest part of person’s income U.K.

5 U.K. In section 833(3)(b) of the Taxes Act 1988 (which provides that, where income falls to be treated as the highest part of a person’s income, his income shall be calculated without regard to any amount included in total income by virtue of section 547(1)(a)) after “section 547(1)(a)” add “ which is a sum in relation to which section 547(5) applies ”.