PART VII GENERAL PROVISIONS RELATING TO TAXATION OF INCOME OF INDIVIDUALS
CHAPTER I PERSONAL RELIEFS
The reliefs
256 General.
F1(1)
F4(2)
(3)
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F8256AMeaning of “adjusted net income”
(1)
For the purposes of this Chapter an individual's adjusted net income for a year of assessment is calculated as follows.
Step 1
Take the amount of the individual's net income for the year of assessment.
Step 2
If in the year of assessment the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid) deduct the grossed up amount of the gift.
Step 3
If the individual is given relief in accordance with section 192 of FA 2004 (relief at source) in respect of any contribution paid in the year of assessment under a pension scheme, deduct the gross amount of the contribution.
Step 4
Add back any relief under section 266 of this Act given by virtue of subsection (7) of that section (payments for life insurance etc) that was deducted in calculating the individual's net income for the year of assessment.
The result is the individual's adjusted net income for the year of assessment.
(2)
The grossed up amount of a gift is the amount of the gift grossed up by reference to the basic rate for the year of assessment.
(3)
The gross amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004.
F8256BMeaning of “the minimum amount”
In this Chapter “the minimum amount” means £2,350.
F9257 Personal allowance.
(1)
(2)
(3)
(4)
For the purposes of subsections (2) and (3) above a person who would have been of or over a specified age within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year.
(5)
In relation to a claimant whose F18adjusted net income for the year of assessment exceeds F11£12,300, subsections (2) and (3) above shall apply as if the amounts specified in them were reduced by F15one half of the excess (but not so as to reduce those amounts below that specified in subsection (1) above).]
F19(6)
An allowance under this section is given effect at Step 3 of the calculation in section 23 of ITA 2007.
F20257AA Children’s tax credit.
F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257A Married couple’s allowanceF22(pre-5th December 2005 marriages).
(1)
F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
F24If the claimant is, for the whole or any part of the year of assessment, a married man whose wife is living with him F25and whose marriage was entered into before 5th December 2005, and either of them F26was born before 6th April 1935, he shall F27(subject to subsection (3A) below) be entitled F28for that year to F29a tax reduction calculated by reference to £2,665 . . . .
(3)
F24If the claimant is, for the whole or any part of the year of assessment, a married man whose wife is living with him F30and whose marriage was entered into before 5th December 2005, and either of them
(b)
was born before 6th April 1935,
F37(3A)
Subsections (2) and (3) above shall not apply in relation to the claimant for any year of assessment if an election made by the claimant and his wife under section 257AB(1)(c) has effect for that year.
(4)
(5)
In relation to a claimant whose F40adjusted net income for the year of assessment exceeds F41£12,300, subsections (2) and (3) above shall apply as if the amounts specified in them were reduced by—
(a)
F32one half of the excess, less
(b)
any reduction made in his allowance under section 257 by virtue of subsection (5) of that section,
F42. . .
F43(5A)
The amounts specified in subsections (2) and (3) above shall not by virtue of subsection (5) above be treated as reduced below F44the minimum amount.
(6)
A man shall not be entitled by virtue of this section to more than one F45tax reduction for any year of assessment; and in relation to a claim by a man who becomes married in the year of assessment and has not previously in the year been entitled to relief under this section, this section shall have effect as if the amounts specified in F46subsections (2) and (3) above were reduced by one twelfth for each month of the year ending before the date of the marriage.
In this subsection “month” means a month beginning with the 6th day of a month of the calendar year.
F47(6A)
A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
F48(7)
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8)
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9)
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F50257ABMarried couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
(1)
This section applies if —
(a)
the claimant is, for the whole or any part of the year of assessment, living with his spouse or civil partner,
(b)
either the claimant or his spouse or civil partner was born before 6th April 1935,
(c)
the marriage or civil partnership was entered into on or after 5th December 2005 or, if the marriage was entered into before that date, an election for this section to apply has effect for that year, and
(2)
The claimant shall be entitled for that year to F52a tax reduction—
(a)
calculated by reference to £5,975 (if either the claimant or his spouse or civil partner is at any time within that year of the age of 75 or upwards), or
(b)
calculated by reference to £5,905 (in any other case).
(3)
For the purposes of subsection (2)(a) above an individual who would have been of or over the age of 75 within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year.
(4)
In relation to a claimant whose F53adjusted net income for the year of assessment exceeds £19,500, subsection (2) above applies as if the amounts specified in it were reduced by—
(a)
one half of the excess, less
(b)
any reduction made in his allowance under section 257 by virtue of subsection (5) of that section.
(5)
The amounts specified in subsection (2) above shall not by virtue of subsection (4) above be treated as reduced below F54the minimum amount.
(6)
An individual shall not be entitled by virtue of this section to more than one F55tax reduction for any year of assessment.
(7)
In relation to a claim by an individual who —
(a)
becomes a spouse or civil partner in the year of assessment, and
(b)
has not previously in the year been entitled to relief under this section,
this section shall have effect as if the amounts specified in subsection (2) above were reduced by one twelfth for each month of the year ending before the date of the marriage or civil partnership.
In this subsection “month” means a month beginning with the 6th day of a month of the calendar year.
(8)
An election under subsection (1)(c) —
(a)
shall be made jointly by the parties to the marriage,
(b)
shall be made before the first year of assessment for which it is to have effect,
(c)
shall have effect for that and each succeeding year of assessment for which any party to the marriage is entitled to relief under this section, and
(d)
shall be irrevocable.
(9)
An election under subsection (1)(d) —
(a)
shall be made jointly by the parties to the marriage or civil partnership, and
(b)
shall be made on or before the 5th anniversary of the 31st January next following the end of the year of assessment to which the election relates.
F56(10)
A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
F57257BA Elections as to transfer of relief under section 257A F58or 257AB.
F59(1)
An individual may elect that for any year of assessment for which the individual's spouse or civil partner is entitled to a tax reduction under section 257A or 257AB—
(a)
the individual shall be entitled (on making a claim) to a tax reduction calculated by reference to half the minimum amount, and
(b)
the spouse or civil partner's appropriate amount shall be reduced by half the minimum amount.
(2)
An individual and the individual's spouse or civil partner may jointly elect that for any year of assessment for which the individual is entitled to a tax reduction under section 257A or 257AB—
(a)
the individual's spouse or civil partner shall be entitled (on making a claim) to a tax reduction calculated by reference to the minimum amount, and
(b)
the individual's appropriate amount shall be reduced by the minimum amount.
(3)
An individual may elect that for any year of assessment for which the individual's spouse or civil partner is entitled to a tax reduction by virtue of an election under subsection (2) above—
(a)
the individual shall be entitled (on making a claim) to a tax reduction calculated by reference to half the minimum amount (in addition to any tax reduction to which the individual is already entitled under section 257A or 257AB), and
(b)
the tax reduction to which the spouse or civil partner is entitled by virtue of that election shall be calculated by reference to half the minimum amount (instead of by reference to the minimum amount).
F60(3A)
In this section “the appropriate amount” means the amount by reference to which the calculation of the tax reduction is to be made.
(4)
An election under this section shall be made by giving notice to the inspector in such form as the Board may determine and—
(a)
subject to subsections (5) and (7) below, shall be made before the first year of assessment for which it is to have effect, and
(5)
An election may be made during the first year of assessment for which it is to have effect if that is the year of assessment in which the marriage F63or civil partnership takes place.
(6)
F64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
An election may be made within the first thirty days of the first year of assessment for which it is to have effect if before that year the inspector has been given written notification that it is intended to make the election.
(8)
The person or persons by whom an election was made may withdraw it by giving notice to the inspector in such form as the Board may determine; but the withdrawal shall not have effect until the year of assessment after the one in which the notice is given.
(9)
F67(10)
A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
F69257BB Transfer of relief under section 257A where relief exceeds incomeF68 or 257AB.
F70(1)
Where—
(a)
an individual is entitled to a tax reduction under section 257A or 257AB, but
(b)
the amount of the tax reduction to which the individual is entitled is greater than the individual's comparable tax liability,
the individual's spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of an election under section 257BA) to a tax reduction equal to the unused part of the individual's MCA tax reductions.
F71(1A)
The individual's MCA tax reductions are the sum of—
(a)
the tax reduction to which the individual is entitled under section 257A or 257AB, and
(b)
any tax reduction to which the individual is entitled by virtue of an election under section 257BA(3).
(1B)
The unused part of the individual's MCA tax reductions is equal to—
(a)
the individual's MCA tax reductions, less
(b)
the individual's comparable tax liability.
(2)
Subsection (1) above shall not apply for a year of assessment unless the claimant’s F72spouse or civil partner gives notice to the inspector that it is to apply.
F73(3)
Where—
(a)
an individual is entitled to a tax reduction by virtue of an election under section 257BA, but
(b)
the amount of the tax reduction to which the individual is entitled is greater than the individual's comparable tax liability,
the individual's spouse or civil partner shall be entitled (in addition to any tax reduction to which that spouse or civil partner is entitled by virtue of section 257A or 257AB) to a tax reduction equal to the unused part of the individual's tax reduction.
F74(3AA)
The unused part of the individual's tax reduction is equal to—
(a)
the tax reduction to which the individual is entitled by virtue of the election under section 257BA, less
(b)
the individual's comparable tax liability.
(3A)
F75. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
Subsection (3) above shall not apply for a year of assessment unless the claimant’s F76spouse or civil partner gives notice to the inspector that it is to apply.
(5)
Any notice under subsection (2) or (4) above—
(a)
shall be given on or before the fifth anniversary of the 31st January next following 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.
F77(5A)
For the purposes of this section, the comparable tax liability of an individual is the amount of the individual's tax left after Step 6 of the calculation in section 23 of ITA 2007, making that calculation with the modifications set out in subsections (5B) and (5C).
(5B)
In making that calculation, do not deduct any tax reduction under—
(a)
section 788 (double taxation arrangements: relief by agreement), or
(b)
section 790(1) (relief for foreign tax where there are no double taxation arrangements).
(5C)
If the individual's entitlement to a tax reduction under section 257A, 257AB, 257BA or this section is extinguished under section 423(4) of ITA 2007 (gift aid: restriction of reliefs) to any extent, deduct from the amount calculated in accordance with subsections (5A) and (5B) the amount by which the tax reduction is reduced.
(5D)
For the purposes of this section a person is treated as being entitled to a tax reduction under section 788 if the person is entitled to credit against income tax under arrangements which have effect under that section.
(5E)
A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
(6)
F78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F79257B 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 F80or
(c)
on account of any payments to which section 593(2) or 639(3) applies,F81or
(d)
on account of any payments to which section 54(5) of the Finance Act 1989 applies.
F82, or
(e)
on account of any payments to which section 32(4) of the Finance Act 1991 applies.
(3)
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 F83sections 256B, 257F84, 257A and 257AB.
(1)
If the retail prices index for the month of F85September preceding a year of assessment is higher than it was for the previous F85September, then, unless Parliament otherwise determines, F86sections 256B, 257F87. . . F88, 257A and 257AB shall apply for that year as if for each amount specified in them as they applied for the previous year (whether by virtue of this section or otherwise) there were substituted an amount arrived at by increasing the amount for the previous year by the same percentage as the percentage increase in the retail prices index, and—
(a)
if in the case of an amount specified in sections 257(5) F89, 257A(5) and 257AB(4) the result is not a multiple of £100, rounding it up to the nearest amount which is such a multiple;
(b)
if in the case of any other amount the increase is not a multiple of £10, rounding the increase up to the nearest amount which is such a multiple.
F90(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F91(2A)
Subsection (1) above shall not require any change to be made in the amounts deductible or repayable under F92PAYE regulations during the period beginning with 6th April and ending with 17th May in the year of assessment.
(3)
F94(4)
This section shall have effect in relation to reliefs for the year 1990-91 (as well as for later years);and for that purpose it shall be assumed that sections 257and 257Aapplied for the year 1989-90as they apply, apart from this section, for the year 1990-91.
257D Transitional relief: husband with excess allowances.
F95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257E Transitional relief: the elderly.
F96. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257F Transitional relief: separated couples.
F97. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F98258 Widower’s or widow’s housekeeper.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
259 Additional relief in respect of children.
F99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
260 Apportionment of relief under section 259.
F100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261 Claims under section 259 for year of marriage.
F101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F102261A Additional relief in respect of children for year of separation.
F103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
262 Widow’s bereavement allowance.
F104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F105263 Dependent relatives.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F106264 Claimant depending on services of a son or daughter.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F107265 Blind person’s allowance.
(1)
F112(1A)
Section 257C (indexation) shall have effect (using the rounding up rule in subsection (1)(b) of that section) for the application of this section for the year 1998-99 and any subsequent year of assessment as it has effect for the application of sections 257 and 257A.
(2)
Where—
(a)
F115(b)
the amount to which the person is entitled exceeds the person's remaining relievable income,
F118(2A)
The person's remaining relievable income is the amount found by—
(a)
taking the amount of the individual's net income, and
(b)
subtracting any personal allowance to which the person is entitled.
(3)
F119. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
F120. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
F121Subsection (2) above shall not apply for a year of assessment unless the person entitled to F122an allowance under subsection (1) has given to the inspector written notice that F123it is to apply; and any such notice—
(a)
shall be given F124on or before the fifth anniversary of the 31st January next following 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.
(6)
(7)
In this section “registered blind person” means a person registered as a blind person in a register compiled under section 29 of the National Assistance Act 1948 or, in the case of a person ordinarily resident in Scotland or Northern Ireland, a person who is a blind person within the meaning of section 64(1) of that Act.
F127(8)
An allowance under this section is given effect at Step 3 of the calculation in section 23 of ITA 2007.
266 Life assurance premiums.
(1)
M2Subject to the provisions of this section, F128section 274 and Schedules 14 and 15 and sections 192 to 194 of the Finance Act 2004, an individual who pays any such premium as is specified in subsection (2) below or makes a payment falling within subsection (7) below shall (without making any claim) be entitled to relief under this section.
(2)
M3The 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 —
F129(i)
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 F130or civil partner; and
(c)
the insurance or contract was made by him or his spouse F130or civil partner.
(3)
Subject to subsections (7), (10) and (11) below, no relief under this section shall be given—
(a)
M4except in respect of premiums payable under policies for securing a capital sum on death, whether in conjunction with any other benefit or not;
(b)
M5in 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)
M6in respect of premiums payable under any policy issued in respect of an insurance made after 13th March 1984 F131. . . ;
(d)
M7in respect of premiums payable during the period of deferment in respect of a policy of deferred assurance.
(4)
M8Subject to F132subsections (7) and (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 F13312.5 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)
F134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6A)
F134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
M9Where a person makes a payment to a trade union as defined in section 28(1) of the M10Trade Union and Labour Relations Act 1974, and part of that payment is attributable to the provision of superannuation, life insurance or funeral benefits, he shall be entitled to relief under this section in respect of that part of the payment, but—
(a)
subsection (4) above shall not apply; and
(b)
F135in calculating his net income there shall be deducted an amount equal to one-half of that part of the payment.
This subsection shall also apply in relation to any payment made to an organisation of persons in police service but only where the annual amount of the part of the payment attributable to the provision of the benefits in question is £20 or more.
(8)
(9)
(10)
M13Subsection (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 M14Conveyancing (Scotland) Act 1924 (but including a security constituted by ex facie absolute disposition or assignation).
(11)
M15Subsection (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 F141spouse, F142civil partner, widow, widower F143, 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.
F144(13)
In F145. . . 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).
F146(14)
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 M16.
F147266ALife assurance premiums paid by employer
(1)
This section applies if—
(a)
pursuant to F148an 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.
F149(3)
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.
M17(1)
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 F150a 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.
M18(1)
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.
M19(1)
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 six 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.
M20(1)
Where—
(a)
(b)
the policy was issued in respect of an insurance made after 26th March 1974 F153. . .; 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 F152. . . 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; F155. . .
F155(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
272 Collection of sums payable under sections 268 and 269.
M21(1)
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)
The Board or an inspector may, by notice served on the body by whom a policy to which section 268 or 269 applies has been issued, require the body, within such time, not being less than 30 days, as may be specified in the notice—
(a)
to furnish such particulars; or
(b)
to make available for inspection by an officer authorised by the Board such books and other documents in the possession or under the control of the body;
as the Board or officer may reasonably require for the purposes of those sections or this section.
F156273 Payments securing annuities.
F157(1)
F158Subject to subsection (2) below, section 274 of this Act and sections 192 to 194 of the Finance Act 2004, if the claimant is, under any Act of Parliament or under any terms and conditions of employment, liable to the payment of any sum, or to the deduction from any salary or stipend of any sum, for the purpose of securing a deferred annuity to a widow or widower F159or surviving civil partner of the claimant or provision for the claimant’s children after the claimant dies, the claimant shall be entitled to a F160tax reduction equal to income tax at the basic rate on the amount of the sum which he or she has paid or which has been deducted from his or her salary or stipend.
F161(2)
F162There is no entitlement to a tax reduction under this section in respect of any contribution paid by any person under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
F163(3)
A tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.
274 Limits on relief under sections 266 and 273.
(1)
M22The aggregate of the premiums or other sums in respect of which relief is given to any person under section 266 shall not exceed £1,500 in any year of assessment or one-sixth of that person’s total income, whichever is the greater.
(2)
M23The aggregate of the relief given under sections 266 and 273 in respect of premiums or sums payable for securing any benefits other than capital sums on death shall not exceed the amount of the income tax calculated at the appropriate rate on £100.
(3)
M24In subsection (2) above “the appropriate rate”—
(a)
in relation to premiums to which section 266 applies, means F16412.5 per cent.;
(b)
in relation to other payments, means the basic rate of income tax.
(4)
M25War 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 “” means any additional premium or other sum 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 or other sum paid in respect of a life insurance policy covering those risks, or either of them, which F165is attributable to those risks, or either of them.