369 Mortgage interest payable under deduction of tax.U.K.
(1)M1If a person who is a qualifying borrower makes a payment of relevant loan interest to which this section applies, he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to income tax thereon at the basic rate for the year of assessment in which the payment becomes due.
(2)Where a sum is deducted under subsection (1) above from a payment of relevant loan interest—
(a)the person to whom the payment is made shall allow the deduction on receipt of the residue;
(b)the borrower shall be acquitted and discharged of so much money as is represented by the deduction as if the sum had been actually paid; and
(c)the sum deducted shall be treated as income tax paid by the person to whom the payment is made.
(3)[F1M2Subject to subsection (5A) below] where payments of relevant loan interest to which this section applies become due in any year, the borrower shall be charged with tax at the basic rate for that year on an amount of income equal, subject to subsection (4) below, to the deduction which, in computing his total income [F2(otherwise than for the purposes of excess liability)], falls to be made on account of those payments.
[F3(3A)In computing for the purposes of excess liability the total income of a person for any year of assessment, no deduction shall be allowed in respect of any amount of relevant loan interest to which this section applies.
(3B)In this section “excess liability” means the excess of liability to income tax over what it would be if all income tax [F4not chargeable at the lower rate]][F5by virtue of section 1(2)(aa) were charged at the basic rate, or (so far as applicable in accordance with section 207A) the lower rate,],to the exclusion of any higher rate.
(4)In any case where—
(a)payments of relevant loan interest to which this section applies become due in any year; and
(b)the total income of the borrower for that year is such that he cannot benefit from any or, as the case may be, the full amount of the relevant personal reliefs to which he is entitled;
so much of that full amount as cannot be deducted from his total income shall be deducted from the amount of income on which he is chargeable to tax by virtue of subsection (3) above.
(5)In subsection (4) above “relevant personal relief” means any relief to which the borrower concerned is entitled under Chapter I of Part VII other than—
(a)relief under section 266 which is given either by deduction by virtue of subsection (5) of that section or in accordance with paragraph 6 of Schedule 14; and
(b)relief under section 273;
and for the purposes of subsection (4) above the full amount of those reliefs means the amount of them determined without regard to section 276.
[F6(5A)In any case where—
(a)payments of relevant loan interest to which this section applies become due in any year, and
(b)the notional lower rate income of the borrower for that year exceeds the actual lower rate income of the borrower for that year,
the borrower shall be charged with tax at the lower rate (rather than the basic rate) for that year on so much of the income on which he is chargeable to tax by virtue of subsection (3) above as is equal to the excess.
(5B)For the purposes of subsection (5A) above—
(a)the notional lower rate income of a borrower for a year is the amount of his total income for the year which would be chargeable at the lower rate if the relevant deduction were not made;
(b)the actual lower rate income of a borrower for a year is the amount of his total income for the year which is actually chargeable at the lower rate;
and the relevant deduction is the deduction which, in computing the borrower’s total income otherwise than for the purposes of excess liability, falls to be made on account of the payments referred to in subsection (5A)(a) above.]
(6)M3Any person by whom a payment of relevant loan interest to which this section applies is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (2)(c) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the payment of relevant loan interest to which it relates.
[F7(7)The following provisions of the Management Act, namely—
(a)section 29(3)(c) (excessive relief),
(b)section 30 (tax repaid in error etc.),
(c)section 88 (interest), and
(d)section 95 (incorrect return or accounts),
shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as a relief which was not due.]
Textual Amendments
F1Words in s. 369(3) inserted (16.7.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance (No. 2) Act 1992 (c. 48), s. 19(5)(7).
F2Words in s. 369(3) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 27(2)(4)(7)
F4Words in s. 369(3B) inserted (16.7.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance (No. 2) Act 1992 (c. 48), s. 19(3)(7).
F5Words in 369(3B) substituted (27.7.1993 with effect for 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras.1, 25(1)
F6S. 369(5A)(5B) inserted (16.7.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance (No. 2) Act 1992 (c. 48), s. 19(5)(7).
F7S. 369(7) inserted (27.7.1993) by 1993 c. 34, s. 58(1)(2)
Modifications etc. (not altering text)
C1 See S.I. 1988 No.1347 (in Part III Vol.5)in respect of housing associations.
Marginal Citations
M1Source-1982 s.26(1), (2)
M2Source-1982 s.26(4)-(6)
M3Source-1982 s.26(7)