Income and Corporation Taxes Act 1988

549 Certain deficiencies allowable as deductions. U.K.

M1 (1) Subject to subsection (2) below, where such an excess as is mentioned in section 541(1)(a) or (b) [F1 , 543(1)(c) or 546C(7)(b)]—

(a) would be treated as a gain arising in connection with a policy or contract, and

(b) would form part of an individual’s total income for the year of assessment in which the final year ends,

a corresponding deficiency occurring at the end of the final year shall be allowable as a deduction from his total income for that year of assessment, so far as it does not exceed [F2 the allowable amount].

[F3 (1A) The allowable amount is the total of any amounts that—

(a) were treated as a gain by virtue of section 541(1)(d), 543(1)(c) or 546C(7) on the previous happenings of chargeable events, and

(b) formed part of that individual’s total income for a previous year of assessment.]

(2) Except where the deficiency mentioned in subsection (1) above occurs in connection with a contract for a life annuity made after 26th March 1974 [F4 but in an accounting period of the insurance company or friendly society beginning before 1st January 1992,] the deduction allowable under that subsection shall be made only for the purposes of ascertaining the individual’s excess liability, that is to say, the excess (if any) of his liability to income tax over what it would be if all income tax [F5 not chargeable [F6 at the starting rate]][F7 were chargeable at the basic rate, or (so far as applicable in accordance with [F8 section 1A]) the lower rate [F9 or the Schedule F ordinary rate],] to the exclusion of [F10 the higher rate and the Schedule F upper rate].

(3) In this section “final year” has the same meaning as in section 546.

Textual Amendments

F1 Words in s. 549(1) substituted (with effect in accordance with s. 83(2) of the amending Act) by Finance Act 2001 (c. 9), Sch. 28 para. 13

F2 Words in s. 549(1) substituted (with effect in accordance with s. 140(4)-(6) of the amending Act) by Finance Act 2004 (c. 12), s. 140(2)

F3 S. 549(1A) inserted (with effect in accordance with s. 140(4)-(6) of the amending Act) by Finance Act 2004 (c. 12), s. 140(3)

F4 Words in s. 549(2) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 48, Sch. 7 para. 9(4)

F5 Words in s. 549(2) inserted (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 19(3)(7)

F6 Words in s. 549(2) substituted (with application in accordance with s. 22(12) of the amending Act) by Finance Act 1999 (c. 16), s. 22(9)(a)

F7 Words in s. 549(2) substituted (27.7.1993 with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 79, SCh. 6 paras. 6, 25(1)

F8 Words in s. 549(2) substituted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 1996 (c. 8), Sch. 6 para. 13

F9 Words in s. 549(2) inserted (with effect in accordance with Sch. 4 para. 13(2) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 13(1)(a)

F10 Words in s. 549(2) substituted (with effect in accordance with Sch. 4 para. 13(2) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 13(1)(b)

Marginal Citations

M1 Source-1975 Sch.2 19; 1975 (No.2) s.40