HC Deb 07 December 1993 vol 234 cc263-6

Resolved,

That—

(1) For subsection (1) of section 353 of the Income and Corporation Taxes Act 1988 there shall be substituted the following subsection— (1) Where a person pays interest in any year of assessment, that person, if he makes a claim to the relief, shall for that year of assessment be entitled (subject to sections 354 to 368) to relief in accordance with this section in respect of so much (if any) of the amount of that interest as is eligible for relief under this section by virtue of sections 354 to 365.

(2) After that subsection there shall be inserted the following subsections— (1A) Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which—

  1. (a) is eligible for that relief by virtue of section 354 or 365, and
  2. (b) so far as eligible by virtue of section 354, is so eligible in a case which falls, or is treated as falling, within section 355(1)(a), 356 or 358,
that relief shall consist in an income tax reduction for that year calculated by reference to that amount. (1B) Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which—
  1. (a) is eligible for that relief otherwise than by virtue of section 354 or 365, or
  2. (b) is eligible for that relief by virtue of section 354 in a case falling within section 355(1)(b),
that relief shall consist (subject to sections 237(5)(b) and 355(4)) in a deduction or set-off of that amount from or against that person's income for that year. (1C) Without prejudice to subsection (1E) below, where the whole or any part of an amount of interest is eligible for relief under this section by virtue of section 354 in a case which (apart from this subsection) would fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b), then that case shall be treated for the purposes of this section and the following provisions of this Act—
  1. (a) except in relation to payments to which an election made for the purposes of this subsection by the person entitled to the relief applies, as falling within section 355(1)(b) and not within section 355(1)(a) or 356; and
  2. (b) in relation to payments to which such an election does apply, as falling within section 355(1)(a) or, as the case may be, 356, and not within section 355(1)(b).
(1D) An election for the purposes of subsection (1C)—
  1. (a) shall be made, and may be withdrawn, by the giving of written notice to an officer of the Board;
  2. (b) shall apply to every payment of interest which—
    1. (i) is made after the time specified in the notice of that election as the time as from which it takes effect; and
    2. (ii) is not made after a time specified in a notice of the withdrawal of that election as the time as from which that election is withdrawn;
  3. (c) shall not be made so as to take effect as from any time except the beginning of a year of assessment or a time as from which the conditions for the case to fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b) have begun to be satisfied in relation to payments of interest on the loan in question;
  4. (d) shall not be withdrawn except as from the beginning of a year of assessment; and
  5. (e) shall not be made so as to take effect, and shall not be withdrawn, as from anytime before the beginning of the year of assessment immediately before that in which the notice of the election or, as the case may be, of the withdrawal is given to an officer of the Board.
(1E) Where any person is entitled for any year of assessment to relief under this section in respect of any amount of interest which is eligible for that relief partly as mentioned in subsection 1(A) above and partly as mentioned in subsection (1B) above, that amount of interest shall be apportioned between the cases to which each of those subsections applies without regard to what parts of the total amount borrowed remain oustanding but according to the following factors, that is to say—
  1. (a) the proportions of the total amount borrowed which were applied for different purposes; and
  2. (b) in the case of so much of any amount of interest which is, or in pursuance of an appointment under paragraph (a) above is treated as, eligible for relief by virtue of section 354, the different uses to which the land or other property in question is put from time to time;
and subsection (1A) or (1B) above shall apply accordingly in relation to the interest apportioned to the case to which that subsection applies. (1F) Where any person is entitled under this section for any year of assessment to an income tax reduction calculated by reference to an amount of interest, the amount of that person's liability for that year to income tax on his total income shall be the amount to which he would have abeen liable part from this section less whichever is the smaller of—
  1. (a) the amount equal to the applicable percentage of that amount of interest; and
  2. (b) the amount which reduces his liability to nil.
(1G) In subsection (1F) above 'the applicable percentage'—
  1. (a) in relation to so much of any interest as is eligible for relief under this section by virtue of section 354, means 20 per cent.; and
  2. (b) in relation to so much of any interest as is eligible for relief under this section by virtue of section 365, means the percentage which is the basic rate for the year of assessment in question.
(1H) In determining for the purposes of subsection (IF) above the amount of income tax to which a person would be liable apart from any income tax reduction under this section, no account shall be taken of—
  1. (a) any income tax reduction under Chapter I of Part VII or section 347B;
  2. (b) 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 or by way of a credit under section 790(1); or
  3. (c) 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."

(3) Subsections (4) and (5) of section 353 of that Act shall cease to have effect.

(4) In section 355(4) of that Act—

  1. (a) for the words from "where" to "but" there shall be substituted "falling within subsection (1)(b) above shall be given only against income from the letting of any land, caravan or house-boat (whether or not the land, caravan or house-boat in question), but"; and
  2. (b) for the words "the first-mentioned land, caravan or house-boat" there shall be substituted "the land, caravan or house-boat in question".

(5) In section 356(1) of that Act, for "Section 355(1)" there shall be substituted "Section 355(1)(a)".

(6) In section 356A(3) of that Act, after "is", in the second place where it occurs, there shall be inserted "or but for section 353(1C)(a) would be".

(7) In sections 356D(1) and 357(1) of that Act, for "eligible for relief under section 353 by virtue of section 355(1)(a) or 356(1)" there shall, in each case, be substituted ", in a case falling or treated as falling within section 355(1)(a), 356 or 358, eligible for relief under section 353 by virtue of section 354".

(8) In sections 357A(7) and 357B(1)(c) and (6) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall, in each case, be substituted "and is such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 were satisfied".

(9) In section 357C(1)(e) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall be substituted "and would have been such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 were satisfied".

(10) In section 357C(2) of that Act, for "by virtue of section 355(1)(a) or 356(1)" there shall be substituted "and was been such that the conditions for the case to fall, or be treated as falling, within section 355(1)(a), 356 or 358 were satisfied".

(11) In section 358 of that Act, after subsection (4) there shall be inserted the following subsection— (4A) References in this Act to a case falling within this section shall not include references to a case falling within section 355(1)(b) where the interest paid by the personal representatives or trustees is eligible for relief under section 353 apart from the assumptions for which subsection (3) above provides.

(12) In section 368(1) of that Act, for "for any other purpose of the Income Tax Acts" there shall be substituted "for any purpose of the Income Tax Acts except so far as it is so allowable in accordance with subsection (1B) of that section."

(13) In subsection (1) of section 369 of that Act, for the words from "income tax" onwards there shall be substituted "the applicable percentage thereof." and after that subsection there shall be inserted the following subsection— (1A) In subsection (1) above 'the applicable percentage'—

  1. (a) in relation to so much of any payment of relevant loan interest as is not a payment in relation to which paragraph (b) below has effect, means 20 per cent.; and
  2. (b) in relation to so much of any payment as—
    1. (i) has become due before 6th April 1994; or
    2. (ii) being a payment becoming due on or after 6th April 1994, would, apart from section 353(2), be eligible for relief under section 353 by virtue of section 365,
means the percentage which is the basic rate for the year of assessment in which the payment has become or becomes due.

(14) For subsections (3) to (5B) of section 369 of that Act there shall be substituted the following subsection— (3) The following payments, that is to say—

  1. (a) payments of relevant loan interest to which this section applies, and
  2. (b) payments which would be such payments but for section 373(5),
shall not be allowable as deductions for any purpose of the Income Tax Acts except in so far as they fall to be treated as such payments by virtue only of section 375(2) and would be allowable apart from this subsection.

(15) In section 370 of that Act— (a) in subsection (2), after "section 353(2)" there shall be inserted "and any other provision applying to interest falling to be treated as relevant loan interest"; and

TABLE A
Cylinder capacity of car in cubic centimetres Cash equivalent
£
1,400 or less 640
More than 1,400 but not more than 2,000 810
More than 2,000 1,200
TABLE AB
Cylinder capacity of car in cubic centimetres Cash equivalent
£
2,000 or less 580
More than 2,000 750

(b) after subsection (6) there shall be inserted the following subsection— (6A) In disregarding section 353(2) for the purposes of subsection (2)(c) above, section 353(1C) and (1D) shall apply for determining whether or not the condition in section 355(1) or 356(1) is fulfilled as (but for section 353(2)) they would apply for the purpose of determining whether or not the case falls, or is treated as falling, within section 355(1)(a) or 356.

(16) In section 375(3) of that Act, for the words from "entitles" to "been allowed" there shall be substituted "shall be taken as regards the borrower as entitling him to any deduction or to retain any amount deducted and, accordingly, where any amount that has been deducted exceeds the amount which ought to have been deducted".

(17) Subsection (7) of section 57 of the Finance Act 1993 shall cease to have effect.

(18) This Resolution—

  1. (a) shall have effect in relation to payments of interest made on or after 6th April 1994 (whenever falling due); and
  2. (b) shall also have effect, so far as it relates to relevant loan interest, in relation to any payments of interest becoming due on or after 6th April 1994 which have been made at any time before that date but on or after 30th November 1993;
and in this paragraph "relevant loan interest" has the same meaning as in Part IX of the Income and Corporation Taxes Act 1988. And it hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collectioin of Taxes Act 1968.