Income and Corporation Taxes Act 1970 (repealed 6.4.1992)

• (5) In this section " personal relief " means any relief under Chapter II of this Part of this Act.

Options for separate assessment

38

• (1) If, within six months before the 6th July in any year of assessment, a husband or a wife makes an application for the purpose in such manner and form as the Board may prescribe, income tax other than surtax for that year shall be assessed, charged and recovered on the income of the husband and on the income of the wife as if they were not married, and all the provisions of the Income Tax Acts with respect to the assessment, charge and recovery of income tax other than surtax shall, save as otherwise provided by those Acts, apply as if they were not married:

Provided that, in the case of persons married during the course of a year of assessment, an application under this subsection may be made as regards that year at any time before the 6th July in the following year.

• (2) If, before the 6th July in the year next following the year of assessment, a husband or a wife makes an application for the purpose in such manner and form as the Board may prescribe—

• (a) surtax for that year shall be assessed, charged and recovered on the income of the husband and on the the income of the wife as if they were not married, and all the provisions of the Income Tax Acts with respect to the assessment, charge and recovery of surtax shall apply as if they were not married, and

• (b) the income of the husband and wife shall be treated as one in estimating total income for the purposes of surtax, and, subject to section 39(4) below, the amount of surtax payable in respect of the total income shall be divided between the husband and wife in proportion to the amounts of their respective incomes and the total amount payable shall not be less than it would have been if an application had not been made under this subsection.

• (3) Subject to subsection (4) below, an application duly made by a husband or wife under subsection (1) or (2) above shall have effect, not only as respects the year of assessment for which it is made, but also for any subsequent year of assessment.

• (4) A person who has made any such application for any year of assessment may give, for any subsequent year of assessment, a notice to withdraw that application; and where such a notice is given the application shall not have effect with respect to the year for which the notice is given or any subsequent year.

• (5) A notice of withdrawal under subsection (4) above shall be in such form, and be given in such manner, as may be prescribed by the Board, and shall not be valid unless it is given within the period allowed by law for making, for the year for which the notice is given, applications similar to that to which the notice relates.

Effect of separate assessment on personal reliefs (including those running for surtax)

39

• (1) Where, by virtue of an application under section 38(1) above, income tax other than surtax for any year of assessment is to be assessable and chargeable on the incomes of a husband and wife as if they were not married, the total relief given to the husband and the wife by way of personal reliefs (meaning, in this subsection, the reliefs provided for by Chapter II of this Part of this Act) shall be the same as if the application had not had effect with respect to the year and, subject to the proviso to this subsection and to subsection (2) below, the reduction of tax flowing from the personal reliefs shall be allocated to the husband and the wife—

• (a) so far as it flows from relief under section 9(1) in the said Chapter II (earned income relief), in proportion to the amounts of their respective earned incomes,

• (b) so far as it flows from relief under section 6 or 9(2) (relief for small incomes, and old age relief), in proportion to the amounts of their respective total incomes,

• (c) so far as it flows from relief under section 19 or 20 (relief for life insurance premiums and other payments), to the husband or the wife according as he or she made the payment giving rise to the relief,

• (d) so far as it flows from relief in respect of a child under section 10(1)(b), or relief in respect of a dependent relative under section 16, or relief in respect of a daughter under section 17, to the husband or the wife according as he or she maintains the child, relative or daughter, and

• (e) as to the balance, in proportion to the amounts of tax which would have been payable by them respectively if the only personal reliefs allowable had been the .reliefs referred to in paragraphs (a) and (b) above:

Provided that, subject to subsection (2) below, the amount of reduction of tax allocated to the wife by virtue of paragraphs (a) to (e) above shall not be less than the minimum amount which, if no application under the said section 38(1) had had effect for that year, would under section 37(3) above have had to go to reduce the tax chargeable in respect of her earned income, and the amount of reduction of tax allocated to the husband shall be correspondingly reduced.

• (2) Where the amount of reduction of tax allocated to the husband under subsection (1) above exceeds the tax (other than surtax) chargeable on the income of the husband for the year of assessment, the balance shall be applied to reduce the tax chargeable on the income of the wife for that year; and where the amount of reduction of tax allocated to the wife under that subsection exceeds the tax (other than surtax) chargeable on her income for the year of assessment, the balance shall be applied to reduce the tax chargeable on the income of the husband for that year.

• (3) Returns of the total incomes of the husband and the wife may be made for the purposes of subsections (1) and (2) above either by the husband or by the wife, but, if the Board are not satisfied with any such return, they may obtain a return from the wife or the husband, as the case may be.

• (4) Where for any year of assessment a husband and wife are separately assessed by virtue of an application under section 38(1) or 38(2) above—

• (a) whether or not they are separately assessed to surtax, the total relief resulting from section 28 above (surtax reliefs) shall be the same as if there were no separate assessment, and

• (b) if they are separately assessed to surtax, the relief resulting from paragraphs (a) and (b) of section 28(1) above (earned income) shall be allocated between them by apportioning the aggregate deduction under those paragraphs from total income in proportion to their respective earned incomes, and

• (c) if they are separately assessed to surtax, the relief resulting from paragraph (c) of section 28(1) above shall be allocated between them as follows—

• (i) the amount (if any) added to the deduction from their total income under that paragraph in respect of relief under section 10(1)(b), 16 or 17 of this Act shall be treated as reducing the income of the husband or the wife according to whether he or she maintains the child, relative or daughter in respect of whom that relief is given, and

• (ii) subject to sub-paragraph (i) above, the said deduction shall be treated as reducing their respective incomes rateably, or, where relief is given under paragraph (a) or (b) of the said section 28(1), as reducing rateably those incomes as first reduced in accordance with paragraph (b) of this subsection, and

• (d) in so far as any deduction to which paragraph (b) or (c) of this subsection applies cannot be applied for the benefit of the one for whose benefit it would be applicable under the paragraph in question, it shall be applied for the benefit of the other.

Collection from wife of tax assessed on husband but attributable to her income

40

• (1) Where—

• (a) an assessment to income tax (hereafter in this section referred to as " the original assessment") is made on a man, or on a man's trustee, guardian, curator, receiver or committee, or on a man's executors or administrators, and

• (b) the Board are of opinion that, if an application for separate assessment under section 38(1) or 38(2) of this Act had been in force with respect to the year for which the assessment is made, an assessment in respect of, or of part of, the same income would have fallen to be made on, or on the trustee, guardian, curator, receiver or committee of, or on the executors or administrators of, a woman who is the said man's wife, or was his wife in that year of assessment, and

• (c) the whole or part of the amount payable under the original assessment has remained unpaid at the expiration of twenty-eight days from the time when it became due,

the Board may serve on her, or, if she is dead, on her executors or administrators, or, if such an assessment as is referred to in paragraph (b) above could in the event therein referred to have been made on her trustee, guardian, curator, receiver or committee, on her or on her trustee, guardian, curator, receiver or committee, a notice—

• (i) giving particulars of the original assessment and of the amount remaining unpaid thereunder, and

• (ii) giving particulars, to the best of their judgment, of the assessment which would have fallen to be made as aforesaid,

and requiring the person on whom the notice is served to pay the amount which would have been payable under the last-mentioned assessment if it conformed with those particulars, or the amount remaining unpaid under the original assessment, whichever is the less.

• (2) The same consequences as respects—

• (a) the imposition of a liability to pay, and the recovery of, the tax, with or without interest, and

• (b) priority for the tax in bankruptcy, or in the administration of the estate of a deceased person, and

• (c) appeals to the General or Special Commissioners, and the stating of cases for the opinion of the High Court, and

• (d) the ultimate incidence of the liability imposed,

shall follow on the service of a notice under subsection (1) above on a woman, or on her trustee, guardian, curator, receiver or committee, or on her executors or administrators, as would have followed on the making on her, or on her trustee, guardian, curator, receiver or committee, or on her executors or administrators, as the case may be, of such an assessment as is referred to in paragraph (b) of that subsection, being an assessment which—

• (i) was made on the day of the service of the notice, and

• (ii) charged the same amount of income tax as is required to be paid by the notice, and

• (iii) fell to be made, and was made, by the authority who made the original assessment, and

• (iv) was made by that authority to the best of their judgment,

and the provisions of the Income Tax Acts relating to the matters specified in paragraphs (a) to (d) of this subsection shall, with the necessary adaptations, have effect accordingly:

Provided that, where an appeal against the original assessment has been heard in whole or in part by the Special Commissioners, any appeal from the notice shall be an appeal to the Special Commissioners, and where an appeal against the original assessment has been heard in whole or in part by the General Commissioners for any division, any appeal from the notice shall be an appeal to the General Commissioners for that division.

• (3) Where a notice is given under subsection (1) above, income tax up to the amount required to be paid by the notice shall cease to be recoverable under the original assessment, and, where the tax charged by the original assessment carried interest under section 86 of the Taxes Management Act 1970, such adjustment shall be made of the amount payable under that section in relation to that assessment, and such repayment shall be made of any amounts previously paid under that section in relation thereto, as are necessary to secure that the total sum, if any, paid or payable under that section in relation to that assessment is the same as it would have been if the amount which ceases to be recoverable had never been charged.

• (4) Where the amount payable under a notice given under subsection (1) above is reduced as the result of an appeal, or of the stating of a case for the opinion of the High Court—

• (a) the Board shall, if in the light of that result they are satisfied that the original assessment was excessive, cause such relief to be given by way of repayment or otherwise as appears to them to be just, but

• (b) subject to any relief so given, a sum equal to the reduction in the amount payable under the notice shall again become recoverable under the original assessment.

• (5) The Board and the inspector shall have the like powers of obtaining information with a view to the giving of, and otherwise in connection with, a notice under subsection (1) above as they would have had with a view to the making of, and otherwise in connection with, such an assessment as is referred to in paragraph (b) of that subsection if the necessary conditions had been fulfilled for the making of such an assessment.

Right of husband to disclaim liability for tax on deceased wife's income

41

• (1) Where a woman dies who, at any time before her death, was a married woman living with her husband, he or, if he is dead, his executors or administrators, may, not later than two months from the date of the grant of probate or letters of administration in respect of her estate or, with the consent of her executors or administrators, at any later date, serve on her executors or administrators and on the inspector a notice in writing declaring that, to the extent permitted by this section, he or they disclaims or disclaim responsibility for unpaid income tax in respect of all income of hers for any year of assessment or part of a year of assessment during which he was her husband and she was living with him:

Provided that a notice under this section shall not be deemed to be validly served on the inspector unless it specifies the names and addresses of the woman's executors or administrators.

• (2) Where such a notice has been duly served on a woman's executors or administrators and on the inspector—

• (a) it shall be the duty of the Board to exercise such powers as they may then or thereafter be entitled to exercise under section 40 above in connection with any assessment made on or before the date when the service of the notice is completed, being an assessment in respect of any of the income to which the notice relates, and

• (b) the assessments (if any), whether to income tax other than surtax or to surtax, which may be made after that date shall in all respects, and in particular as respects the persons assessable and the tax payable, be the assessments which would have fallen to be made if—

• (i) an application for separate assessment under section 38(1) or 38(2) above, as the case may be, had been in force in respect of the year of assessment in question, and

• (ii) all assessments previously made had been made accordingly.

• (3) In the application of this section to Scotland, the reference to the date of the grant of probate or letters of administration shall be construed as a reference to the date of confirmation.

Construction of references to married women living with their husbands, etc.

42

• (1) A married woman shall be treated for income tax purposes as living with her husband unless—

• (a) they are separated under an order of a court of competent jurisdiction, or by deed of separation, or

• (b) they are in fact separated in such circumstances that the separation is likely to be permanent.

• (2) Where a married woman is living with her husband and either—

• (a) one of them is, and one of them is not, resident in the United Kingdom for a year of assessment, or

• (b) both of them are resident in the United Kingdom for a year of assessment, but one of them is, and one of them is not, absent from the United Kingdom throughout that year,

the same consequences shall follow for income tax purposes as would have followed if, throughout that year of assessment, they had been in fact separated in such circumstances that the separation was likely to be permanent:

Provided that, where this subsection applies and the net aggregate amount of income tax (including surtax) falling to be borne by the husband and the wife for the year is greater than it would have been but for the provisions of this subsection, the Board shall cause such relief to be given (by the reduction of such assessments on the husband or the wife or the repayment of such tax paid (by deduction or otherwise) by the husband or the wife as the Board may direct) as will reduce the said net aggregate amount by the amount of the excess.

CHAPTER V — Aggregation of Income—Parent and Child

General rule for aggregation of investment etc. income of unmarried infants not regularly working

43

• (1) Subject to the following provisions of this section, an infant's income, so far as it is income for a year of assessment or part of a year of assessment during which he or she is unmarried and not regularly working, shall, in the circumstances specified in section 44 below, be treated in accordance with that section as income of his or her parent or parents.

An infant is to be treated for the purposes of this subsection as working regularly if, and only if, he or she—

• (a) is engaged in a full-time occupation, not being one entered into during an interval not exceeding fifteen months between two periods of full-time education, and

• (b) intends to be regularly engaged in that or another such occupation,

and in this provision " occupation " means any office, employment, trade, profession or vocation.

• (2) Subsection (1) above does not apply to—

• (a) earned income, or

• (b) income derived from any sum, or from assets representing any sum, paid by way of, or in satisfaction of a claim for, damages in respect of personal injury to the infant (including any disease, and any impairment of his or her physical or mental condition) or paid in respect of any such personal injury by a body established for charitable purposes only, or by the Criminal Injuries Compensation Board or under any enactment of the Parliament of Northern Ireland providing for compensation in respect of criminal injuries, or

• (c) income consisting of payments made to a female infant by the putative father of a child of the infant and for the benefit, maintenance or education of that child,

but, subject to those exclusions and to subsection (3) below, applies to all such amounts as would fall to be included in computing the infant's total income apart therefrom, and so applies notwithstanding anything in any other enactment (including, except so far as the contrary is expressly provided, any enactment passed after this Act) requiring any amount not to be treated as income of anyone other than the infant.

• (3) Subsection (1) above shall not have effect in relation to an infant for any year of assessment for which his or her aggregate income, so far as it would fall within that subsection or within section 437(1) of this Act (settlements on children: treatment of income as settlor's) but for this exception and the corresponding exception in subsection (3) of the said section 437, does not exceed £5.

• (4) Income of an infant falling to be treated as income of a parent by virtue of the provisions of this Chapter shall be so treated for all income tax purposes, or for the purposes of income tax other than surtax, or for the purposes of surtax only, according to the purposes for which it would have constituted income of the infant but for those provisions.

• (5) Any tax falling to be assessed in respect of income which is to be treated by virtue of this Chapter as income of an infant's parent shall, instead of being assessed on the infant, or on the infant's trustee, guardian, curator, receiver or committee, or on the infant's executors or administrators, be assessable on the parent, or, in the appropriate cases, on the parent's trustee, guardian, curator, receiver or committee, or on the parent's executors or administrators.

• (6) This section shall be disregarded for the purposes of section 21 of the Finance Act 1965 (calculation of capital gains tax by reference to liability to income tax).

Detailed rules

44

• (1) Subject to the following provisions of this section, income to which section 43(1) above applies shall be treated as follows—

• (a) so far as it is income for a year of assessment, or part of a year of assessment, during which both parents of the infant are alive and are married to and living with each other, as income for that year of the father,

• (b) so far as it is income for a year or part during which both parents are alive, but are either not married to each other or not living with each other, as income for that year of the father or, for any period during which the mother has actual custody of the infant, as income for that year of the mother, and

• (c) so far as it is income for a year or part during which one only of the parents is alive, as income for the year of that parent.

• (2) So far as any income to which the said section 43(1) applies is income for a year of assessment, or part of a year of assessment, of an infant who is illegitimate and has not been adopted, subsection (1) above shall not apply to the income, but it shall be treated instead as income for that year of the mother, or, for any period during which the father has actual custody of the infant, as income for that year of the father.

• (3) Subsection (1) above shall not apply to any income so far as it is income for a year of assessment, or part of a year of assessment, during which the infant was in law in the custody of a person or persons other than a parent, and was not in the actual custody of a parent.

• (4) Where, in the case of any income falling within subsection (1)(a) above, one of the infant's parents is, and one is not, resident for the year in the United Kingdom, the said subsection (1)(a) shall have effect in relation thereto as if, instead of specifying the infant's father, it specified the parent resident for the year in the United Kingdom if the infant is so resident, and the other parent if the infant is not so resident.

• (5) Nothing in this section shall have effect so as to treat income of an infant resident in the United Kingdom for any year of assessment as income of a parent not so resident for that year, or income of an infant not so resident for any year as income of a parent so resident for that year.

Consequences of aggregation as respects certain payments involving tax reliefs

45

• (1) Where income of an infant for any period is treated by virtue of this Chapter as income of a parent, and the infant has made payments of either of the following descriptions—

• (a) annual payments in respect of which a deduction is permitted in computing for that period total income for the purposes of income tax or surtax, or

• (b) payments in that period of interest in respect of which income tax at the standard rate is repayable,

the said payments shall, to the extent of that income, be treated as having been made thereout by the parent instead of by the infant, and in the order in which they are described above.

• (2) Where income of an infant for any period is so treated, and the infant has during that period made payments qualifying for relief under section 19 of this Act (life policy and annuity contract premiums), the deductions from tax to which the infant would apart from this subsection be entitled by reason of those payments shall, to the extent that the payments could have been made out of the income so treated (or, where subsection (1) above has effect, out of that income reduced by the payments falling within that subsection), be made instead from the tax with which the parent is chargeable.

Right of parent to recover tax on aggregated income

46

• (1) Where income of an infant is treated by virtue of this Chapter as income of a parent for any year of assessment, the parent shall be entitled to recover from the infant an amount equal to that by which the tax chargeable on and payable by the parent for the year exceeds that which would have been so chargeable and payable if the income had not been so treated:

Provided that, so far as the excess is attributable to trust income which has not been distributed, the right conferred by this subsection shall be exercisable against that income instead of against the infant.

• (2) A parent may require from the Board a certificate specifying in relation to any income the amount of tax which he or she is entitled to recover under subsection (1) above from trustees, and any such certificate shall be conclusive evidence of that amount.

Accountability of parent for tax repayments attributable to aggregation

47

Where income of an infant is treated as income of a parent by virtue of this Chapter, and, by reason thereof, the parent obtains in respect of any allowance or relief a repayment of tax in excess of that to which he or she would have been entitled if the income had not been so treated, the parent shall pay an amount equal to the excess to the infant, or, if the income arose under a trust, to the trustees.

Supplemental

48

• (1) For the purposes of this Chapter, an infant's parents are to be treated as living with each other unless—

• (a) they are separated under an order of a court of competent jurisdiction, or by deed of separation, or

• (b) they are in fact separated in such circumstances that the separation is likely to be permanent.

• (2) Where a parent appeals against any assessment or decision on a claim on the grounds that an infant was not, or was, in his or her actual custody for any period, or was or was not for any period in the actual custody of the other parent, the other parent shall be entitled to appear and be heard on that question by the Commissioners hearing the appeal; and, as respects that question—

• (a) if the other parent does so appear, the determination of the Commissioners shall for the purposes of income tax be final and conclusive against him or her, save that he or she shall have the same right as the appellant to require the statement of a case for the opinion of the High Court, and

• (b) the determination of the Commissioners shall also be final and conclusive against the other parent if he or she fails without reasonable cause to appear.

• (3) A trustee shall, on being so required in writing by a parent of any beneficiary under the trust, give to the parent details of the trust income arising to the beneficiary for any year of assessment during or for any part of which the beneficiary is an infant.

• (4) In this Chapter—

• " infant " means a person who has not attained the age of eighteen,

• " parent " means, in relation to an infant who has been adopted, a parent by adoption (with references to the father and the mother of an infant construed accordingly), and references to adoption include references to adoption under the law of any territory outside the United Kingdom.

CHAPTER VI — Residence

British subjects etc. temporarily abroad

49

Every British subject or citizen of the Republic of Ireland shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any allowance, annuity or stipend, or from any trade, profession, employment or vocation in the United Kingdom or elsewhere.

Residence of persons working abroad

50

• (1) Where a person works full-time in one or more of the following, that is to say, a trade, profession, vocation, office or employment, and the condition mentioned in subsection (2) below is satisfied, the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use.

• (2) The said condition is that no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom.

• (3) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom.

Temporary residents in United Kingdom

51

• (1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, who is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence therein, and who has not actually resided in the United Kingdom at one time os several times for a period equal in the whole to six months in any year of assessment, but if any such person resides in the United Kingdom for the aforesaid period he shall be so chargeable for that year.

• (2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has.

PART II — Annual Payments and Interest

Deduction of income tax at standard rate

Payments out of profits or gains brought into charge to income tax

52

• (1) Where any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest, is payable wholly out of profits or gains brought into charge to income tax—

• (a) no assessment to income tax (other than surtax) shall be made on the person entitled to the annuity or other annual payment, and

• (b) the whole of the profits or gains shall be assessed and charged with income tax on the person liable to the annuity or other annual payment, without distinguishing the annuity or other annual payment, and

• (c) the person liable to make the payment, whether out of the profits or gains charged with income tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of income tax thereon at the standard rate for the year in which the amount payable becomes due, and

• (d) the person to whom the payment is made shall allow the deduction on receipt of the residue of the payment, and the person making the deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid.

• (2) Where—

• (a) any royalty or other sum paid in respect of the user of a patent, or

• (b) any rent, royalty or other payment which, by section 156 or 157 of this Act (mining etc. rents and royalties), is declared to be subject to deduction of income tax under this Part of this Act as if it were a royalty or other sum paid in respect of the user of a patent,

is paid wholly out of profits or gains brought into charge to income tax, the person making the payment shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of the income tax thereon at the standard rate for the year in which the amount payable becomes due.

Payments not out of profits or gains brought into charge to income tax

53

• (1) Where—

• (a) any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest, or

• (b) any royalty or other sum paid in respect of the user of a patent, or

• (c) any rent, royalty or other payment which, by section 156 or 157 of this Act (mining etc. rents and royalties), is declared to be subject to deduction of income tax under this Part of this Act as if it were a royalty or other sum paid in respect of the user of a patent,

is not payable, or not wholly payable, out of profits or gains brought into charge to income tax, the person by or through whom any payment thereof is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon at the standard rate in force at the time of the payment.

• (2) Where any such payment as is mentioned in subsection (1) above is made by or through any person, that person shall forthwith deliver to the inspector an account of the payment, and shall be assessable and chargeable with income tax at the standard rate on the payment, or on so much thereof as is not made out of profits or gains brought into charge to income tax.

• (3) All the provisions of the Income Tax Acts relating to persons who are to be chargeable with income tax, to income tax assessments, and to the collection and recovery of income tax, shall, so far as they are applicable, apply to the charge, assessment, collection and recovery of income tax under this section.

• (4) Subsections (2) and (3) above have effect subject to the provisions of Schedule 9 to this Act with respect to the time and manner in which companies resident in the United Kingdom are to account for and pay income tax in respect of payments from which tax is deductible.

Annual interest

54

• (1) Subject to subsections (2) and (3) below, where any yearly interest of money chargeable to tax under Case III of Schedule D is paid—

• (a) otherwise than in a fiduciary or representative capacity, by a company or local authority, or

• (b) by or on behalf of a partnership of which a company is a member, or

• (c) by any person to another person whose usual place of abode is outside the United Kingdom.

the person by or through whom the payment is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon at the standard rate in force at the time of the payment.

• (2) Subsection (1) above does not apply—

• (a) to interest payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom, or

• (b) to interest paid by such a bank in the ordinary course of that business.

• (3) Subsections (2) to (4) of section 53 above shall apply to payments within subsection (1) of this section as they apply to payments within subsection (1) of that section.

Certificates of deduction

55

• (1) A person making any payment which is subject to deduction of income tax by virtue of section 52, 53 or 54 above shall, if the recipient so requests in writing, furnish him with a statement in writing showing the gross amount of the payment, the amount of tax deducted, and the actual amount paid.

• (2) The duty imposed by subsection (1) above shall be enforceable at the suit or instance of the person requesting the statement.

Construction of references to payments not out of profits or gains brought into charge

56

In section 53 above, any reference to a payment or sum as being not payable, or not wholly payable, out of profits or gains brought into charge to income tax shall be construed as a reference to it as being payable wholly or in part out of a source other than profits or gains brought into charge; and any such reference elsewhere in the Tax Acts shall be construed accordingly.

Interest paid: relief from income tax

Loans for purchase or improvement of land

57

• (1) Subject to the following provisions of this Part of this Act, interest is eligible for relief under this section if it is paid by a person for the time being owning an estate or interest in land in the United Kingdom or the Republic of Ireland on a loan to defray money applied—

• (a) in purchasing the estate or interest, or one absorbed into, or given up to obtain, the estate or interest, or

• (b) in improving or developing the land, or buildings on the land, or

• (c) in paying off another loan, where the claimant could have obtained relief under this section for interest on that other loan if it had not been paid off (and, if free of interest, assuming it carried interest).

• (2) Subsection (1) above shall not apply to a loan unless made in connection with the application of the money, and either on the occasion of its application or within what is in the circumstances a reasonable time from the application of the money ; and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.

• (3) If and so far as a loan made by allowing the debtor to overdraw an account is applied in improving land or buildings (otherwise than by the construction of a building or part of a building), no relief shall be given in respect of interest on the loan falling due more than three years after the end of the year of assessment in which the loan is so applied.

• (4) References in this section to money applied in improving or developing land or buildings include references to payments in respect of maintenance or repairs incurred by reason of dilapidation attributable to a period before the estate or interest was acquired, but otherwise do not include references to payments in respect of maintenance or repairs, or any of the other payments mentioned in section 72(1) of this Act (payments deductible from rent).

• (5) References in this section to money applied in improving or developing land include references to expenditure incurred or defrayed directly or indirectly in respect of street works, other than works of maintenance or repair, for any highway or road, or in Scotland any right of way, adjoining or serving the land.

• (6) References in this section to an estate or interest in land include references to the property in any caravan but, unless it is a large caravan, no relief shall be given by virtue of this subsection in respect of the payment of any interest unless—

• (a) the caravan, taken with the land on which it stands, is for the time being a rateable hereditament for the purposes of the General Rate Act 1967 or any corresponding enactment in force in Scotland, Northern Ireland or the Republic of Ireland, and

• (b) the owner, or his wife or her husband, has, as occupier of the caravan, duly paid rates under that Act or any such enactment for the period in which the interest was paid.

In this subsection "hereditament", in relation to Scotland, means lands and heritages.

• (7) References in this section to an estate or interest do not include references—

• (a) to a rentcharge or, in Scotland, a superiority or the interest of a creditor in a contract of ground annual; or

• (b) to the interest of a chargee or mortgagee, or, in Scotland, the interest of a creditor in a charge or security of any kind over land.

• (8) Where interest is payable by the tenant occupier of any property to the landlord in pursuance of arrangements whereby money advanced at interest by the landlord is applied by the tenant in purchasing the landlord's estate or interest, but that estate or interest is not to pass to the tenant until some time after the interest begins to be payable, this section shall have effect in relation to the tenant as if he were the owner of the landlord's estate or interest.

• (9) Interest eligible for relief under this section shall be deducted from or set off against the income of the person paying it for the year of assessment in which it is paid, and income tax shall be discharged or repaid accordingly.

• (10) Where relief for any year of assessment is given under this section in respect of interest on any debt, then interest on that debt shall not be allowable as a deduction for any other purpose of the Income Tax Acts for that year or any subsequent year of assessment if and so far as this section applies to that interest; and where interest on any debt is allowed as a deduction in computing profits or gains or losses for the purposes of income tax for any year of assessment, then this section shall not apply to interest on that debt in relation to that or any subsequent year of assessment.

In this subsection references to relief having been given or a deduction being allowed are references to its being given or allowed in a claim or assessment which has been finally determined.

• (11) Subsection (1)(a) above shall not apply—

• (a) where the seller and purchaser are a husband and his wife, and either sells to the other, or

• (b) where the purchaser, or the wife or husband of the purchaser, has since 15th April 1969 disposed of an estate or interest in the land in question, and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan, or

• (c) where the purchasers are the trustees of a settlement, and the seller is the settlor, or the wife or husband of the settlor, and it appears that the main purpose of the purchase is to obtain relief in respect of interest on the loan, or

• (d) where the purchaser is directly or indirectly purchasing from a person who is within the terms of section 533 of this Act connected with him, and the price substantially exceeds the value of what is acquired;

and subsection (1)(b) above shall not apply where the person spending the money is within the terms of the said section 533 connected with the person who, directly or indirectly, receives the money, and the money substantially exceeds the value of the work done.

For the purposes of this subsection, references to a husband and wife are references to a husband and his wife living with him.

• (12) In this section, as it applies throughout the United Kingdom and in relation to the Republic of Ireland—

• " caravan " has the meaning given by section 29(1) of the Caravan Sites and Control of Development Act 1960,

• " large caravan " means one which has either or both of the following dimensions— an overall length (excluding any drawbar) exceeding 22 feet, an overall width exceeding 7 feet 6 inches, where " overall length " and " overall width " have the meanings given in Regulation 3 of the Motor Vehicles (Construction and Use) Regulations 1966,

• " street works " means any works for the sewering, levelling, paving, metalling, flagging, channelling and making good of a road, and includes the provision of proper means for lighting a road.

Loan applied in acquiring interest in close company

58

• (1) This section applies to a loan to an individual to defray money applied—

• (a) in acquiring any part of the ordinary share capital of a close company within subsection (2) below, or

• (b) in lending money to such a close company which is used wholly and exclusively for the purposes of the business of the company or of any associated company (being a close company within subsection (2) below) of the company, or

• (c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (and, if free of interest, assuming it carried interest).

• (2) Subsection (1) above applies to a close company—

• (a) if it is a trading company, or

• (b) if it is a member of a trading group, or

• (c) if the whole, or substantially the whole, of its income is of one or more of the following descriptions, that is—

• (i) estate or trading income,

• (ii) interest, and dividends or other distributions, received from a 51 per cent subsidiary of it (both companies being bodies corporate) if the subsidiary is itself within any of paragraphs (a), (b) and (c) of this subsection.

• (3) Relief shall be given in respect of any payment of the interest by the individual on the loan—

• (a) if when the interest is paid he has a material interest in the company, and

• (b) if, taking the period from the application of the proceeds of the loan until the interest was paid as a whole, he has worked for the greater part of his time in the actual management or conduct of the business of the company, or of any associated company of the company, and

• (c) if he shows that in that period he has not recovered any capital from the close company, apart from any amount taken into account under subsection (4) below.

• (4) If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the close company without using that amount in repayment of the loan, he shall be treated for the purposes of this section as if he had at that time repaid that amount out of the loan, and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.

If under section 64(4) below this section applies to a loan part only of which fulfils the conditions in this section, so as to afford relief for interest on that part, the deduction to be made under this subsection shall be made wholly out of interest on that part.

• (5) The individual shall be treated as having recovered an amount of capital from the close company if—

• (a) he receives consideration of that amount or value for the sale of any part of the ordinary share capital of the company, or any consideration of that amount or value by way of repayment of any part of that ordinary share capital, or

• (b) the close company repays that amount of a loan or advance from him, or

• (c) he receives consideration of that amount or value for assigning any debt due to him from the close company.

In the case of a sale or assignment otherwise than by way of a bargain made at arm's length, the sale or assignment shall be deemed to be for consideration of an amount equal to the market value of what is disposed of.

• (6) Subsections (3), (4) and (5) above shall apply to a loan within subsection (1)(c) above as if it, and any loan it replaces, were one loan, and so that—

• (a) references to the application of the proceeds of the loan are references to the application of the proceeds of the original loan, and

• (b) any restriction under subsection (4) above which applied to any loan which has been replaced shall apply also to the loan which replaces it.

• (7) Subsection (1) above shall not apply to a loan unless made in connection with the application of the money, and either on the occasion of its application, or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.

• (8) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.

• (9) " Distribution " has in this section the meaning given by Part X of this Act with sections 284 and 285, and expressions used in this section to which a meaning is given by Chapter III of Part XI of this Act have the same meaning in this section; and—

• (a) in determining for the purposes of subsection (2)(c)(ii) above whether one body corporate is a 51 per cent subsidiary of another, that other shall be treated as not being the owner—

• (i) of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom, or

• (ii) of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt,

• (b) for the purposes of subsection (3) (a) above, an individual has a material interest in a company—

• (i) if he, either on his own or with any one or more of his associates, or if any associate of his with or without any other such associates, is the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent of the ordinary share capital of the company, or

• (ii) if, on an amount equal to the whole distributable income of the company falling under Chapter III of Part XI of this Act to be apportioned for the purposes of surtax, more than 5 per cent of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together.

Loan applied in acquiring interest in a partnership

59

• (1) This section applies to a loan to an individual to defray money applied—

• (a) in purchasing a share in a partnership, or

• (b) in contributing money to a partnership by way of capital or a premium, or in advancing money to the partnership, where the money contributed or advanced is used wholly and exclusively for the purposes of the trade, profession or vocation carried on by the partnership, or

• (c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (and, if free of interest, assuming it carried interest).

• (2) Relief shall be given in respect of any payment of interest by the individual on the loan—

• (a) if throughout the period from the application of the proceeds of the loan until the interest was paid he has personally acted in the conduct of the trade, profession or vocation carried on by the partnership, and

• (b) if he shows that in that period he has not recovered any capital from the partnership, apart from any amount taken into account under the next following subsection.

• (3) If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the partnership without using that amount in repayment of the loan, he shall be treated for the purposes of this section as if he had at that time repaid that amount out of the loan, and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.

If under section 64(4) below this section applies to a loan part only of which fulfils the conditions in this section, so as to afford relief for interest on that part, the deduction to be made under this subsection shall be made wholly out of interest on that part.

• (4) The individual shall be treated as having recovered an amount of capital from the partnership if—

• (a) he receives a consideration of that amount or value for the sale of any part of his interest in the partnership, or

• (b) the partnership returns any amount of capital to him or repays any amount advanced by him, or

• (c) he receives consideration of that amount or value for assigning any debt due to him from the partnership.

In the case of a sale or assignment otherwise than by way of a bargain made at arm's length, the sale or assignment shall be deemed to be for consideration of an amount equal to the market value of what is disposed of.

• (5) Subsections (2), (3) and (4) above shall apply to a loan within subsection (1)(c) above as if it, and any loan it replaces, were one loan, and so that—

• (a) references to the application of the proceeds of the loan are references to the application of the proceeds of the original loan, and

• (b) any restriction under subsection (3) above which applied to any loan which has been replaced shall apply also as respects the loan which replaces it.

• (6) Subsection (1) above shall not apply to a loan unless made in connection with the application of the money, and either on the occasion of its application, or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.

• (7) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.

Loan to purchase machinery or plant used by a partnership

60

• (1) Where an individual is a member of a partnership which, under section 44 of the Capital Allowances Act 1968, is entitled to a capital allowance or liable to a balancing charge for any year of assessment in respect of machinery or plant belonging to the individual, he shall be entitled to relief on any interest paid by him in that year on a loan to defray money applied as capital expenditure on the provision of that machinery or plant.

• (2) No relief shall be given under this section in respect of interest falling due and payable more than three years after the end of the year of assessment in which the debt was incurred.

• (3) Where the machinery or plant is in use partly for the purposes of the trade, profession or vocation carried on by the partnership and partly for other purposes, section 28 of the said Act of 1968 (part-time use) shall apply in relation to relief under this section as it applies in relation to writing-down allowances.

• (4) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.

Loan to pay estate duty

61

• (1) This section applies to any loan to the personal representatives of a deceased person the proceeds of which are applied—

• (a) in paying, before the grant of representation, estate duty in accordance with section 6(2) of the Finance Act 1894, being estate duty in respect of personal property of which the deceased was competent to dispose at his death payable on delivery of the Inland Revenue affidavit, or

• (b) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off.

• (2) Interest paid on the loan in respect of any period ending within one year from the making of the loan within subsection (1)(a) above shall be deducted from or set off against the income of the personal representatives as such for the year in which the interest is paid :

Provided that in relation to estate duty on property the principal value of which falls to be ascertained under section 55 of the Finance Act 1940 (shares and debentures of certain companies) this subsection shall have effect with the substitution for " one year " of " three years ".

• (3) No relief shall be given under this section in respect of interest on so much of any loan as is applied in paying estate duty in respect of property situate in Great Britain which did not pass to the personal representatives as such, or in respect of property which, even if it had been situate in Great Britain, would not have passed to the personal representatives as such.

• (4) Sufficient evidence of the amount of estate duty paid in accordance with the said section 6(2) in respect of any particular description of property, and of any statements relevant to its computation in the Inland Revenue affidavit, may be given by the production of a document purporting to be a certificate from the Board.

• (5) For the purposes of this section—

• (a) " estate duty" means estate duty leviable under the law in force in Great Britain or the law in force in Northern Ireland, together with any interest payable on the duty,

• (b) references to interest in respect of a period ending within a given time apply whether or not interest continues to run after that time.

• (6) This section shall apply to estate duty leviable under the law of Northern Ireland with the substitution for the estate duty enactments mentioned in this section of the corresponding enactments forming part of the law of Northern Ireland, and with the substitution of " Northern Ireland " for " Great Britain " in subsection (3) above, and the reference to the Board shall include a reference to the Ministry of Finance for Northern Ireland.

Certain pre-1970 loans

62

• (1) Relief shall be given in respect of any payment of interest falling due before 6th April 1975 on a debt incurred on or before 15th April 1969, being annual interest—

• (a) on which the recipient is chargeable to tax under Case III of Schedule D, and

• (b) which is not interest on a debt incurred by overdrawing an account with the creditor,

where both the date when the payment fell due and its amount were fixed by or under arrangements made when the debt was incurred, or subsequent arrangements in force on 15th April 1969.

• (2) Relief shall be given in respect of any interest paid without deduction of tax in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom, or from a person bona fide carrying on business as a member of a stock exchange in the United Kingdom or bona fide carrying on the business of a discount house in the United Kingdom, if, assuming that it had been paid without deduction of tax when it became due and payable, relief could have been given in respect of it under section 200 of the Income Tax Act 1952 (which was repealed by section 18(2) of the Finance Act 1969, but not so as to affect relief for interest paid before 6th April 1970 in respect of a period before 1st July 1969).

• (3) Interest eligible for relief under this section shall be deducted from or set off against the income of the person paying the interest for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.

Supplemental: overdrafts

63

• (1) This section has effect for the purposes of sections 57 to 61 above.

• (2) If a person draws money from a bank account or other running account, and applies it, or any part of it, so as to fulfil the conditions in any of those sections, he shall be regarded as obtaining a loan of that money up to the amount of the highest debit balance in the account in the six months beginning with the date on which the money is drawn:

Provided that if the date fell before 6th April 1968, it shall be assumed that the said highest debit balance was not less than the amount of money drawn from the account.

• (3) If the account has been in credit throughout a year of assessment (excluding any year before the year 1968-69), any loan so obtained before the year in which the account has been in credit shall be treated as having been repaid at the beginning of that year.

• (4) The whole of the interest on debit balances in the account in any year of assessment shall be available for attribution to any outstanding loans so obtained:

Provided that the amount of interest attributable to a loan, or to the aggregate of any loans, made before the beginning of the year 1968-69 shall not exceed the amount of interest on debit balances in the account in the year 1968-69 with which the said person has been charged.

• (5) A loan so obtained shall be regarded as carrying interest in any year of assessment at the rate chargeable on the account on the last day of that year on which the account was in debit, but only so far as interest is available for attribution under subsection (4) above, and. where part only of a loan is eligible for relief under the said sections 57 to 61, that interest is to be attributed rateably to the eligible and ineligible parts of the loan.

• (6) Where the amount of interest paid on a loan for part only of a year of assessment is to be ascertained, this section shall be applied to ascertain the amount of interest paid for the whole of the year, and that amount shall be apportioned between that part of the year and the remainder according to their respective lengths.

Other supplemental provisions

64

• (1) The following provisions have effect as respects relief under sections 57 to 62 above.

• (2) Where credit is given for any money due from the purchaser under any sale, that shall be treated for the purposes of those sections as the making of a loan to defray money applied by the purchaser in making the purchase.

• (3) If interest is paid at a rate in excess of a reasonable commercial rate, so much of any payment as represents such an excess shall not be eligible for relief under any of those sections.

• (4) Where the whole of a debt does not fulfil the conditions required by any one of those sections, relief shall be given under the section only in respect of the proportion of any payment of interest equal to the proportion of the debt fulfilling those conditions at the time of the application of the money in question.

• (5) If relief is given in respect of any interest under any of those sections, the interest shall not be allowable as a deduction for any other purpose of the Income Tax Acts.

• (6) No relief shall be given against income chargeable to corporation tax, or any other income of a company.

• (7) The relief shall be given only on the making of a claim therefor.

• (8) Subject to subsection (10) below, a person who claims relief in respect of any payment of interest shall furnish to the inspector a statement in writing by the person to whom the payment is made showing—

• (a) the date when the debt was incurred,

• (b) the amount of the debt when incurred,

• (c) the interest paid in the year of assessment for which the claim is made, and

• (d) the name and address of the debtor:

Provided that if the claim relates to interest on an overdraft the statement shall show, instead of the particulars in paragraphs (a) to (d) above—

• (i) the date when the money was drawn out of the account, and, unless that date fell before 6th April 1968, the highest debit balance in the account in the six months beginning with that date,

• (ii) the rate of interest chargeable on the account for the last day of the year of assessment to which the claim relates on which the account was in debit,

• (iii) the amount of interest on debit balances in the account in the year of assessment, and

• (iv) the name and address of the claimant.

• (9) Subject to the said subsection (10), a person to whom any interest is paid by another person shall, if that other person so requests in writing, furnish that other person with a statement in writing conforming with subsection (8) above and dealing with that payment of interest.

The duty imposed by this subsection shall be enforceable at the suit or instance of the person making the request.

• (10) Subsections (8) and (9) above shall not apply to interest paid to a building society as denned in section 343(8) of this Act, to a company within section 343(9) of this Act, or to a local authority.

Special types of payment

Small maintenance payments

65

• (1) In this section " small maintenance payments" means payments under an order made by a court in the United Kingdom—

• (a) by one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or tor the benefit of the other party to that marriage for that other party's maintenance, or

• (b) to any person for the benefit of, or for the maintenance or education of, a person under 21 years of age, not being such a payment as is mentioned in paragraph (a) above,

being (subject to subsection (5) below) payments which—

• (i) are for the time being required by the order (whether as originally made or as varied) to be made—

• ((A)) weekly at a rate not exceeding £7 10s. Od. per week, or

• ((B)) monthly at a rate not exceeding £32 10s. Od. per month, and

• (ii) would, apart from this section, fall within section 52 or 53 above (deduction of income tax from annual payments),

and " small maintenance order " means an order providing for the making of small maintenance payments.

• (2) Notwithstanding anything in the said section 52 or 53, small maintenance payments shall be made without deduction of income tax.

• (3) Any sums paid in or towards the discharge of a small maintenance payment shall be chargeable under Case III of Schedule D, but the tax shall (notwithstanding anything in sections 119 to 121 of this Act) be computed in all cases on the payments falling due in the year of assessment, so far as paid in that or in any other year.

• (4) A person making a claim in that behalf shall be entitled, in computing his total income for any year of assessment for any of the purposes of the Income Tax Acts, to deduct sums paid by him in or towards the discharge of any small maintenance payments which fall due in that year; and, for the purposes of section 25 of this Act (personal reliefs not to be given in respect of charges on income), any amount which can be deducted under this subsection in computing the total income of a person shall be treated as if it were income the tax on which that person is entitled to charge against another person.

• (5) The Treasury may from time to time, by order made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons, increase the amount of £7 10s. Od. and the amount of £32 10s. Od. in subsection (1)(i) above, either as respects payments within paragraph (a) of that subsection, or as respects payments within paragraph (b) thereof, or as respects both.

• (6) An order under subsection (5) above which increases, or further increases, the said amount of £7 10s. Od. for a class of payments shall increase, or further increase, the amount of £32 10s. Od. for that class of payments so that it is 52 twelfths of the weekly amount or, if that does not give a convenient round sum, such other amount as appears to the Treasury to be the nearest convenient round sum; and an order under that subsection may contain provision whereby it—

• (a) does not in general affect payments falling due in the year of assessment in which it comes into force under small maintenance orders made before its coming into force, but

• (b) in the case of a small maintenance order which was made before that time but is varied or revived after that time, does apply in relation to payments falling due under that order at any time after the variation or revival.

• (7) Where a court—

• (a) make or revive a small maintenance order, or

• (b) vary or revive an order so that it becomes, or ceases to be, a small maintenance order, or

• (c) change the persons who are entitled to small maintenance payments,

the court shall furnish to the Board, in such form as the Board may prescribe, particulars of the order or variation, as the case may be, the names of the persons affected by the order, and, so far as known to the court, the addresses of those persons.

In this subsection—

• " the persons affected ", in relation to a small maintenance order, means the person liable to make the payments under the order and any person for the time being entitled to the payments, and

• references to the variation of an order include references to the making of an order changing the persons entitled to the payments thereunder.

Tithe annuities

66

• (1) No deduction in respect of income tax shall be made from any instalment of any annuity within the meaning of the Tithe Acts 1936 and 1951.

• (2) Five-sixths, but no more, of the amount of any payment made as such an instalment, or as part of such an instalment, shall for income tax purposes be deducted from, or set off against, the income of the person making the payment for the year of assessment in which the instalment becomes payable, and income tax shall be discharged or repaid accordingly.

PART III — Schedule A, and Associated Charges under Schedule D

The Schedule A charge

Schedule A

67

• (1) The Schedule referred to as Schedule A is as follows:—

SCHEDULE A (1) Tax under this Schedule shall be charged on the annual profits or gains arising in respect of any such rents or receipts as follow, that is to say— (a) rents under leases of land in the United Kingdom, (b) rentcharges, ground annuals and feu duties, and any other annual payments reserved in respect of, or charged on or issuing out of, such land, and (c) other receipts arising to a person from, or by virtue of, his ownership of an estate or interest in or right over such land or any incorporeal hereditament or incorporeal heritable subject in the United Kingdom. (2) Tax under this Schedule shall be charged by reference to the rents or receipts to which a person becomes entitled in the chargeable period. (3) Paragraph 1 above does not apply— (a) to any yearly interest, or (b) to any profits or gains charged to tax under Schedule D by virtue of section 112 of this Act (mines, quarries and other concerns), or (c) to any payment so charged by virtue of section 156 or 157 of this Act (mining etc. rents and royalties); and the said paragraph has effect subject also to the provisions of section 140 of this Act with respect to tied premises. (4) Where rent is payable under a lease under which the tenant is entitled to the use of furniture, and tax in respect of the payment for its use is chargeable under Case VI of Schedule D, tax in respect of the rent shall be charged under the said Case VI instead of under this Schedule unless the landlord elects that this paragraph shall not apply.

• (2) An election that paragraph 4 of Schedule A shall not apply shall be made by notice in writing to the inspector given within two years after the end of the chargeable period; and where such notice is given, any adjustment of the liability to tax of the person giving it which is required in consequence thereof may be made by an assessment, or by repayment or otherwise, as the case may require.