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Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(b) any value received in the first year of the 6 year period is treated as received at the beginning of the second year of that period.

(7) This section is subject to section 368 (value received if there is more than one investment).

(8) Value received is ignored, for the purposes of this section, so far as the CITR attributable to any loan, securities or shares in respect of any one or more tax years has already been reduced or withdrawn on its account.

Value received by investor during 6 year period: securities or shares

364

(1) This section applies if the investment consists of securities or shares and—

(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period,

(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),

(c) the receipt is wholly or partly in excess of the permitted level of receipts in respect of the continuing investment, and

(d) the amount of that excess ... is not an amount of insignificant value.

(2) Any CITR attributable to the continuing investment in respect of any tax year must be withdrawn.

(3) For the purposes of subsection (1) the permitted level of receipts is exceeded if—

(a) any amount of value is received by the investor (ignoring any amounts of insignificant value) in the first 3 years of the 6 year period, or

(b) the total amount of value received by the investor (ignoring any amounts of insignificant value)—

(i) before the beginning of the fifth year of that period, exceeds 25% of the invested capital,

(ii) before the beginning of the final year of that period, exceeds 50% of the invested capital, or

(iii) before the end of that period, exceeds 75% of the invested capital.

(4) In this section—

“the invested capital”, in relation to the continuing investment, means the amount subscribed for the securities or shares concerned, and

“an amount of insignificant value” means an amount of value which—is not more than £1,000, orif it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.

(5) This section is subject to section 368 (value received if there is more than one investment).

(6) Value received is ignored, for the purposes of this section, so far as CITR attributable to any loan, securities or shares in respect of any one or more tax years has already been reduced or withdrawn on its account.

Receipts of insignificant value to be added together

365

(1) This section applies if—

(a) value is received (“the relevant receipt”) by the investor from the CDFI at any time during the 6 year period relating to the investment,

(b) the investor has received from the CDFI one or more receipts of insignificant value at a time or times—

(i) during that period, but

(ii) not later than the time of the relevant receipt, and

(2) The investor is treated for the purposes of this Part as if the relevant receipt had been a receipt of an amount of value equal to that total amount.

(3) A receipt does not fall within subsection (1)(b) if the whole or any part of it has previously formed part of a total amount falling within subsection (1)(c).

(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the relevant amount.

(5) If the investment consists of a loan, the relevant amount for the purposes of subsection (4) is—

(a) if the relevant receipt is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and

(b) if the relevant receipt is received in a later year, the average capital balance of the loan for the year in question.

(6) For the purposes of subsection (5)—

(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and

(b) the relevant receipt and any receipts within subsection (1)(b) are ignored when calculating the average capital balance for the year in question.

(7) If the investment consists of securities or shares, the relevant amount for the purposes of subsection (4) is—

(a) if the relevant receipt is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and

(b) in any other case, the amount subscribed for such of the securities or shares as—

(i) are held by the investor at the time the relevant receipt is received, and

(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.

(8) This section is subject to section 368 (value received if there is more than one investment).

When value is received

366

(1) For the purposes of this Chapter the investor receives value from the CDFI at any time when the CDFI—

(a) repays, redeems or repurchases any securities or shares included in the investment,

(b) releases or waives any liability of the investor to the CDFI or discharges, or undertakes to discharge, any liability of the investor to a third person,

(d) provides a benefit or facility for the investor or any associate of the investor,

(e) disposes of an asset to the investor for no consideration or for a consideration of an amount or value which is less than the market value of the asset,

(f) acquires an asset from the investor for a consideration of an amount or value which is more than the market value of the asset, or

(g) makes a payment to the investor other than a qualifying payment.

(2) For the purposes of subsection (1)(b) the CDFI is treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.

(3) For the purposes of subsection (1)(c) the following are treated as loans made by the CDFI to the investor—

(a) the amount of any debt due from the investor to the CDFI (other than an ordinary trade debt), and

(b) the amount of any debt due from the investor to a third person which has been assigned to the CDFI.

(4) For the purposes of this section—

(a) references to a debt or liability do not, in relation to a person, include references to any debt or liability which would be discharged by the making by that person of a qualifying payment,

(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would have been a qualifying payment, and

(c) any reference to a payment or disposal to a person includes a reference to a payment or disposal made to that person indirectly or to that person's order or for that person's benefit.

(5) In subsection (4) references to “a person” include references to any other person who, at any time in the 6 year period, is connected with that person, whether or not the other person is so connected at the material time.

(6) In this section—

“qualifying payment” means—any payment by any person for any goods, services or facilities provided by the investor (in the course of the investor's trade or otherwise) which is reasonable in relation to the market value of those goods, services or facilities,the payment by any person of any interest which represents no more than a reasonable commercial return on money lent to that person,the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or securities of that company,any payment for the acquisition of an asset which does not exceed its market value,the payment by any person, as rent for any property occupied by the person, of an amount which is not more than a reasonable and commercial rent for the property, anda payment in discharge of an ordinary trade debt, and

“ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—is for not more than 6 months, andis not longer than that normally given to customers of the person carrying on the trade or business.

The amount of value received

367

In a case falling within a provision listed in column 1 of the following table, the amount of value received for the purposes of this Chapter is given by the corresponding entry in column 2 of the table.

Value received if there is more than one investment

368

(1) This section applies if—

(a) the investor makes two or more investments in the CDFI,

(b) the investor is eligible for and claims CITR in respect of those investments, and

(c) the investor receives value (other than value within section 366(1)(a)) which is received within the 6 year periods relating to two or more of those investments.

(2) Sections 363, 364, 365 and 369 have effect in relation to each investment referred to in subsection (1)(c) as if the amount of the value received were reduced by multiplying it by the fraction—

$$AB$where—(a) A is the appropriate amount in respect of the investment in question, and(b) B is the sum of that amount and the appropriate amount or amounts in respect of the other investment or investments.$

(3) If the investment consists of a loan, the appropriate amount for the purposes of subsection (2) is—

(a) if the value is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and

(b) if the value is received in a later year, the average capital balance of the loan for the year in question.

(4) For the purposes of subsection (3)—

(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and

(b) the receipt of value is ignored when calculating the average capital balance for the year in question.

(5) If the investment consists of securities or shares, the appropriate amount for the purposes of subsection (2) is—

(a) if the value is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and

(b) in any other case, the amount subscribed for such of the securities or shares as—

(i) are held by the investor at the time the value is received, and

(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.

Effect of receipt of value on future claims for CITR

369

(1) This section applies if the investment consists of securities or shares and—

(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period, and

(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),

but no CITR attributable to the continuing investment is withdrawn under section 364 as a result of the receipt.

(2) For the purposes of calculating any CITR in respect of any securities or shares included in the continuing investment for any relevant tax year, the amount subscribed for the securities or shares included in the continuing investment is treated as reduced by the amount of the value received.

(3) For this purpose the “relevant” tax years are—

(a) any tax year ending on or after the anniversary of the investment date immediately before the receipt of value, or

(b) if the value was received on an anniversary of the investment date, any tax year ending on or after that anniversary.

(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.

(5) This section is subject to section 368 (value received if there is more than one investment).

Receipts of value by or from connected persons

370

In sections 363 to 369, if the context permits, references to the investor or the CDFI include references to any person who at any time in the 6 year period relating to the investment is connected with the investor or, as the case may be, the CDFI, whether or not the person is connected at the material time.

CITR not due

CITR subsequently found not to have been due

371

If any CITR has been obtained which is subsequently found not to have been due, the CITR must be withdrawn.

Manner of withdrawal or reduction

Manner of withdrawal or reduction of CITR

372

(1) This section applies if any CITR has been obtained which falls to be withdrawn or reduced under this Chapter.

(2) The CITR must be withdrawn or reduced by making an assessment to income tax for the tax year for which the CITR was obtained.

(3) No assessment may be made under subsection (2) because of any event occurring after the death of the investor.

(4) An assessment under this paragraph may be made at any time not more than 6 years after the end of the tax year for which the relief was obtained.

(5) Subsection (4) is without prejudice to section 36(1A) of TMA 1970 (loss of tax brought about deliberately etc).

Chapter 7 — Supplementary and general

Miscellaneous

Information to be provided by the investor

373

(1) If—

(a) the investor has obtained CITR in respect of the investment, and

(b) an event occurs because of which CITR attributable to the investment in respect of any tax year falls to be withdrawn or reduced by virtue of section 360, 361, 362 or 364,

the investor must give an officer of Revenue and Customs a notice containing particulars of the event.

(2) Subject to subsection (3), a notice under subsection (1) must be given not later than the normal self-assessment filing date for the tax year in which the event occurred.

(3) If—

(a) the investor is required to give a notice as a result of the receipt of value by a person connected with the investor (see section 370), and

(b) the end of the period of 60 days beginning when the investor comes to know of that event is later than the final notice date under subsection (2),

the notice must be given before the end of that 60 day period.

Disclosure

374

(1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information—

(a) by the Secretary of State to an officer of Revenue and Customs for the purpose of assisting Her Majesty's Revenue and Customs to discharge their functions under the Income Tax Acts so far as relating to matters arising under this Part, or

(b) by an officer of Revenue and Customs to the Secretary of State for the purpose of assisting the Secretary of State to discharge the Secretary of State's functions under this Part.

(2) Information obtained by such disclosure is not to be further disclosed except for the purposes of legal proceedings arising out of the functions referred to.

Nominees

375

(1) For the purposes of this Part—

(a) loans made by or to, or disposed of by, a nominee for a person are treated as made by or to, or disposed of by, that person, and

(b) securities or shares subscribed for by, issued to, acquired or held by or disposed of by a nominee for a person are treated as subscribed for by, issued to, acquired or held by or disposed of by that person.

(2) For the purposes of subsection (1) references to things done by or to a nominee for a person include things done by or to a bare trustee for a person.

Application for postponement of tax pending appeal

376

No application may be made under section 55(3) or (4) of TMA 1970 (application for postponement of payment of tax pending appeal) on the ground that an individual is eligible for CITR unless a claim for the CITR has been duly made by the individual under this Part.

Identification of securities or shares on a disposal

377

(1) This section applies for the purpose of identifying the securities or shares disposed of in any case where—

(a) the investor disposes of part of a holding of securities or shares (“the holding”), and

(b) the holding includes securities or shares to which CITR is attributable in respect of one or more tax years that have been held continuously by the investor from the time they were issued until the disposal.

(2) Any disposal by the investor of securities or shares included in the holding which have been acquired by the investor on different days is treated as relating to those acquired on an earlier day rather than to those acquired on a later day.

(3) If there is a disposal by the investor of securities or shares included in the holding which have been acquired by the investor on the same day, any of those securities or shares—

(a) to which CITR is attributable, and

(b) which have been held by the investor continuously from the time they were issued until the time of disposal,

are treated as disposed of after any other securities or shares included in the holding which were acquired by the investor on that day.

(4) For the purposes of this section a holding of securities is any number of securities of a company which—

(a) carry the same rights,

(b) were issued under the same terms, and

It does not matter for this purpose that the number of the securities grows or diminishes as securities carrying those rights and issued under those terms are acquired or disposed of.

(5) For the purposes of this section a holding of shares is any number of shares in a company which—

(a) are of the same class, and

(b) are held by the investor in the same capacity.

It does not matter for this purpose that the number of the shares grows or diminishes as shares of that class are acquired or disposed of.

(6) In a case to which section 127 of TCGA 1992 (equation of original shares and new holding) applies, shares comprised in the new holding are to be treated for the purposes of subsections (2) and (3) as acquired when the original shares were acquired.

(7) In subsection (6)—

(a) the reference to section 127 of TCGA 1992 includes a reference to that section as it is applied by virtue of any enactment relating to chargeable gains, and

(b) “original shares” and “new holding” have the same meaning as in section 127 of TCGA 1992 or (as the case may be) that section as applied by virtue of the enactment in question.

Definitions

Meaning of “issue of securities or shares”

378

(1) In this Part—

(a) references (however expressed) to an issue of securities of any body are to such securities of that body as carry the same rights and are issued under the same terms and on the same day, and

(b) references (however expressed) to an issue of shares in any body are to such shares in that body as are of the same class and issued on the same day.

(2) In this Part references (however expressed) to an issue of securities of or shares in a body to an individual are to such of the securities or shares in an issue of securities of or shares in that body as are issued to that individual in one capacity.

Meaning of “disposal”

379

(1) Subject to subsection (2), in this Part “disposal” is read in accordance with TCGA 1992, and related expressions are read accordingly.

(2) An investor is treated as disposing of any securities or shares which but for section 151BC(1) of TCGA 1992 the investor—

(a) would be treated as exchanging for other securities or shares by virtue of section 136 of that Act, or

(b) would be so treated but for section 137(1) of that Act (which restricts section 136 to genuine reconstructions).

Construction of references to being “held continuously”

380

(1) This section applies if for the purposes of this Part it becomes necessary to determine whether the investor has held the investment (or any part of it) continuously throughout any period.

(2) The investor is not treated as having held the investment (or any part of it) continuously throughout a period if the investor—

(a) is treated, under any provision of TCGA 1992, as having disposed of and immediately re-acquired the investment (or part) at any time during the period, or

(b) is treated as having disposed of the investment (or part) at any such time, by virtue of section 379(2).

Meaning of “associate”

381

(1) In this Part “associate”, in relation to a person, means—

(a) any relative or partner of that person,

(b) the trustee or trustees of any settlement in relation to which that person, or any relative of that person (living or dead), is or was a settlor, and

(c) if that person has an interest in any shares or obligations of a company which are subject to any trust or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and

(ii) if that person is a company, any other company which has an interest in those shares or obligations.

(2) In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or lineal descendant.

(3) In subsection (1)(b) “settlor” and “settlement” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

Minor definitions etc

382

(1) In this Part—

“body” includes an unincorporated association, and

“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise).

(2) For the purposes of this Part shares in a company are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.

(3) For the purposes of this Part the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.

(4) In this Part—

(a) references to CITR obtained by the investor in respect of any investment (or part of an investment) include references to CITR obtained by the investor in respect of that investment (or part) at any time after the investor has disposed of it, and

(b) references to the withdrawal or reduction of CITR obtained by the investor in respect of the investment (or any part of it) include references to the withdrawal or reduction of CITR obtained in respect of that investment (or part) at any such time.

(5) In the case of any condition that cannot be met until a future date—

(a) references in this Part to a condition being met for the time being are to nothing having occurred to prevent its being met, and

(b) references to its continuing to be met are to nothing occurring to prevent its being met.

Part 8 — Other reliefs

Chapter 1 — Interest payments

The relief: introduction

Relief for interest payments

383

(1) A person who pays interest in a tax year is entitled to relief for the tax year for the interest if—

(a) the loan on which the interest is payable is a loan to which a provision specified in subsection (2) applies,

(b) the interest is eligible for relief in accordance with this Chapter, and

(2) The provisions are—

(a) section 388 (loan to buy plant or machinery for partnership use),

(b) section 390 (loan to buy plant or machinery for employment use),

(d) section 396 (loan to buy interest in employee-controlled company),

(e) section 398 (loan to invest in partnership),

(f) section 401 (loan to invest in co-operative), and

(g) section 403 (loan to pay inheritance tax).

(3) The amount of the relief given under subsection (1) is equal to the amount of the interest eligible for relief.

(4) The relief is given by deducting that amount in calculating the person's net income for the tax year in which the interest is paid (see Step 2 of the calculation in section 23).

(5) This section is subject to—

(a) section 384 (general restrictions on relief under this Chapter),

(aa) section 384B (restriction on relief where cash basis applies),

(b) section 385 (general provisions about loans),

(d) section 387 (exclusion of double relief etc), and

(e) section 405 (carry back and forward of relief for interest on loans within section 403).

(6) See also section 564O (under which this Chapter applies as if arrangements to which section 564C applies were loans and alternative finance return were interest).

General restrictions on relief under Chapter

384

(1) Relief is not to be given under this Chapter for interest on a debt incurred—

(a) by overdrawing an account, or

(b) by debiting the account of any person as the holder of a credit card or under similar arrangements.

(2) If the interest paid on a loan in a tax year exceeds a reasonable commercial amount of interest on the loan for the relevant period , relief is not to be given under this Chapter for so much of the interest as represents the excess.

(3) The relevant period is the tax year or, if the loan exists for part only of the tax year, the part of the tax year for which the loan exists.

(4) A reasonable commercial amount of interest on the loan for the relevant period is an amount which, together with any interest paid before that period (other than unrelieved interest), represents a reasonable commercial rate of interest on the loan from the date it was made to the end of that period.

(5) “Unrelieved interest” means interest which because of subsection (2) is not eligible for relief under this Chapter.

General provisions about loans

385

(1) References in this Chapter to a loan being used or used in any way—

(a) are references to the money lent being applied or, as the case may be, applied in that way, and

(b) except in section 403 include references to a loan being used to meet expenditure already incurred or, as the case may be, already incurred on such a use.

(2) Sections 392, 396, 398, 401 and 403 apply to a loan only if it is made—

(a) in connection with the use of money, and

(b) on the occasion of its use or within what is in the circumstances a reasonable time from its use.

(3) Those sections apply to a loan only if the loan is used as mentioned in those sections without first having been used for another purpose.

(4) For the purposes of this Chapter the giving of credit for any money due from the purchaser under a sale is treated as the making of a loan used by the purchaser in making the purchase.

Loans partly meeting requirements

386

(1) If, at the time a loan (“the mixed loan”) is used, only part of the mixed loan is a loan to which any of the provisions specified in section 383(2) apply, for the purposes of this Chapter that part (“the qualifying part”) is treated as a loan to which the provision in question applies.

(2) Accordingly, the corresponding proportion of the interest on the mixed loan is eligible for relief.

(3) If a mixed loan is partly repaid, for the purposes of this Chapter the corresponding proportion of the repayment is treated as repaying the qualifying part (but see section 406(5)).

(4) In this section “the corresponding proportion” means the proportion that the qualifying part bears to the whole of the mixed loan at the time the mixed loan is used.

Exclusion of double relief etc

387

(1) Interest for which relief is given under this Chapter is not allowable as a deduction for any other income tax purposes.

(2) No relief is given under this Chapter for any tax year for the payment of any interest taken into account in calculating the profits of—

(a) any trade, profession or vocation,

(b) any UK property business, or

(3) If interest is so taken into account, no relief is given under this Chapter for any relevant tax year for other interest on the same debt or liability.

(4) A tax year is a relevant one if the interest has been taken into account in calculating the profits of the trade, profession, vocation or business of the tax year.

(5) For the purposes of subsection (3) all interest which—

(a) is capable of being taken into account in calculating the profits of a trade, profession, vocation or business, and

(b) is payable by the same person on money advanced to the person on current account,

is treated as interest on the same debt.

(6) It does not matter whether the money is advanced—

(a) on one or more accounts, or

(b) by the same or separate banks or other persons.

(7) The reference in subsections (2) to (4) to interest taken into account is a reference to interest allowed as a deduction in an assessment which can no longer be varied (whether on appeal or otherwise).

Loans for plant or machinery

Loan to buy plant or machinery for partnership use

388

(1) This section applies to a loan that is used for capital expenditure on the provision of plant or machinery to which subsection (2) applies.

(2) This subsection applies to plant or machinery if—

(a) it is in use for the purposes of a trade, profession or ... property business carried on by a partnership, and

(b) the partnership is entitled to a capital allowance or liable to a balancing charge in respect of it under section 264 of CAA 2001 (partnership using property of a partner) for the period of account in which the interest is paid.

(3) A partnership is treated as entitled to a capital allowance or liable to a balancing charge in respect of plant or machinery for a period of account (“the later period”) for the purposes of subsection (2)(b) if—

(a) it has been so entitled or liable for a previous period of account, and

(b) no disposal value has been brought into account in respect of it in the later period or any earlier period of account.

(4) In this section and sections 389 and 390—

“capital expenditure” has the meaning given in section 4 of CAA 2001,

“period of account” has the same meaning as in that Act (see section 6(2) to (6) of that Act), and

“property business” has the same meaning as in Part 2 of that Act (see section 16 of that Act).

Eligibility requirements for interest on loans within section 388

389

(1) Interest on a loan within section 388(1) is eligible for relief if conditions A and B are met.

(2) Condition A is that the interest is paid by an individual who is a member of the partnership referred to in section 388(2).

(3) Condition B is that the interest falls due and payable not later than 3 years after the end of the period of account in which the loan was made.

(4) If the machinery or plant is in use partly for the purposes of the trade, profession or ... property business carried on by the partnership referred to in section 388(2) (“trade purposes”) and partly for other purposes, only part of the interest is eligible for relief.

(5) That part is such part as it is just and reasonable to attribute to trade purposes, having regard to all the relevant circumstances and, in particular, to the extent of the use for other purposes.

Loan to buy plant or machinery for employment use

390

(1) This section applies to a loan that is used for capital expenditure on the provision of plant or machinery to which subsection (2) applies.

(2) This subsection applies to plant or machinery if—

(a) it is in use for the purposes of an office or employment held by an individual in the tax year,

(b) the plant or machinery belongs to the individual, and

(c) the individual is entitled to a capital allowance or liable to a balancing charge in respect of it under Part 2 of CAA 2001 for the tax year.

(3) An individual is treated as entitled to a capital allowance or liable to a balancing charge in respect of plant or machinery for a tax year (“the later year”) for the purposes of subsection (2)(c) if—

(a) the individual has been so entitled or liable for a previous tax year, and

(b) no disposal value has been brought into account in respect of it in the later year or any earlier year.

(4) An individual is also treated as so entitled or liable for the purposes of this section if the individual would be so entitled or liable but for a contribution made by the individual's employer.

Eligibility requirements for interest on loans within section 390

391

(1) Interest on a loan within section 390(1) is eligible for relief if conditions A and B are met.

(2) Condition A is that the interest is paid by the individual referred to in section 390(2).

(3) Condition B is that the interest falls due and payable not later than 3 years after the end of the tax year in which the loan was made.

(4) If the machinery or plant is in use partly for the purposes of the office or employment referred to in section 390(2) (“employment purposes”) and partly for other purposes, only part of the interest is eligible for relief.

(5) That part is such part as it is just and reasonable to attribute to employment purposes having regard to all the relevant circumstances and, in particular, to the extent of the use for other purposes.

Loans for interests in close companies etc

Loan to buy interest in close company

392

(1) This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2) The ways are—

(a) acquiring any part of the ordinary share capital of a close company that is not a close investment-holding company,

(b) lending to such a company money which is used wholly and exclusively—

(i) for the purposes of the business of the company, or

(ii) for the purposes of the business of any associated company of the company which is also a close company that is not a close investment-holding company, or

(3) Subsection (2)(a) does not apply if at any time the individual by whom the shares are acquired or that individual's spouse or civil partner—

(a) makes a claim for relief in respect of them under Part 5 of this Act or, in the case of shares issued before 6 April 2007, Chapter 3 of Part 7 of ICTA (enterprise investment scheme), or

(b) makes a claim in respect of them under Schedule 5B to TCGA 1992 (enterprise investment scheme: reinvestment).

(3A) Subsection (2) does not apply if at any time the individual by whom the shares are acquired or the money is lent, or that individual's spouse or civil partner, makes—

(a) a claim under Part 5B of this Act for relief in respect of the amount invested in acquiring the shares or (as the case may be) in return for the debentures in respect of the money lent, or

(b) a claim in respect of the amount under Schedule 8B to TCGA 1992 (hold-over relief for gains re-invested in social enterprises).

(3B) For the purposes of subsection (3A)(a) “debenture” includes any instrument creating or acknowledging indebtedness.

(4) In this section and section 393—

“close company” includes a company which— is resident in an EEA state ..., andif it were UK resident, would be a close company,

“close investment-holding company” is to be read in accordance with section 393A, and

“associated company” has the meaning given by section 449 of CTA 2010.

(5) This section is subject to section 411 (ineligibility of interest where business is occupation of commercial woodlands).

Eligibility requirements for interest on loans within section 392

393

(1) Interest on a loan within section 392(1) to an individual is eligible for relief only if—

(a) when the interest is paid the company is not a close investment-holding company, and

(b) the capital recovery condition and either the full-time working conditions or the material interest conditions are met.

(2) The capital recovery condition is that in the period from the use of the loan to the payment of the interest the individual has not recovered any capital from the company, apart from any amount taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).

(3) The full-time working conditions are that—

(a) when the interest is paid the individual holds part of the ordinary share capital of the company, and

(b) in the period from the use of the loan to the payment of the interest the greater part of the individual's time has been spent in the actual management or conduct of the company or of an associated company of the company.

(4) The material interest conditions are that—

(a) when the interest is paid the individual has a material interest in the company (see section 394), and

(b) if the company exists wholly or mainly for the purpose of holding investments or other property, either—

(i) the condition in subsection (3)(b) is met, or

(ii) no property held by the company is used as a residence by the individual.

Meaning of “material interest” in section 393

394

(1) For the purposes of section 393(4)(a) an individual has a material interest in a company if a relevant person meets condition A or B.

(2) In this section “relevant person” means—

(a) the individual, either alone or with one or more associates (see section 395), or

(b) any associate of the individual with or without such other associates.

(3) Condition A is that the relevant person is the beneficial owner of, or able directly or indirectly to control, more than 5% of the ordinary share capital of the company.

(4) Condition B is that the relevant person possesses, or is entitled to acquire, such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.

(5) In this section—

“control” is to be read in accordance with sections 450 and 451 of CTA 2010, and

“participator” has the meaning given by section 454 of CTA 2010.

Meaning of “associate” in section 394

395

(1) For the purposes of determining under section 394 whether an individual has a material interest in a company, in that section “associate”, in relation to that individual and company, means—

(a) a relative or partner of the individual,

(b) the trustees of a settlement in relation to which—

(i) the individual is a settlor, or

(ii) a relative of the individual (living or dead) is or was a settlor,

(c) if the individual is interested in any shares or obligations of the company which are subject to a trust, the trustees of the settlement, and

(d) if the individual is interested in any shares or obligations of the company which are part of the estate of a deceased person, the personal representatives.

(2) But, despite subsection (1)(c), the trustees of an employee benefit trust are not regarded for the purposes of section 394 as the associates of an individual merely because the individual has an interest in shares or obligations of the company as a beneficiary of the trust, unless subsection (3) applies.

(3) This subsection applies if at any time after 26 July 1989 the individual, alone or with associates, or an associate of the individual, alone or with other such associates—

(a) has been the beneficial owner of more than 5% of the ordinary share capital of the company, or

(b) has been able directly or indirectly to control more than 5% of that share capital.

(4) In subsection (3) “associate” has the meaning given by section 549(4) of ITEPA 2003.

(5) Sections 552 to 554 of ITEPA 2003 (attribution of interests in company) apply for the purposes of subsection (3) in relation to the individual as they apply for the purposes of the provisions listed in section 549(2) of that Act in relation to an employee.

(6) In this section—

“control” is to be read in accordance with sections 450 and 451 of CTA 2010,

“employee benefit trust” has the meaning given by section 550 of ITEPA 2003 except that the reference in section 550(3) of that Act to 13 March 1989 is to be read as a reference to 26 July 1989, and

“relative” means spouse or civil partner, ancestor or lineal descendant or brother or sister.

Loans for interests in employee-controlled companies

Loan to buy interest in employee-controlled company

396

(1) This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2) The ways are—

(a) acquiring part of the ordinary share capital of a company that first becomes an employee-controlled company—

(i) after the date of acquisition, or

(ii) not earlier than 12 months before that date, and

(b) repaying another loan to which this section applies.

(3) For the purposes of this section and section 397, a company is employee-controlled at any time when—

(a) more than 50% of the issued ordinary share capital of the company is owned beneficially by persons who are full-time employees of the company, and

(b) more than 50% of the voting power in the company is so owned.

(4) If an individual owns beneficially more than 10% of the issued ordinary share capital of, or voting power in, a company, for the purposes of subsection (3) the excess is treated as being owned by an individual who is not a full-time employee of the company.

(5) In this section and section 397 “full-time employee”, in relation to a company, means an individual the greater part of whose time is spent working as an employee or director of the company or of a 51% subsidiary of the company.

(6) This section is subject to section 411 (ineligibility of interest where business is occupation of commercial woodlands).

Eligibility requirements for interest on loans within section 396

397

(1) Interest on a loan within section 396 to an individual is eligible for relief only if conditions A to D are met.

(2) Condition A is that the company is, throughout the period beginning with the date on which the shares are acquired and ending with the date on which the interest is paid (“the payment date”)—

(a) an unquoted company that is resident in the United Kingdom or an EEA state and is not resident outside the European Economic Area, and

(b) a trading company or the holding company of a trading group.

(3) Condition B is that during the tax year in which the interest is paid the company either—

(a) first becomes an employee-controlled company, or

(b) is such a company throughout a period of at least 9 months.

(4) Condition C is that—

(a) the individual is a full-time employee of the company throughout the period beginning with the date on which the loan is used (“the use date”) and ending with the payment date, or

(b) the individual ceased to be such an employee not more than 12 months before the payment date and was such an employee throughout the period beginning with the use date and ending with the date the individual ceased to be such an employee.

(5) Condition D is that in the period from the use of the loan to the payment of the interest the individual has not recovered any capital from the company, apart from any amount taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).

(6) In this section—

“holding company” means a company whose business (ignoring any trade carried on by it) consists wholly or mainly of the holding of shares or securities of one or more companies which are its 75% subsidiaries,

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades,

“trading group” means a group the business of whose members taken together consists wholly or mainly of the carrying on of a trade or trades (taking a group to consist of a company with one or more 75% subsidiaries and those subsidiaries), and

“unquoted company” means a company none of whose shares is included in the official UK list.

Loans for investing in partnerships

Loan to invest in partnership

398

(1) This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2) The ways are—

(a) purchasing a share in a partnership,

(b) contributing money to a partnership, by way of capital or premium, that is used wholly for the purposes of the trade or profession carried on by the partnership,

(d) repaying another loan to which this section applies.

(3) This section is subject to section 411 (ineligibility of interest where business is occupation of commercial woodlands).

Eligibility requirements for interest on loans within section 398

399

(1) Interest on a loan within section 398 to an individual is eligible for relief only if conditions A and B are met.

(2) Condition A is that throughout the period from the use of the loan until the interest is paid the individual has been a member of the partnership otherwise than—

(a) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907 (c. 24), or

(b) as a member of an investment LLP.

(3) Condition B is that in that period the individual has not recovered any capital from the partnership, apart from any amount taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).

(4) If section 400 (film partnerships) applies in a tax year, only 40% of the interest that would otherwise be eligible for relief for that year is eligible.

(5) For the purposes of subsection (2) an individual who is not a member of a partnership is treated as such a member if—

(a) the partnership carries on a profession,

(b) the individual is employed by the partnership in a senior capacity, and

(i) to act independently in dealing with clients of the partnership, and

(ii) to act generally in such a way as to be indistinguishable from the partners in relations with those clients.

(6) For the purposes of subsection (2) “investment LLP” means a limited liability partnership—

(a) whose business consists wholly or mainly of the making of investments, and

(b) the principal part of whose income is derived from investments,

and whether a limited liability partnership is an investment LLP is determined for each period of account of the partnership.

Film partnerships

400

(1) This section applies in a tax year if—

(a) the partnership (“the film partnership”) carries on a trade,

(b) the profits or losses of the trade are calculated in accordance with Chapter 9 of Part 2 of ITTOIA 2005 (films etc),

(d) the individual to whom the loan is made (“A”) is or has been a member of the investment partnership, and

(e) at any time in the year the proportion of the profits of the investment partnership to which A is entitled is less than the proportion of that partnership's capital contributed by A at that time.

(2) For the purposes of subsection (1)(c), a loan is secured on an asset or activity of a partnership if there is an arrangement—

(a) under which such an asset may be used or relied upon wholly or partly to guarantee repayment of any part of the loan, or

(b) because of which any part of the loan is expected to be repaid directly or indirectly out of assets held by or income accruing to the partnership.

(3) In subsection (1)(e)—

“profits” excludes any amount that would not be taken into account as, or for the purposes of calculating, income for income tax purposes, and

“partnership's capital” means—anything that is, or in accordance with generally accepted accounting practice would be, accounted for as partners' capital or partners' equity, andamounts lent to the partnership by partners or persons connected with partners.

(4) So far as the investment partnership's capital includes at any time any of the following amounts, they are treated as amounts contributed by A—

(a) any amount A paid to acquire any interest in the partnership, so far as A retains the interest at that time,

(b) any amount made available by A directly or indirectly to another person, so far as that person retains any interest in the partnership at that time,

(d) any amount A made available directly or indirectly to another person, so far as any amount that person lent to the partnership has not been repaid at that time, and

(e) an amount made available in any other way prescribed by regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(5) Regulations under subsection (4)(e)—

(a) may make provision having retrospective effect,

(b) may make provision generally or only in relation to specified cases or circumstances,

(d) may make transitional, consequential or incidental provision, and

(e) may be made only if a draft of them has been laid before and approved by a resolution of the House of Commons.

(6) In this section a reference to A includes a reference to a person connected with A.

(7) Section 993 (meaning of “connected” persons) applies for the purposes of this section with the omission of subsections (3) to (7).

Loans for investing in co-operatives

Loan to invest in co-operative

401

(1) This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2) The ways are—

(a) acquiring shares in a body which is a co-operative,

(b) lending money to any such body which is used wholly and exclusively for the purposes of the business of that body or of a subsidiary of that body, and

(3) In this Chapter—

“co-operative” means a common ownership enterprise or a co-operative enterprise as defined in section 2 of the Industrial Common Ownership Act 1976 (c. 78), and

“subsidiary”, in relation to a co-operative, has the same meaning as for the purposes of section 2 of that Act.

Eligibility requirements for interest on loans within section 401

402

(1) Interest on a loan within section 401 to an individual is eligible for relief only if conditions A to C are met.

(2) Condition A is that when the interest is paid the body continues to be a co-operative.

(3) Condition B is that in the period from the use of the loan to the payment of the interest the greater part of the individual's time has been spent working as an employee of the body or of a subsidiary of the body.

(4) Condition C is that in that period the individual has not recovered any capital from the body, apart from any taken into account under section 406(2) (recovered capital that is treated as a repayment of the loan).

Loans for paying inheritance tax

Loan to pay inheritance tax

403

(1) This section applies to a loan to the personal representatives of a deceased person if the loan is used—

(a) in paying inheritance tax that meets the condition specified in subsection (2), or

(b) in repaying another loan to which this section applies.

(2) The condition is that the personal representatives are obliged to pay the tax under section 226(2) of IHTA 1984 (obligation of personal representatives to pay tax on delivery of their account).

(3) A written statement appearing to be from an officer of Revenue and Customs is sufficient evidence—

(a) of the amount of inheritance tax that meets the condition specified in subsection (2), and

(b) of any statements relevant to its calculation.

(4) In this section references to inheritance tax include interest payable on that tax.

Eligibility requirements for interest on loans within section 403

404

Interest on a loan within section 403(1) is eligible for relief only so far as it is paid in respect of a period ending within 12 months from the making of the loan used as mentioned in section 403(1)(a).

Carry back and forward of relief for interest on loans within section 403

405

(1) This section applies if relief for any interest on a loan within section 403(1) that is eligible for relief cannot be given for the tax year in which the interest is paid because there is not enough income in that year.

(2) The person paying the interest is entitled to relief for that interest—

(a) for the preceding tax year, or

(b) if there is not enough income in that year, for the tax year preceding it,

and so on.

(3) If relief cannot be given under subsection (2), it may instead be given—

(a) for the tax year following that in which the interest is paid, or

(b) if there is not enough income in that year, for the tax year following it,

and so on.

General and supplementary

Effect of recovery of capital in the case of some loans

406

(1) This section applies if the individual to whom a loan is made to which section 392, 396, 398 or 401 applies recovers any amount of capital from the company, partnership or co-operative concerned at any time after the loan is used.

(2) The individual is treated for the purposes of this Chapter as having repaid that amount out of the loan at that time, whether or not such a repayment occurred.

(3) Accordingly, only part of the interest that, apart from any such repayment, would be payable on the loan for any period after that time and eligible for relief is so eligible.

(4) That part is so much of that interest as is attributable to the amount of the loan after the repayment.

(5) In the case of a loan to which section 386 applies (loans partly meeting requirements), subsection (3) applies instead of section 386(3) (under which repayments are apportioned between the qualifying and non-qualifying parts of such loans).

(6) The cases in which an individual is treated as having recovered an amount of capital for the purposes of this section are set out in section 407(1) to (3).

Events counting as recovery of capital for section 406

407

(1) An individual is treated as having recovered an amount of capital from a company for the purposes of section 406 if—

(a) the individual receives consideration of that amount or value—

(i) for the sale, exchange or assignment of part of the ordinary share capital of the company,

(ii) by way of repayment of part of that ordinary share capital, or

(iii) for assigning a debt due to the individual from the company, or

(b) the company repays that amount of a loan or advance from the individual.

(2) An individual is treated as having recovered an amount of capital from a partnership for those purposes if—

(a) the individual receives consideration of that amount or value—

(i) for the sale, exchange or assignment of part of the individual's interest in the partnership, or

(ii) for assigning a debt due to the individual from the partnership, or

(b) the partnership repays that amount of a loan or advance from the individual, or

(3) An individual is treated as having recovered an amount of capital from a co-operative for those purposes if—

(a) the individual receives consideration of that amount or value—

(i) for the sale, exchange or assignment of part of the individual's shares in the co-operative,

(ii) by way of repayment of part of the individual's shares in the co-operative, or

(iii) for assigning a debt due to the individual from the co-operative, or

(b) the co-operative repays that amount of a loan or advance from the individual.

(4) A sale or assignment that is not a bargain made at arm's length is treated for the purposes of this section as being made for a consideration of an amount equal to the market value of what is disposed of.

Replacement loans

408

(1) This section applies to a replacement loan.

(2) In subsection (1) “replacement loan” means a loan to which section 392, 396, 398 or 401 applies because the loan is used in repaying another loan (“the replaced loan”) to which that section applies.

(3) This Chapter, except for sections 385 and 386, applies to the replacement loan as if that loan and the replaced loan were a single loan (subject to subsection (5)).

(4) Accordingly, any restriction under section 406 (effect of recovery of capital in the case of some loans) which applies to the replaced loan applies to the replacement loan.

(5) But this Chapter, except for sections 385 and 386, applies as if references to the use of the loan were references to the use of the original loan.

Business successions between partnerships

409

(1) This section applies if—

(a) a loan to which section 398 applies is made to an individual,

(b) the partnership in question (“the old partnership”) is dissolved,

(c) on its dissolution another partnership of which the individual is a member (“the new partnership”) is formed to carry on the whole or part of the undertaking carried on by the old partnership, and

(d) interest payable on the loan for the period ending with the dissolution of the old partnership was eligible for relief (or would have been had any been payable).

(2) This Chapter applies as if the old partnership and the new partnership were the same partnership.

(3) Section 399(5) (salaried partners etc treated as partners) applies for the purposes of subsection (1)(c) as it applies for the purposes of section 399(2).

Other business successions and reorganisations

410

(1) This subsection applies if—

(a) a loan to which one of the business loan provisions or section 398 (loan to invest in partnership) applies is made to an individual (“the original loan”),

(b) the company, partnership or co-operative in question is involved in a transaction as a result of which the individual acquires shares in or makes a loan to another company or a body that is a co-operative,

(c) interest payable on the original loan for the period ending with the time of the transaction was eligible for relief (or would have been had any been payable), and

(d) had the original loan been made at the time of the transaction and applied in acquiring the shares in or making the loan to the other company or the co-operative, the original loan would have fallen within one of the business loan provisions.

(2) If subsection (1) applies, from the time of the transaction referred to in subsection (1)(b) the original loan is treated as if it had been made and applied as mentioned in subsection (1)(d).

(3) In this section “the business loan provisions” means—

(a) section 392 (loan to buy interest in close company),

(b) section 396 (loan to buy interest in employee-controlled company), and

Ineligibility of interest where business is occupation of commercial woodlands

411

(1) Interest that would be eligible for relief under this Chapter apart from this section is not eligible if—

(a) the interest is on a loan to which section 392, 396 or 398 applies, and

(b) the business carried on by the close company, employee-controlled company or partnership concerned consists of the occupation of commercial woodlands.

(2) If only part of the business consists in such occupation, only part of the interest is ineligible for the relief.

(3) That part is such part of the interest as it is just and reasonable to attribute to that part of the business having regard to all the relevant circumstances and, in particular, to the extent of the other part of the business.

(4) For the purposes of this section two or more businesses carried on by a company or partnership are to be regarded as a single business.

(5) In this section “commercial woodlands” means woodlands in the United Kingdom which are managed on a commercial basis and with a view to the realisation of profits.

Information

412

(1) A person (“the payer”) who claims relief under this Chapter for a payment of interest made in a tax year is entitled to request the person to whom the interest is paid to give the payer a statement in writing about that interest containing the information specified in subsection (3).

(2) That request must be in writing.

(3) The information is—

(a) the date when the debt was incurred,

(b) the amount of the debt when incurred,

(d) the name and address of the debtor.

(4) The person to whom the interest is paid has a duty to comply with a request under subsection (1) and that duty is enforceable by the payer.

(5) This section does not apply if the interest is paid to a building society or to a local authority.

Chapter 2 — Gift aid

The relief

Overview of Chapter

413

(1) This Chapter gives relief for some gifts of money to charities by individuals.

(2) The relief is set out in section 414.

(3) The Chapter contains provisions under which, in some circumstances—

(a) the individual's entitlement to some other reliefs may be restricted (see section 423), and

(b) the individual may be charged to income tax (see section 424).

(4) See section 430 for bodies that are treated as charities for the purposes of this Chapter.

(4A) This Chapter is subject to section 809ZM (removal of income tax relief in respect of tainted charity donations etc).

(5) For related reliefs for charities see Part 10 of this Act and Part 11 of CTA 2010.

(6) For related reliefs for community amateur sports clubs see Chapter 9 of Part 13 of CTA 2010.

Relief for gifts to charity

414

(1) An individual who makes a gift to a charity which is a qualifying donation is entitled to the relief set out in subsection (2).

(2) The Income Tax Acts have effect in their application to the individual for the tax year in which the gift is made as if—

(a) the gift had been made after deduction of income tax at the basic rate, and

(b) the basic rate limit and the higher rate limit (see section 10) and additionally, in the case of a Scottish taxpayer, the upper limit for the Scottish basic rate and the limits for any Scottish rates above the Scottish basic rate, were increased by an amount equal to the grossed up amount of the gift.

(3) See subsection (7) of section 535 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief) for provision about how relief under this Chapter is to be ignored for the purpose of calculating relief under that section.

Meaning of “grossed up amount”

415

In this Chapter references to the grossed up amount of a gift are to the amount of the gift grossed up by reference to the basic rate for the tax year in which the gift is made ... .

Meaning of “qualifying donation”

416

(1) A gift made to a charity by an individual is a qualifying donation for the purposes of this Chapter if—

(a) conditions A to F are met, and

(b) the individual, or an intermediary representing the individual, gives the charity, or an intermediary representing the charity, a gift aid declaration relating to the gift (see section 428).

(1A) For the purpose of subsection (1)(b) an intermediary is—

(a) a person authorised by the individual to give a gift aid declaration on behalf of that individual to the charity,

(b) a person authorised by a charity to receive a gift aid declaration on behalf of that charity, or

(2) Condition A is that the gift takes the form of a payment of a sum of money.

(3) Condition B is that the payment is not subject to any condition as to repayment.

(4) Condition C is that the payment is not a sum falling within section 713(3) of ITEPA 2003 (payroll deduction scheme).

(5) Condition D is that the payment is not deductible in calculating the individual's income from any source.

(6) Condition E is that the payment is not conditional on, associated with or part of an arrangement involving, the acquisition of property by the charity from the individual or a person connected with the individual.

An acquisition by way of gift is ignored for the purposes of this condition.

(6A) Condition EA is that the payment is not by way of, and does not amount in substance to, waiver by the individual of entitlement to sums (whether of principal or return) due to the individual from the charity in respect of an amount—

(a) advanced to the charity, and

(b) in respect of which a person, whether or not the individual, has obtained relief under Part 5B (relief for social investments).

(7) Condition F is that—

(a) there are no benefits associated with the gift, or

(b) there are benefits associated with the gift but the restrictions on those benefits are not breached.

See sections 417 to 421 for provision about benefits associated with gifts.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “benefits associated with a gift”

417

A benefit is associated with a gift for the purposes of this Chapter if it is received by the individual who makes the gift, or a person connected with the individual, in consequence of making the gift.

Restrictions on associated benefits

418

(1) For the purposes of section 416(7), the restrictions on benefits associated with a gift are breached if condition A or B is met.

(2) Condition A is that the total value of the benefits associated with the gift exceeds the variable limit, which is—

(a) in a case where the amount of the gift is £100 or less, 25% of that amount, and

(b) in a case where the amount of the gift exceeds £100, the sum of £25 and 5% of the amount of the excess.

(3) Condition B is that the sum of—

(a) the total value of the benefits associated with the gift, and

(b) the total value of the benefits (if any) associated with each relevant prior gift,

is more than £2,500.

(4) “Relevant prior gift” means a gift—

(a) which has already been made by the individual to the charity in the tax year, and

(b) which is a qualifying donation.

(5) This section needs to be read with sections 419 to 421.

Gifts and benefits linked to periods of less than 12 months

419

(1) This section modifies the application of section 418(2) in relation to a gift if condition A, B, C or D is met.

(2) Condition A is that a benefit associated with the gift relates to a period of less than 12 months.

(3) Condition B is that a benefit associated with the gift consists of a right to receive benefits at intervals over a period of less than 12 months.

(4) Condition C is that a benefit associated with the gift is one of a series of benefits which are—

(a) received at intervals, and

(b) associated with a series of gifts made at intervals of less than 12 months.

(5) Condition D is that—

(a) a benefit associated with the gift is not one of a series of benefits received at intervals, and

(b) the gift is one of a series of gifts made at intervals of less than 12 months.

(6) If condition A, B or C is met, then for the purposes of section 418(2)—

(a) the value of the benefit is taken to be the annual equivalent of its actual value, and

(b) the amount of the gift is taken to be the annual equivalent of its actual amount.

(7) If condition D is met, the amount of the gift is taken for the purposes of section 418(2) to be the annual equivalent of its actual amount.

(8) The annual equivalent of the value of a benefit, or of the amount of a gift, is calculated as follows.

Step 1

Multiply the value or amount by 365.

Step 2

If condition A or B is met in relation to the benefit (and neither condition C nor condition D is met in relation to it), divide the result by the number of days in the period of less than 12 months referred to in subsection (2) or (as the case may be) subsection (3).

If condition C or D is met in relation to the benefit, divide the result by the average number of days in the intervals of less than 12 months referred to in subsection (4)(b) or (as the case may be) subsection (5)(b).

Admission rights

Disregard of certain admission rights

420

(1) A benefit associated with a gift is ignored for the purposes of this Chapter if the benefit consists of a relevant right of admission.

(2) “Right of admission” means a right which—

(a) benefits the individual who makes the gift or that individual and one or more members of that individual's family (whether or not the right must be exercised by all of them at the same time),

(b) authorises admission to premises or property to which the public are admitted on payment of an admission fee, and

(c) authorises admission to those premises or that property without payment of the admission fee or on payment of a reduced fee.

(3) A right of admission is a relevant right of admission if—

(a) conditions A and B are met in relation to it, and

(b) either condition C or condition D is met in relation to it.

(4) Condition A is that the opportunity to make a gift and to receive the right of admission in consequence is available to the public.

(5) Condition B is that the right of admission is a right granted by the charity for the purpose of viewing property preserved, maintained, kept or created by a charity for its charitable purposes.

(6) The property mentioned in subsection (5) includes, in particular—

(a) buildings,

(b) grounds or other land,

(d) animals,

(e) works of art (but not performances),

(f) artefacts, and

(g) property of a scientific nature.

(7) Condition C is that the right of admission applies, during a period of at least 12 months, at all times at which the public can obtain admission.

(8) Condition D is that—

(a) a member of the public could purchase the same right of admission, and

(b) the amount of the gift is greater by at least 10% than the amount the member of the public would have to pay.

(9) This section needs to be read with section 421.

Admission rights: supplementary

421

(1) This section applies for the purposes of section 420.

(2) Condition C is to be treated as met even if the right does not apply on days which are specified by the charity as event days, provided no more than 5 days are so specified in relation to the applicable period.

(3) The applicable period is—

(a) the period during which the right applies, in the case of a right which applies for a period of 12 months, or

(b) each calendar year during all or part of which the right applies, in the case of a right which applies for a period of more than 12 months.

(4) An “event day” is a day on which an event is to take place on the premises to which the right relates.

(5) In condition D the “same right of admission” means a right relating to the same property, classes of persons and periods of time as the right received in consequence of the gift.

Disqualified overseas gifts

422

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Measures to ensure donor's liability not less than tax treated as deducted

Restriction of certain reliefs

423

(1) This section applies if—

(a) an individual makes one or more gifts to charities in a tax year which are qualifying donations, and

(b) amount A is greater than amount B.

(2) In this section—

“amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and

“amount B” means the total amount of income tax and capital gains tax to which the individual is charged for the tax year (before applying this section).

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425.

(4) The individual's entitlement to the reliefs mentioned in subsection (5) is extinguished, so far as is necessary to ensure that the total amount of income tax and capital gains tax to which the individual is charged for the tax year (after applying this section)—

(a) is equal to amount A, or

(b) if that is not possible, falls short of amount A by as little as possible.

(5) The reliefs are—

(a) an allowance under Chapter 2 of Part 3 of this Act ... (personal allowance and blind person's allowance),

(b) a tax reduction under Chapter 3 of Part 3 of this Act ... (tax reductions for married couples and civil partners), and

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charge to tax

424

(1) Income tax is charged under this section if—

(a) an individual makes one or more gifts to charity in a tax year which are qualifying donations, and

(b) amount A is greater than amount C.

(2) In this section—

“amount A” means the total amount of the tax treated as deducted from the gifts under section 414, and

“amount C” means the sum of—the amount of income tax to which the individual is charged for the tax year, andthe amount of capital gains tax to which the individual would be chargeable for the tax year if the following were ignored—(i) any relief under sections 2 and 6 of TIOPA 2010 (ii) any relief under section 18(1)(b) and (2) of TIOPA 2010 (relief for foreign tax where no double taxation arrangements).

(3) For the purposes of this section, the total amount of income tax to which the individual is charged for the tax year is the amount calculated in accordance with section 425, after taking into account any restriction of relief under section 423.

(4) The amount of the tax charged under this section is equal to the difference between amount A and amount C.

(5) Tax charged under this section is charged for the tax year in which the gift or gifts are made.

(6) The person liable for any tax charged under this section is the individual.

Total amount of income tax to which individual charged for a tax year

425

(1) For the purposes of sections 423 and 424, the total amount of income tax to which an individual is charged for a tax year is the amount calculated as follows.

(2) Calculate the individual's liability to income tax for the tax year in accordance with section 23, as modified by subsection (3).

(3) In applying section 23—

(a) at Step 6, ignore any tax reductions to which the individual is entitled for the tax year under a provision listed in subsection (4), and

(b) ignore Step 7.

(4) The tax reductions to be ignored are tax reductions under—

(a) section 453 (qualifying maintenance payments),

(b) sections 2 and 6 of TIOPA 2010 (double taxation arrangements: relief by agreement), or

(5) From the amount calculated in accordance with subsections (2) to (4) deduct—

(a) any tax treated as having been paid under—

(i) section 399(2) ... of ITTOIA 2005 (distributions from UK resident companies etc on which there is no tax credit),

(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iv) section 530(1) of that Act (gains from contracts for life insurance), or

(v) section 685A(3) of that Act (settlor-interested settlements), ... and

(b) any tax treated as deducted from estate income under section 656(3) or 657(4) of ITTOIA 2005, so far as that income is treated under section 679 of that Act as paid from sums within section 680(4) of that Act ...

(6) For the purposes of this section a person is treated as being entitled to a tax reduction under sections 2 and 6 of TIOPA 2010 if the person is entitled to credit against income tax under double taxation arrangements.

Election to carry back relief

Election by donor: gift treated as made in previous tax year

426

(1) If—

(a) an individual makes a gift to a charity that is a qualifying donation, and

(b) the condition in subsection (2) is met,

the individual may elect to be treated as if the gift had been made in the previous tax year (“year P”).

(2) The condition is that the individual's charged amount for year P (see section 427) is at least equal to the increased total of gifts.

(3) If an election is made, sections 414 and 423 to 425 have effect in relation to the individual as if the gift were a qualifying donation made by the individual in year P.

(4) The increased total of gifts is the sum of—

(a) the grossed up amount of the gift, and of any gifts that are the subject of the same election or an election made at the same time,

(b) the sum of the grossed up amounts of any gifts to charities made by the individual in year P which—

(i) are qualifying donations, and

(ii) are not themselves treated as made in the tax year before year P because of an election under this section, and

(c) the sum of the grossed up amounts of any gifts which, as a result of an earlier election under this section, are treated as made in year P.

(5) The grossed up amount of the gifts mentioned in paragraphs (a) and (c) of subsection (4) is to be determined as if the gifts were made in year P.

(6) An election must be made—

(a) on or before the date on which the individual delivers a return for year P under section 8 of TMA 1970 (personal return), and

(b) not later than the normal self-assessment filing date for year P.

(7) An election does not affect the position of the recipient of the gift (see section 520 (gifts to charitable trusts: income tax treated as paid) and and sections 471 and 475 of CTA 2010 (charitable companies and eligible bodies: income tax treated as paid etc)).

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary

Meaning of “charged amount”

427

(1) For the purposes of this Chapter, an individual's charged amount is the amount calculated as follows.

(2) Calculate the amount of the individual's modified net income for year X (see section 1025).

(3) Calculate the amount on which the individual is chargeable to capital gains tax for year X.

(4) Add together the amounts calculated under subsections (2) and (3).

The result is the individual's charged amount for year X.

Meaning of “gift aid declaration”

428

(1) In this Chapter “gift aid declaration” means a declaration which—

(a) is given in the manner specified by regulations made by the Commissioners for Her Majesty's Revenue and Customs, and

(b) contains any information and any statements required by the regulations.

(2) The regulations may provide for declarations—

(a) to have effect,

(b) to cease to have effect, or

in any circumstances and for any purposes specified by the regulations.

(3) The regulations may also require—

(a) charities, or intermediaries within the meaning of section 416(1A), to keep records with respect to declarations received from individuals or from those intermediaries,

(b) charities or intermediaries to produce, for inspection by an officer of Revenue and Customs, any records required to be kept by those charities or intermediaries by regulations made under paragraph (a), and

(c) intermediaries to provide statements of account, and other specified information relating to declarations made, in such form and at such times as may be specified, to individuals who have authorised those intermediaries to give those declarations to charities on their behalf.

(4) The regulations may also make different provision for different cases or circumstances, including—

(a) different provision for declarations made in a different manner or by different descriptions of persons, and

(b) different provision depending on whether or not an intermediary, within the meaning of section 416(1A), is involved in the giving or receiving of the declaration.

(5) The regulations may also make provision—

(a) for the imposition of a penalty of a specified amount (which must not exceed £3000) for a failure to comply with a specified requirement imposed by the regulations,

(b) for the assessment and recovery of the penalty (which may include provision about the reduction of the penalty in specified circumstances), and

Giving through self-assessment return

429

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“Charity” to include exempt bodies

430

(1) In this Chapter “charity” includes—

(a) the Trustees of the National Heritage Memorial Fund, and

(b) the Historic Buildings and Monuments Commission for England,

(d) a club that is registered as a community amateur sports club for the purposes of Chapter 9 of Part 13 of CTA 2010.

(2) For the purposes of the application of section 414(1) in relation to clubs that are charities as a result of subsection (1)(d) of this section, membership fees are not gifts.

Chapter 3 — Gifts of shares, securities and real property to charities etc

Entitlement to relief

Relief for gifts of shares, securities and real property to charities etc

431

(1) An individual who disposes of the whole of the beneficial interest in a qualifying investment (see section 432) to a charity is entitled to relief if—

(a) the disposal is otherwise than by way of a bargain made at arm's length, and

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