Finance Act 1994

77Rate of relief to married couples etc

(1)The provisions of section 256 of the Taxes Act 1988 (general provision as to personal reliefs) shall become subsection (1) of that section and after that subsection there shall be inserted the following subsections—

“(2)Where under any provision of this Chapter the relief to which a person is entitled for any year of assessment consists in an income tax reduction calculated by reference to a specified amount, the effect of that relief shall be that the amount of that person’s liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from that provision less whichever is the smaller of—

(a)the amount equal to 20 per cent. of the specified amount; and

(b)the amount which reduces his liability to nil.

(3)In determining for the purposes of subsection (2) above the amount of income tax to which a person would be liable apart from any provision providing for an income tax reduction, no account shall be taken—

(a)where that provision is section 259 or 261A, of any income tax reduction under any of the other provisions of this Chapter;

(b)where that provision is section 262(1), of any income tax reduction under any of the other provisions of this Chapter except section 259 or 261A; or

(c)whatever that provision—

(i)of any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(ii)of any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment;

but paragraph (a) above, so far as it relates to any income tax reduction under section 261A, is without prejudice to the provisions of subsection (2) of that section.”

(2)In section 257A of that Act (married couple’s allowance)—

(a)in subsection (1), for the words from “to a deduction” onwards there shall be substituted “for that year to an income tax reduction calculated by reference to £1,720”;

(b)in subsection (2), for the words from “to a deduction” to “the deduction” there shall be substituted “for that year to an income tax reduction calculated by reference to £2,665 (instead of to the reduction”; and

(c)in subsection (3), for the words from “to a deduction” to “the deduction” there shall be substituted “for that year to an income tax reduction calculated by reference to £2,705 (instead of to the reduction”.

(3)In section 259(2) of that Act (additional personal allowance), for “to a deduction from his total income of” there shall be substituted “for that year to an income tax reduction calculated by reference to”.

(4)In section 261A(1) of that Act (additional personal allowance for a year in which spouses separate), for “to a deduction from his total income of” there shall be substituted “for that year to an income tax reduction calculated by reference to”.

(5)In subsection (1) of section 262 of that Act (widow’s bereavement allowance)—

(a)in paragraph (a), for “to a deduction from her total income of” there shall be substituted “to an income tax reduction calculated by reference to”; and

(b)in paragraph (b), for “to a deduction of” there shall be substituted “to an income tax reduction calculated by reference to”.

(6)The Taxes Act 1988 and the [1970 c. 9.] Taxes Management Act 1970 shall have effect with the amendments specified in Schedule 8 to this Act (which supplements the provisions of this section).

(7)This section and Schedule 8 to this Act shall have effect for the year 1994-95 and, subject to the following provisions of this section, for subsequent years of assessment.

(8)For the year 1995-96 and subsequent years of assessment section 256(2)(a) of the Taxes Act 1988 shall have effect with the substitution of “15 per cent” for the words “20 per cent.”

(9)For the year 1995-96, section 257A of the Taxes Act 1988 shall have effect—

(a)as if the same amount (namely £1,720) were specified in subsection (1) as is specified in that subsection as it applies for the year 1994-95;

(b)as if the amount specified in subsection (2) were “£2,995”; and

(c)as if the amount specified in subsection (3) were “£3,035”.

(10)Section 257C(1) of the Taxes Act 1988 (indexation), so far as relating to section 257A (1) to (3) of that Act, shall not apply for the year 1994-95 or for the year 1995-96 but shall not be prevented by anything in this section from applying for the year 1996-97 or any subsequent year of assessment.