Part 3U.K.Personal reliefs

[F1CHAPTER 3AU.K.Transferable tax allowance for married couples and civil partners

IntroductionU.K.

55ATax reduction under ChapterU.K.

(1)This Chapter contains provisions about the entitlement of a spouse or civil partner to a tax reduction in a case where the other party to the marriage or civil partnership has elected for a reduced personal allowance.

(2)A tax reduction under this Chapter is given effect at Step 6 of the calculation in section 23.

(3)For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to tax reduction).

Tax reductionU.K.

55BTax reduction: entitlementU.K.

(1)An individual is entitled to a tax reduction for a tax year of the appropriate percentage of the transferable amount if the conditions in subsection (2) are met.

(2)The conditions are that—

[F2(a)the individual is the gaining party (see section 55C(1)(a)) in the case of an election under section 55C which is in force for the tax year,]

(b)the individual is not, for the tax year, liable to tax at a rate other than the basic rate, [F3 the default basic rate, the savings basic rate,] [F4the dividend nil rate,] [F5the Scottish basic rate,] [F6a Scottish rate below the Scottish basic rate, the Scottish intermediate rate,] [F7the Welsh basic rate,] the dividend ordinary rate [F8, the savings nil rate] or the starting rate for savings,

[F9(ba)if for the tax year the individual is liable to tax at the dividend nil rate, the individual would for that year neither be liable to tax at the dividend upper rate, nor be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted,]

(c)the individual meets the requirements of section 56 (residence) for the tax year, and

(d)neither the individual nor the [F10relinquishing] spouse or civil partner makes a claim for the tax year under section 45 (married couple's allowance: marriages before 5 December 2005) or section 46 (married couple's allowance: marriages and civil partnerships on or after 5 December 2005).

(3)“The appropriate percentage” is the basic rate [F11or default basic rate] [F12or, in the case of a Scottish taxpayer [F13or Welsh taxpayer], the Scottish basic rate] [F14or Welsh basic rate] at which the individual would be charged to income tax for the tax year to which the reduction relates.

(4)“The transferable amount”—

(a)for the tax year 2015-16, is [F15£1,060], and

(b)for the tax year 2016-17 and subsequent tax years, is 10% of the amount of personal allowance specified in section 35(1) for the tax year to which the reduction relates.

(5)If the transferable amount calculated in accordance with subsection (4)(b) would otherwise not be a multiple of £10, it is to be rounded up to the nearest amount which is a multiple of £10.

[F16(5A)In this section “the relinquishing spouse or civil partner”, in relation to an election under section 55C, means the individual mentioned in section 55C(1)(a) by whom, or by whose personal representatives, the election is made.]

(6)If an individual is entitled to a tax reduction under subsection (1) [F17by reference to an election under section 55C] , the personal allowance to which the [F18relinquishing] spouse or civil partner is entitled under section 35 F19... is reduced for the tax year by the transferable amount.

(7)If an individual who is entitled to a tax reduction for a tax year under subsection (1) dies during that tax year, subsection (6) is to be ignored (but this does not affect the individual's entitlement to the tax reduction).

Election to reduce personal allowanceU.K.

55CElection to reduce personal allowanceU.K.

(1)An individual may make an election for the purposes of section 55B if—

(a)the individual is married to, or in a civil partnership with, the same person [F20(“the gaining party”)] —

(i)for the whole or part of the tax year concerned, and

(ii)when the election is made [F21or, where the election is made after the death of one or each of them, when they were last both living],

(b)the individual is entitled to a personal allowance under section 35 F22... for that tax year,

(c)assuming the individual's personal allowance was reduced as set out in section 55B(6), the individual would not for that year be liable to tax at a rate other than the basic rate, [F23the default basic rate, the savings basic rate,] [F24the dividend nil rate,] [F25the Scottish basic rate,] [F26a Scottish rate below the Scottish basic rate, the Scottish intermediate rate,] [F27the Welsh basic rate,] the dividend ordinary rate [F28, the savings nil rate] or the starting rate for savings,

[F29(ca)where on that assumption the individual would for the tax year be liable to tax at the dividend nil rate, the individual on that assumption would for that year neither be liable to tax at the dividend upper rate, nor be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted,] and

(d)where the individual meets the requirements of section 56 (residence) for the tax year by reason of meeting the condition in subsection (3) of that section, the individual meets the condition in subsection (2) of this section.

(2)The condition is that the individual's hypothetical net income for the tax year concerned is less than the amount of the personal allowance to which the individual is entitled for that tax year under section 35 F30....

(3)For the purposes of subsection (2), an individual's “hypothetical net income” is the amount that would be that individual's net income calculated at Step 2 of section 23 if that individual's income tax liability were calculated on the basis that the individual—

(a)was UK resident for the tax year concerned (and the year was not a split year),

(b)was domiciled in the United Kingdom for that tax year,

(c)in that tax year, did not fall to be regarded as resident in a country outside the United Kingdom for the purposes of double taxation arrangements having effect at the time, and

(d)for that tax year, had made a claim for any available relief under section 6 of TIOPA 2010 (as required by subsection (6) of that section).

(4)An individual's hypothetical net income for a tax year is, to the extent that it is not sterling, to be calculated by reference to the average exchange rate for the year ending on 31 March in the tax year concerned.

[F31(5)The personal representatives of an individual may make any election for the purposes of section 55B that the individual (if living) might make in relation to—

(a)the tax year in which the individual dies, or

(b)an earlier tax year.]

55DProcedure for elections under section 55CU.K.

(1)An election under section 55C is to be made not more than 4 years after the end of the tax year to which it relates.

(2)If the conditions in paragraphs (a) to (d) of section 55C(1) continue to be met, an election continues in force in each subsequent tax year unless—

(a)subsection (3) applies,

(b)the election is withdrawn, or

(c)it ceases to have effect under subsection (5).

(3)Where an election is made after the end of the tax year to which it relates [F32or is made after the death of either of the spouses or civil partners], the election has effect for the tax year to which it relates only (and accordingly does not continue in force for subsequent tax years under subsection (2)).

(4)An election may be withdrawn only by a notice given by the individual by whom the election was made [F33; an election made by an individual's personal representatives may not be withdrawn].

(5)If an individual's spouse or civil partner does not obtain a tax reduction under section 55B in respect of a tax year in which an election is in force the election ceases to have effect for subsequent tax years; but this does not prevent an individual making a further election for the purposes of section 55B(2)(a) (whether or not in relation to the same marriage or civil partnership).

(6)The withdrawal of an election under subsection (4) does not, except in the cases dealt with by subsection (7), have effect until the tax year after the one in which the notice is given.

(7)The withdrawal of an election under subsection (4) has effect for the tax year in which the notice is given if—

(a)in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being married, the marriage has come to an end in that tax year, or

(b)in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being in a civil partnership, the civil partnership has come to an end in that tax year.

(8)For the purposes of subsection (7)(a), a marriage comes to an end if any of the following is made in respect of it—

[F34(a)in England and Wales, a divorce order which has been made final, a nullity of marriage order which has been made final, a judicial separation order or a corresponding decree,]

(b)in Scotland, a decree of divorce, a declarator of nullity or a decree of separation [F35or]

[F36(c)in Northern Ireland, a decree absolute of divorce, a decree of nullity of marriage or a decree of judicial separation.]

(9)For the purposes of subsection (7)(b), a civil partnership comes to an end if any of the following is made in respect of it—

(a)a dissolution order or nullity order, which has been made final,

(b)a separation order, or

(c)in Scotland, a decree of dissolution, a declarator of nullity or a decree of separation.

(10)A notice under subsection (4) must—

(a)be given to an officer of Revenue and Customs, and

(b)must be in the form specified by the Commissioners for Her Majesty's Revenue and Customs.

(11)Paragraph 3(1)(b) of Schedule 1A to TMA 1970 (amendment of claims and elections) does not apply to an election under section 55C.

[F37(12)In subsection (8) “corresponding decree” means any of the following—

• a decree absolute of divorce;

• a decree absolute of nullity of marriage;

• a decree of judicial separation.]

SupplementaryU.K.

55ELimitation on number of tax reductions and electionsU.K.

(1)An individual is not entitled to more than one tax reduction under section 55B for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).

(2)An individual is not entitled to have more than one election for the purposes of section 55B which operates for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).]