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Finance Bill
Schedule 35 — Gains on policies of life insurance, etc: rate of tax

    415

 

Part 4

Rollover of gain on maturity into new policy

Repeal of section 540(2) of the Taxes Act 1988

  14      (1)      Section 540(2) of the Taxes Act 1988 (maturity not a chargeable event if

option exercised to re-invest whole proceeds of maturing policy in new

5

policy) shall cease to have effect.

          (2)      This paragraph is subject to paragraph 15.

Saving for certain policies maturing on or after 9th April 2003

  15      (1)      The maturity of a policy of life insurance (“the old policy”) on or after 9th

April 2003 is not a chargeable event for the purposes of Chapter 2 of Part 13

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of the Taxes Act 1988 if—

              (a)             a new policy is issued in consequence of the exercise of an option

conferred by the old policy,

              (b)             all sums becoming payable under the old policy on or after 9th April

2003 are retained by the company with which the insurance was

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made and applied in the payment of one or more premiums under

the new policy, and

              (c)             sub-paragraph (2) applies.

          (2)      This sub-paragraph applies if—

              (a)             the option was exercised in writing on or before 8th April 2003, or

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              (b)             the old policy matures on or before 30th April 2003 and has not been

varied on or after 9th April 2003 so as to—

                    (i)                   change the date of maturity of the policy,

                    (ii)                  change any option conferred by the policy, or

                    (iii)                 confer any option.

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Schedule 35

Section 173

 

Gains on policies of life insurance, etc: rate of tax

Application of the lower rate

  1       (1)      Section 1A of the Taxes Act 1988 (application of lower rate to income from

savings and distributions) is amended as follows.

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          (2)      In subsection (2) (which specifies the income to which the lower rate applies)

omit the word “and” immediately preceding paragraph (c) and at the end of

that paragraph insert “; and

                    (d)                      any amount included in an individual’s total income by

virtue of section 547(1)(a) (chargeable event gains on life

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policies etc).”.

          (3)      In subsection (5) (ordering rule for highest part of income for the purposes

of the Income Tax Acts) after “the Income Tax Acts” insert “(other than

section 550)”.

 

 

Finance Bill
Schedule 36 — Foster carers
Part 1 — Introduction

    416

 

Method of charging gains from policies of life insurance etc to tax

  2       (1)      Section 547 of the Taxes Act 1988 is amended as follows.

          (2)      In subsection (5)(a) (individual to be treated as having paid income tax at the

basic rate on a sum included in his income by virtue of subsection (1)(a)) for

“the basic rate” substitute “the lower rate”.

5

          (3)      In subsection (9A)(a) (definition of “the appropriate rate” where charitable

trustees are liable to income tax on a gain by virtue of subsection (9)) for “the

basic rate for that year” substitute “the lower rate”.

Relief where gain charged at a higher rate

  3        In section 550(3) of the Taxes Act 1988 (rates of tax to be applied in

10

calculating tax which would be chargeable on gain if calculated by reference

to the appropriate fraction) for “the basic rate” substitute “the lower rate”.

Gains included in aggregate income of estate of deceased

  4        In section 699A(4)(b) of the Taxes Act 1988 (sums included in aggregate

income of estate of the deceased by virtue of section 547(1)(c) to be assumed

15

to bear tax at the basic rate) for “the basic rate” substitute “the lower rate”.

Income to be disregarded in determining highest part of person’s income

  5        In section 833(3)(b) of the Taxes Act 1988 (which provides that, where

income falls to be treated as the highest part of a person’s income, his income

shall be calculated without regard to any amount included in total income

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by virtue of section 547(1)(a)) after “section 547(1)(a)” add “which is a sum

in relation to which section 547(5) applies”.

Schedule 36

Section 176

 

Foster carers

Part 1

25

Introduction

Introductory

  1       (1)      This Schedule provides relief on income from the provision by an individual

of foster care (see paragraph 4).

          (2)      The form of relief available depends on whether his total foster care receipts

30

(see paragraph 5) exceed his limit (see paragraphs 6 to 9).

          (3)      If they do not, paragraph 10 provides for the income to be exempt from

income tax.

          (4)      If they do, the individual may elect for an alternative method of calculating

the income (see paragraphs 11 to 14).

35

 

 

Finance Bill
Schedule 36 — Foster carers
Part 1 — Introduction

    417

 

Individuals qualifying for relief

  2       (1)      An individual qualifies for relief under this Schedule for a year of

assessment for which the following conditions are met.

          (2)      The first condition is that the individual has foster care receipts (see

paragraph 3).

5

          (3)      The second condition is that the individual does not derive any taxable

income, other than foster care receipts, from any relevant trade, profession

or vocation, or from any relevant foster care arrangement.

          (4)      For the purposes of sub-paragraph (3)—

              (a)             “taxable income” means receipts or other income in respect of which

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the individual is chargeable to tax for the year of assessment;

              (b)             a relevant trade, profession or vocation, or a relevant foster care

arrangement, is one from which the individual derives any foster

care receipts for that year.

          (5)      In this Schedule, “foster care arrangement” means an arrangement by which

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an individual provides foster care otherwise than as part of a trade,

profession or vocation carried on by that individual.

Meaning of “foster care receipts”

  3       (1)      For the purposes of this Schedule, receipts are “foster care receipts” of an

individual for a year of assessment if—

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              (a)             they are receipts in respect of the provision of foster care,

              (b)             apart from this Schedule, they would be chargeable—

                    (i)                   under Case I or II of Schedule D as the profits of a trade,

profession or vocation, or

                    (ii)                  under Case VI of Schedule D as the profits of one or more

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foster care arrangements, and

              (c)             they accrue to the individual during the income period for those

receipts specified below.

          (2)      In the case of receipts which would, apart from this Schedule, be chargeable

under Case I or II of Schedule D as the profits of a trade, profession or

30

vocation, the income period for those receipts is the basis period of the trade,

profession or vocation for the year of assessment (see sections 60 to 63 of the

Taxes Act 1988).

          (3)      In the case of receipts which would, apart from this Schedule, be chargeable

under Case VI of Schedule D as the profits of one or more foster care

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arrangements, the income period for those receipts is the year of assessment.

Meaning of “provision of foster care”

  4       (1)      In this Schedule, the “provision of foster care” means the provision of

accommodation and maintenance for a child by an individual who—

              (a)             is a person falling within any of sub-paragraphs (2) to (4), and

40

              (b)             is not a person who is excluded by sub-paragraph (5).

          (2)      A person falls within this sub-paragraph if he is a person with whom the

child has been placed under—

 

 

Finance Bill
Schedule 36 — Foster carers
Part 1 — Introduction

    418

 

              (a)             section 23(2)(a) of the Children Act 1989 (c. 41) (provision of

accommodation and maintenance for children by local authorities),

or

              (b)             section 59(1)(a) of that Act (provision of accommodation for children

by voluntary organisations).

5

          (3)      A person falls within this sub-paragraph if—

              (a)             he is a person who is approved as a foster carer by a local authority

or a voluntary organisation in accordance with regulations under

section 5 of the Social Work (Scotland) Act 1968 (c. 49) (as at 9th April

2003, see regulation 7 of the Fostering of Children (Scotland)

10

Regulations 1996 (S.I. 1996/3263)) and is providing accommodation

for the child who is being “looked after” by a local authority within

the meaning of section 17(6) of the Children (Scotland) Act 1995

(c. 36), or

              (b)             he is a person with whom the child has been placed—

15

                    (i)                   under regulations under section 5 of the Social Work

(Scotland) Act 1968 (as at 9th April 2003, see regulations 14

and 16 of the Fostering of Children (Scotland) Regulations

1996), or

                    (ii)                  pursuant to a supervision requirement under section 70 of

20

the Children (Scotland) Act 1995 (c. 36).

          (4)      A person falls within this sub-paragraph if he is a person with whom the

child has been placed under—

              (a)             Article 27(2)(a) of the Children (Northern Ireland) Order 1995 (S.I.

1995/755 (N.I. 2)) (provision of accommodation and maintenance for

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children by authorities), or

              (b)             Article 75(1)(a) of that Order (provision of accommodation for

children by voluntary organisations).

          (5)      The persons who are excluded are—

              (a)             a parent of the child;

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              (b)             a person who is not a parent of the child but who has parental

responsibility, or (in Scotland) parental responsibilities, in relation to

the child;

              (c)             where the child is in care and there was a residence order in force

with respect to him immediately before the care order was made, a

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person in whose favour the residence order was made;

              (d)             in Scotland, where the child is in care and there was a residence order

or a contact order in force with respect to him immediately before he

was placed in care, a person in whose favour the residence order or

contact order was made.

40

Meaning of “total foster care receipts”

  5       (1)      For the purposes of this Schedule, an individual’s “total foster care receipts”

for a year of assessment or (as the case may be) a period of account are all of

the individual’s foster care receipts for that year or period.

          (2)      In calculating an individual’s total foster care receipts, no deduction is

45

allowed for any expenses or any other matter.

 

 

Finance Bill
Schedule 36 — Foster carers
Part 1 — Introduction

    419

 

The individual’s limit

  6        The individual’s limit for a year of assessment is the total of—

              (a)             the individual’s share of the fixed amount for that year (see

paragraph 7), and

              (b)             each amount per child for that individual for that year (see

5

paragraph 8).

The individual’s share of the fixed amount

  7       (1)      The fixed amount is £10,000.

          (2)      If, in a year of assessment, no adjustment falls to be made in the case of an

individual—

10

              (a)             under sub-paragraph (3), or

              (b)             under sub-paragraph (4),

                   the individual’s share of the fixed amount for that year is the fixed amount.

          (3)      If, in a year of assessment,—

              (a)             the residence used to provide the foster care from which an

15

individual’s foster care receipts for that year are derived is also used

by one or more other individuals for the provision of foster care, and

              (b)             that other individual, or those other individuals, also have foster care

receipts for that year,

                   each individual’s share of the fixed amount for that year is that amount

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divided by the total number of individuals who use the residence in that

year for the provision of foster care and have foster care receipts for that

year.

                   This sub-paragraph is subject to sub-paragraph (4).

          (4)      If, in a year of assessment, the individual’s income period for his foster care

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receipts is a period other than a year, the individual’s share of the fixed

amount for that year of assessment is found by multiplying the amount that

would be his share (apart from this sub-paragraph) by—equation: over[char[D],num[365.00000000,"365"]]

                   where D is the number of days in the individual’s income period.

          (5)      In this paragraph “residence” means—

30

              (a)             a building, or part of a building, which is occupied or intended to be

occupied as a separate residence, or

              (b)             a caravan or houseboat.

          (6)      If a building or part of a building is designed for permanent use as a single

residence, but is temporarily divided into two or more separate residences,

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it is still treated as a single residence.

The amount per child

  8       (1)      An individual’s amount per child for a year of assessment is found by

multiplying—

              (a)             the number of weeks during the income period for that year in which

40

the individual provides foster care for that child, by

 

 

Finance Bill
Schedule 36 — Foster carers
Part 2 — The exemption and the alternative methods of calculation

    420

 

              (b)             the weekly amount for that child.

          (2)      The weekly amount for a child is—

              (a)             £200 for a week throughout which the child is under 11 years old,

and

              (b)             £250 for a week—

5

                    (i)                   in which the child reaches the age of 11, or

                    (ii)                  throughout which the child is 11 years old or over.

          (3)      Where in the case of any week an individual provides foster care for a child

during an income period for part only of the week, that part of a week counts

as a whole week for the purposes of this paragraph.

10

          (4)      Where an income period begins or ends during a week, that week is to be

counted for the purposes of this paragraph as falling within the income

period which ends during the week (unless there is no such income period,

in which case it falls within the income period which begins during the

week).

15

          (5)      In this paragraph “week” means any period of seven days beginning with a

Monday.

Power to alter amounts

  9        The Treasury may by order amend the amounts for the time being specified

in paragraph 7(1) and 8(2).

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Part 2

The exemption and the alternative methods of calculation

The exemption

  10      (1)      This paragraph applies to an individual for a year of assessment for which—

              (a)             the individual qualifies for relief under this Schedule,

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              (b)             his total foster care receipts do not exceed his limit, and

              (c)             paragraph 15 (cases where accounting date for trade, profession or

vocation is other than 5th April) does not apply.

          (2)      If the individual’s foster care receipts for the year of assessment are the

receipts of a trade, profession or vocation, the profits or losses from that

30

trade, profession or vocation for the year are to be treated as nil.

          (3)      If, in a case falling within sub-paragraph (2), the individual would, apart

from that sub-paragraph, be entitled to a deduction for the year under

section 63A(1) or (3) of the Taxes Act 1988 (overlap profits and overlap

losses), the individual is entitled to that deduction notwithstanding that sub-

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paragraph.

          (4)      Sub-paragraph (5) applies if the individual’s foster care receipts for the year

of assessment are receipts from one or more foster care arrangements.

          (5)      For each foster care arrangement from which those receipts arise, the

amount of—

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              (a)             the receipts arising in the year of assessment from the arrangement,

less

              (b)             any expenses associated with those receipts,

 

 

Finance Bill
Schedule 36 — Foster carers
Part 2 — The exemption and the alternative methods of calculation

    421

 

           is to be treated as nil.

Alternative calculation of profits where amount is above the limit

  11       The alternative method of calculating profits given in paragraphs 12 and 13

applies to an individual for a year of assessment for which—

              (a)             the individual qualifies for relief under this Schedule,

5

              (b)             his total foster care receipts exceed his limit,

              (c)             paragraph 15 (cases where accounting date for trade, profession or

vocation is other than 5th April) does not apply, and

              (d)             an election by him under paragraph 14 has effect.

Alternative calculation of profits: income from trade, etc

10

  12      (1)      This paragraph applies if—

              (a)             the alternative method of calculating profits applies to an individual

for a year of assessment, and

              (b)             his foster care receipts for the year are the receipts of a trade,

profession or vocation.

15

          (2)      The profits of the year of assessment of the trade, profession or vocation

from which the individual’s foster care receipts arise are—

              (a)             the amount of the foster care receipts for the year arising from the

trade, profession or vocation, less

              (b)             the individual’s limit for the year.

20

Alternative calculation of profits: income charged under Case VI of Schedule D

  13      (1)      This paragraph applies if—

              (a)             the alternative method of calculating profits applies to an individual

for a year of assessment, and

              (b)             his foster care receipts for the year are receipts from one or more

25

foster care arrangements.

          (2)      The amount of the profits of the year of assessment from all of the foster care

arrangements from which the individual’s foster care receipts arise is—

              (a)             the sum of the foster care receipts for the year from each foster care

arrangement from which those receipts arise, less

30

              (b)             the individual’s limit for the year.

Election for alternative method

  14      (1)      An individual may elect—

              (a)             for the alternative method of calculating profits given in paragraph

12 or 13 to apply if the conditions specified in paragraph 11(a), (b)

35

and (c) are met, and

              (b)             for the alternative method of calculating profits given in sub-

paragraph (5) of paragraph 15 to apply if the conditions specified in

paragraphs (a) and (b) of sub-paragraph (4) of that paragraph are

met.

40

          (2)      An election under this paragraph has effect for the year of assessment for

which it is made.

 

 

 
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