ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in principle and in practice adverse to some taxpayers and favourable to others. But the numbers affected and the amounts involved are likely to be small.
Change 155: Double relief for interest payments: repeal of section 368 of ICTA in relation to relief remaining under section 353 of ICTA: Schedule 1 (section 368 of ICTA)
This change relates to the repeal of section 368 of ICTA which prevents interest qualifying for relief twice.
Section 368 of ICTA prevents relief being given for the same amount of interest more than once, for example under section 353 of ICTA and as a trading deduction. The rule in section 368 has been rewritten in section 387. But that provision only applies to relief under Chapter 1 of Part 8 of this Act and will not apply to relief under section 353 of ICTA by virtue of section 365 of ICTA. As that relief is obsolescent, it has been left in ICTA, rather than being rewritten in the Act. It relates to interest on loans taken out to purchase a life annuity and is given as a tax reduction.
As the rule in section 368 of ICTA is repealed without being rewritten in relation to section 365, there is the theoretical possibility for relief on the same interest under section 353 (life annuity loans) of ICTA and either under section 383 of this Act or as a trading deduction.
In practice, however, it is extremely unlikely that the circumstances which might allow double relief will exist. The loan would have to be taken out before 9 March 1999 by an individual aged over 65 with at least 90% of the loan proceeds being applied to purchase the annuity and the remaining portion applied on another qualifying purpose. It is then possible for interest on that remaining portion (a maximum of 10% of the loan) to give rise to both a tax reduction and an allowable deduction.
In view of the fact that this possibility is so remote, no special rule to prevent double relief has been introduced on the repeal of section 368 of ICTA.