ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL General rules
Under this change relief is given for the annual payments and patent royalties previously within section 348 of ICTA as a deduction in calculating net income (but not from “non-qualifying income”): see sections 448(4), 449(5), 1025(2)(a) and 1026. So section 3 of ICTA is not rewritten. That section required the income out of which an annual payment or patent royalty payment is made to be charged at the basic rate. The new approach makes it unnecessary.
Income tax is still deducted (at the basic rate, except in the cases covered by section 902(3)). Rather than this being optional or mandatory depending on the payer’s position, it is always mandatory. So section 348(1)(c) of ICTA is not rewritten. The tax deducted from the payment will be collected directly rather than being charged on the income out of which the payment is made.
The tax deducted is then collected as part of the payer’s self-assessment (see Chapter 17 of Part 15 of this Act) and the provisions that restrict personal reliefs etc are no longer needed.
The change also means that some payers who under the source legislation have to account for part or all of the deducted tax under a section 350 assessment will now account for it under Self Assessment. This will affect:
	all individuals (section 350 of ICTA will no longer apply to them, regardless of the amount of income they have in the tax year); and
	persons other than individuals whose income is only sufficient to cover part of the charge.
It should normally be less onerous for taxpayers to deal with this on their self-assessment returns than to have to deal with it separately. But a few taxpayers who do not presently require a self-assessment return will need to complete one in future.
In addition, taxpayers will no longer have to worry about which regime applies. This is relevant in relation to taxpayers for whom it is not easy to tell in advance whether their income will or will not be sufficient to cover charges on income.
The change may affect the time at which tax is paid (including payments on account) and the compliance regime applicable. But it will affect only a small number of taxpayers and the amounts involved are correspondingly small.
None of this will affect the position of corporation tax payers, exempt bodies such as local authorities, or income tax payers (other than individuals) who have no income and who would not otherwise have needed to complete a self-assessment form. All these will remain within one or other of the regimes rewritten in Chapters 15 and 16 of Part 15 of this Act.