ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is adverse to some taxpayers and favourable to others in principle. But it is expected to have no practical effect as it is in line with current practice. Change 78: Gift aid: omission of section 25(9)(c) of FA 1990: sections 423 and 425
This change clarifies the way in which the total amount of income tax and capital gains tax to which an individual is charged is calculated (amount B in section 423, adjusted to amount C in section 424).
There are two places in which the source legislation provides for the “amount of income tax and capital gains tax with which the donor is charged” to be calculated.
The first (in section 25(6)(c) of FA 1990) is used to determine whether any personal and other allowances in Chapter 1 of Part 7 of ICTA should be restricted in order to ensure that the donor is charged with an amount of tax equal to the tax treated as deducted from the gift. This is “amount B” in the rewritten legislation (section 423).
The second (in section 25(9) of FA 1990) is used to determine the amount of income tax the donor may have to pay under section 25(8), and presupposes that any restriction of personal reliefs under section 25(6)(c) has already been carried out. This is “amount C” in the rewritten legislation (section 424).
Section 25(9) of FA 1990 provides detailed rules about how this calculation is to be carried out. But there are no such explicit rules in section 25(6)(c) of FA 1990.
The change makes it clear that amounts B and C are both to be calculated following the detailed rules in section 25(9) of FA 1990, subject to taking account of any restriction of personal reliefs when calculating amount C.
In particular, this means it is not necessary to rewrite section 25(9)(c) of FA 1990. That provision was anomalous as although the tax reduction for married couples and civil partners may be restricted under section 25(6)(c), the second calculation disregards that tax reduction but without it being clear how any such restriction is to be taken into account when doing so (section 25(9)(c)).