485G Miscellaneous (Chapter 2A)

Summary

This section provides for matters miscellaneous to the restriction of reliefs.

Details

Refund of DIRT tax

(1) Nothing in this Chapter affects the right of a person who is permanently incapacitated from obtaining a refund of DIRT tax deducted on the basis that the person is entitled to exemption from tax on such income.

Adaptation of tax relief regimes

(2)(a) & (b) The capital allowances system and other relief regimes are adapted to ensure that the restriction of reliefs provided for by this Chapter does not affect the normal workings of those systems, particularly as respects the carry forward of unused reliefs under those provisions in circumstances where there is also “excess relief” under the provisions of this Chapter.

Capital allowances

(2)(a)(i) For the purposes of the capital allowances regime under Part 9 (or that Part as applied by other provisions), the amount of any capital allowance used in a tax year is calculated as if the restriction does not apply. Therefore, an individual will be treated as having got the full benefit of an allowance used in a year despite the fact that the allowance may have been included in the general restriction. This is because the restricted portion of the allowance is carried forward as part of a general pool of restricted reliefs. This general pool is known as “excess relief” and is allowed in the following or subsequent years as a separate relief outside of the capital allowance system.

(2)(a)(ii) The provision in section 292 governing the calculation of the “amount unallowed” is to be unaffected by any restriction of reliefs. This calculation determines the remaining amount of capital expenditure that has not been allowed against a person’s income by way of capital allowances. The amount is used in determining the amount of a balancing allowance or a balancing charge.

(2)(a)(iii) In a case where the restriction applies, the calculation of the amount of a balancing allowance or a balancing charge in respect of capital expenditure on an industrial building or structure is to be firstly determined in the normal way. However, any balancing charge arising is then to be adjusted in accordance with paragraph (b). Any reduction made to a balancing charge will also be deducted from the amount of “excess relief” available to the individual involved.

(2)(b) The amount by which the balancing charge referred to in paragraph (a)(iii) is to be reduced is the lesser of:

• the amount of any “excess relief” coming forward to the year in which the balancing charge arises which has not already been deducted for the year, and
• the sum of the amounts of the allowances restricted each year that relate to the building or structure involved. The amount to be taken for each year is calculated by applying the following fraction to the allowance in respect of the building or structure for the particular year:

where-

A = the amount of the allowance made to the individual for the year,

E = the amount of the individual’s “excess relief” for the year, and

S = the individual’s aggregate of specified reliefs for the year.

Prevention of double relief for carry forward of relief restricted

(2)(a)(iv) Relief restricted by this Chapter is only carried forward as part of the pool of restricted reliefs provided for by section 485F. It will not be possible to carry forward any part of the restricted reliefs as part of the original relief from which it derives. Otherwise, the person conceivably could be entitled to carry forward the relief denied in a year on the double if a carry forward provision is a feature of a particular relief.

Charge to tax under Case IV

(3) To the extent that an individual’s taxable income, determined in accordance with section 485E, exceeds the income on which he or she was chargeable to tax under the various Schedules, then the excess is deemed to be an amount chargeable to income tax under Case IV of Schedule D. This provision will ensure that a charge to tax arises, for example where an exemption is restricted, despite the fact that the underlying income is otherwise exempt.

Any amount charged in this way, is not to be regarded as part of the individual’s total income for the tax year and is to be disregarded for the purposes of certain calculations in the Chapter.

Interaction of restriction calculation with other calculations

(4)(a)(i) This provision, which is subject to paragraph (b), subsection (5) and paragraph 5 of Schedule 24, addresses situations where calculations of reliefs, deductions, credits and reductions in tax payable arise in other provisions of the Tax Acts. The calculations in question are those that require total income, taxable income, tax payable or tax chargeable for a year to be taken into account. Those calculations are to be carried out as if the restriction under this Chapter did not apply. However, any “excess relief” that comes forward under the provisions of section 485F should be given in accordance with the rules in that section.

(4)(a)(ii) In the case of a relief or deduction, effect is to be given to it before the application of the restriction but after the application of section 485F. In the case of credits and reductions in tax payable, the benefits of these (as calculated before the restriction but after the application of section 485F) are to be given against the amount of tax chargeable following the application of the restriction.

(4)(b) These rules are not to affect the amount of tax chargeable on an individual in relation to his or her taxable income as determined in accordance with section 485E. This is the amount of tax to be charged on that recalculated taxable income before any credits or other reductions in that amount of tax.

(5) The exemption and marginal relief provisions of sections 187 and 188 do not apply where the restriction under this Chapter applies.

Relevant Date: Finance Act 2021