Finance Act 1994 (c. 9)

(The document as of February, 2008)

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65 Liability of insured in certain cases

(1) Regulations may make provision under this section with regard to any case where at any time--

(a) an insurer does not have any business establishment or other fixed establishment in the United Kingdom, and

(b) no person is the insurer's tax representative by virtue of section 57 above.

(2) Regulations may make provision allowing notice to be served in accordance with the regulations on--

(a) the person who is insured under a taxable insurance contract, if there is one insured person, or

(b) one or more of the persons who are insured under a taxable insurance contract, if there are two or more insured persons;

and a notice so served is referred to in this section as a liability notice.

(3) Regulations may provide that if a liability notice has been served in accordance with the regulations--

(a) the Commissioners may assess to the best of their judgment the amount of any tax due in respect of premiums received by the insurer under the contract concerned after the material date and before the date of the assessment, and

(b) that amount shall be deemed to be the amount of tax so due.

(4) The material date is--

(a) where there is one person on whom a liability notice has been served in respect of the contract, the date when the notice was served or such later date as may be specified in the notice;

(b) where there are two or more persons on whom liability notices have been served in respect of the contract, the date when the last of the notices was served or such later date as may be specified in the notices.

(5) Regulations may provide that where--

(a) an assessment is made in respect of a contract under provision included in the regulations by virtue of subsection (3) above, and

(b) the assessment is notified to the person, or each of the persons, on whom a liability notice in respect of the contract has been served,

the persons mentioned in subsection (6) below shall be jointly and severally liable to pay the tax assessed, and that tax shall be recoverable accordingly.

(6) The persons are--

(a) the person or persons mentioned in subsection (5)(b) above, and

(b) the insurer.

(7) Where regulations make provision under subsection (5) above they must also provide that any provision made under that subsection shall not apply if, or to the extent that, the assessment has subsequently been withdrawn or reduced.

(8) Regulations may make provision as to the time within which, and the manner in which, tax which has been assessed is to be paid.

(9) Where any amount is recovered from an insured person by virtue of regulations made under this section, the insurer shall be liable to pay to the insured person an amount equal to the amount recovered; and regulations may make provision requiring an insurer to pay interest where this subsection applies.

(10) Regulations may make provision for adjustments to be made of a person's liability in any case where--

(a) an assessment is made under section 56 above in relation to the insurer, and

(b) an assessment made by virtue of regulations under this section relates to premiums received (or assumed for the purposes of the assessment to be received) within a period which corresponds to any extent with the accounting period to which the assessment under section 56 relates.

(11) Regulations may make provision as regards a case where--

(a) an assessment made in respect of a contract by virtue of regulations under this section relates to premiums received (or assumed for the purposes of the assessment to be received) within a given period, and

(b) an amount of tax is paid by the insurer in respect of an accounting period which corresponds to any extent with that period;

and the regulations may include provision for determining whether, or how much of, any of the tax paid as mentioned in paragraph (b) above is attributable to premiums received under the contract in the period mentioned in paragraph (a) above.

(12) Regulations may--

(a) make provision requiring the Commissioners, in prescribed circumstances, to furnish prescribed information to an insured person;

(b) make provision requiring any person on whom a liability notice has been served to keep records, to furnish information, or to produce documents for inspection or cause documents to be produced for inspection;

(c) make such provision as the Commissioners think is reasonable for the purpose of facilitating the recovery of tax from the persons having joint and several liability (rather than from the insurer alone);

(d) modify the effect of any provision of this Part.

(13) Regulations may provide for an insured person to be liable to pay tax assessed by virtue of the regulations notwithstanding that he has already paid an amount representing tax as part of a premium.

66 Directions as to amounts of premiums

(1) This section applies where--

(a) anything is received by way of premium under a taxable insurance contract, and

(b) the amount of the premium is less than it would be if it were received under the contract in open market conditions.

(2) The Commissioners may direct that the amount of the premium shall be taken for the purposes of this Part to be such amount as it would be if it were received under the contract in open market conditions.

(3) A direction under subsection (2) above shall be given by notice in writing to the insurer, and no direction may be given more than three years after the time of the receipt.

(4) Where the Commissioners make a direction under subsection (2) above in the case of a contract they may also direct that if--

(a) anything is received by way of premium under the contract after the giving of the notice or after such later date as may be specified in the notice, and

(b) the amount of the premium is less than it would be if it were received under the contract in open market conditions,

the amount of the premium shall be taken for the purposes of this Part to be such amount as it would be if it were received under the contract in open market conditions.

(5) For the purposes of this section a premium is received in open market conditions if it is received--

(a) by an insurer standing in no such relationship with the insured person as would affect the premium, and

(b) in circumstances where there is no other contract or arrangement affecting the parties.

(6) For the purposes of this section it is immaterial whether what is received by way of premium is money or something other than money or both.

67 Deemed date of receipt of certain premiums

(1) In a case where--

(a) a premium under a contract of insurance is received by the insurer after 30th November 1993 and before 1st October 1994, and

(b) the period of cover for the risk begins on or after 1st October 1994,

for the purposes of this Part the premium shall be taken to be received on 1st October 1994.

(2) Subsection (3) below applies where--

(a) a premium under a contract of insurance is received by the insurer after 30th November 1993 and before 1st October 1994,

(b) the period of cover for the risk begins before 1st October 1994 and ends after 30th September 1995, and

(3) For the purposes of this Part--

(a) so much of the premium as is attributable to such of the period of cover as falls after 30th September 1995 shall be taken to be received on 1st October 1994;

(b) so much as is so attributable shall be taken to be a separate premium.

(4) If a contract relates to more than one risk subsection (1) above shall have effect as if the reference in paragraph (b) to the risk were to any given risk.

(5) If a contract relates to more than one risk, subsections (2) and (3) above shall apply as follows--

(a) so much of the premium as is attributable to any given risk shall be deemed for the purposes of those subsections to be a separate premium relating to that risk;

(b) those subsections shall then apply separately in the case of each given risk and the separate premium relating to it;

and any further attribution required by those subsections shall be made accordingly.

(6) Subsections (1) and (4) above do not apply in relation to a contract if the contract belongs to a class of contract as regards which the normal practice is for a premium to be received by or on behalf of the insurer before the date when cover begins.

(7) Subsections (2), (3) and (5) above do not apply in relation to a contract if the contract belongs to a class of contract as regards which the normal practice is for cover to be provided for a period exceeding twelve months.

(8) Any attribution under this section shall be made on such basis as is just and reasonable.

68 Special accounting schemes

(1) Regulations may make provision establishing a scheme in accordance with the following provisions of this section; and in this section "a relevant accounting period", in relation to an insurer, means an accounting period as regards which the scheme applies to the insurer.

(2) Regulations may provide that if an insurer notifies the Commissioners that the scheme should apply to him as regards accounting periods beginning on or after a date specified in the notification and prescribed conditions are fulfilled, then, subject to any provision made under subsection (9) below, the scheme shall apply to the insurer as regards accounting periods beginning on or after that date.

(3) Regulations may provide that where--

(a) an entry is made in the accounts of an insurer showing a premium under a taxable insurance contract as due to him, and

(b) the entry is made as at a particular date which falls within a relevant accounting period,

then (whether or not that date is one on which the premium is actually received by the insurer or on which the premium would otherwise be treated for the purposes of this Part as received by him) the premium shall for the purposes of this Part be taken to be received by the insurer on that date or, in prescribed circumstances, to be received by him on a different date determined in accordance with the regulations.

(4) Where regulations make provision under subsection (3) above they may also provide that, for the purposes of this Part, the amount of the premium shall be taken to be the amount which the entry in the accounts treats as its amount.

(5) Regulations may provide that provision made under subsections (3) and (4) above shall apply even if the premium, or part of it, is never actually received by the insurer or on his behalf; and the regulations may include provision that, where the premium is never actually received because the contract under which it would have been received is never entered into or is terminated, the premium is nonetheless to be taken for the purposes of this Part to be received under a taxable insurance contract.

(6) Regulations may provide that any provision made under subsection (4) above shall be subject to any directions made under section 66 above.

(7) Regulations may provide that where a premium is treated as received on a particular date by virtue of provision made under subsection (3) above and there is another date on which the premium--

(a) is actually received by the insurer, or

(b) would, apart from the regulations, be treated for the purposes of this Part as received by him,

the premium shall be taken for the purposes of this Part not to be received by him on that other date.

(8) Regulations may provide that provision made under subsection (7) above shall apply only to the extent that there is no excess of the actual amount of the premium over the amount which, by virtue of regulations under this section or of a direction under section 66 above, is to be taken for the purposes of this Part to be its amount; and the regulations may include provision that where there is such an excess, the excess amount shall be taken for the purposes of this Part to be a separate premium and to be received by the insurer on a date determined in accordance with the regulations.

(9) Regulations may provide that if a notification has been given in accordance with provision made under subsection (2) above and subsequently--

(a) the insurer gives notice to the Commissioners that the scheme should not apply to him as regards accounting periods beginning on or after a date specified in the notice, or

(b) the Commissioners give notice to the insurer that the scheme is not to apply to him as regards accounting periods beginning on or after a date specified in the notice,

then, if prescribed conditions are fulfilled, the scheme shall not apply to the insurer as regards an accounting period beginning on or after the date specified in the notice mentioned in paragraph (a) or (b) above unless the circumstances are such as may be prescribed.

(10) Regulations may include provision--

(a) enabling an insurer to whom the scheme applies as regards an accounting period to account for tax due in respect of that period on the assumption that the scheme will apply to him as regards subsequent accounting periods;

(b) designed to secure that, where the scheme ceases to apply to an insurer, any tax which by virtue of provision made under paragraph (a) above has not been accounted for is accounted for and paid.

(11) Regulations may provide that where--

(a) an entry in the accounts of an insurer shows a premium as due to him,

(b) the entry is made as at a date falling before 1st October 1994,

(c) tax in respect of the receipt of the premium would, apart from the regulations, be charged by reference to a date (whether or not the date on which the premium is actually received by the insurer) falling on or after 1st October 1994,

(d) the date by reference to which tax would be charged falls within a relevant accounting period, and

(e) prescribed conditions are fulfilled,

the premium, or such part of it as may be found in accordance with prescribed rules, shall be taken for the purposes of this Part to have been received by the insurer before 1st October 1994.

(12) Without prejudice to subsection (13) below, regulations may include provision modifying any provision made under this section so as to secure the effective operation of the provision in a case where a premium consists wholly or partly of anything other than money.

(13) Regulations may modify the effect of any provision of this Part.

(14) The reference in subsection (3)(a) above to a premium under a taxable insurance contract includes a reference to anything that, although not actually received by or on behalf of the insurer, would be such a premium if it were so received.

69 Reduced chargeable amount

(1) Where a contract provides cover for one or more exempt matters and also provides cover for one or more non-exempt matters, for the purposes of this Part the chargeable amount is such amount as, with the addition of the tax chargeable, is equal to the difference between--

(a) the amount of the premium, and

(b) such part of the premium as is attributable to the exempt matter or matters.

(2) In applying subsection (1) above, any amount that is included in the premium as being referable to tax (whether or not the amount corresponds to the actual amount of tax payable in respect of the premium) shall be taken to be wholly attributable to the non-exempt matter or matters; and, subject to that, any attribution under subsection (1) above shall be made on such basis as is just and reasonable.

(3) For the purposes of this section an exempt matter is any matter such that, if it were the only matter for which the contract provided cover, the contract would not be a taxable insurance contract.

(4) For the purposes of this section a non-exempt matter is a matter which is not an exempt matter.

(5) If the contract relates to a lifeboat and lifeboat equipment, the lifeboat and the equipment shall be taken together in applying this section.

(6) If a matter for which the contract provides cover is loss of or damage to goods in foreign or international transit, the matter is not an exempt matter for the purposes of this section unless the insured enters into the contract in the course of a business carried on by him.

Supplementary

70 Interpretation: taxable insurance contracts

(1) Subject to the following provisions of this section, any contract of insurance is a taxable insurance contract.

(2) A contract is not a taxable insurance contract if it fulfils one or more of the following conditions--

(a) the contract is a contract of reinsurance;

(b) the contract is one whose effecting and carrying out constitutes business of one or more of the classes specified in Schedule 1 to the [1982 c. 50.] Insurance Companies Act 1982 (long term business) and constitutes only such business;

(d) the contract relates only to a commercial ship and is a contract whose effecting and carrying out constitutes business of one or more of the relevant classes and constitutes only such business;

(e) the contract relates only to a lifeboat and is a contract whose effecting and carrying out constitutes business of one or more of the relevant classes and constitutes only such business;

(f) the contract relates only to a lifeboat and lifeboat equipment and is such that, if it related only to a lifeboat, it would fall within paragraph (e) above;

(g) the contract relates only to a commercial aircraft and is a contract whose effecting and carrying out constitutes business of one or more of the relevant classes and constitutes only such business;

(h) the contract relates to one risk which is situated outside the United Kingdom;

(i) the contract relates to two or more risks each of which is situated outside the United Kingdom;

(j) the contract relates only to loss of or damage to foreign or international railway rolling stock;

(k) the contract relates only to loss of or damage to goods in foreign or international transit and the insured enters into the contract in the course of a business carried on by him;

(l) the contract relates only to credit granted in relation to relevant supplies falling within section 1(1) of the [1991 c. 67.] Export and Investment Guarantees Act 1991.

(3) The conditions referred to in subsection (2)(c) above are that--

(a) the vehicle is used, or intended for use, by a handicapped person in receipt of a disability living allowance by virtue of entitlement to the mobility component or of a mobility supplement,

(b) the insured lets such vehicles on hire to such persons in the course of a business consisting predominantly of the provision of motor vehicles to such persons, and

(c) the insured does not in the course of the business let such vehicles on hire to such persons on terms other than qualifying terms.

(4) For the purposes of subsection (3)(c) above a vehicle is let on qualifying terms to a person (the lessee) if the consideration for the letting consists wholly or partly of sums paid to the insured by--

(a) the Department of Social Security,

(b) the Department of Health and Social Services for Northern Ireland, or

on behalf of the lessee in respect of the disability living allowance or mobility supplement to which the lessee is entitled.

(5) For the purposes of subsection (2)(d) and (e) above the relevant classes are classes 1, 6 and 12 of the classes specified in Part I of Schedule 2 to the [1982 c. 50.] Insurance Companies Act 1982 (ships, accident, third-party etc.).

(6) For the purposes of subsection (2)(g) above the relevant classes are classes 1, 5 and 11 of the classes specified in Part I of Schedule 2 to the Insurance Companies Act 1982 (aircraft, accident, third-party etc.).

(7) In deciding whether a contract relates to lifeboat equipment the nature of the risks concerned is immaterial, and they may (for example) be risks of dying or sustaining injury or of loss or damage.

(8) For the purposes of subsection (2)(l) above relevant supplies are--

(a) any supply of goods where the supply is to be made outside the United Kingdom or where the goods are to be exported from the United Kingdom;

(b) any supply of services where the services are to be performed outside the United Kingdom.

(9) Regulations may make provision for determining for the purposes of subsection (8) above--

(a) the place where a supply of goods is to be regarded as made;

(b) the place where services are to be regarded as performed.

(10) For the purposes of this section--

(a) "handicapped" means chronically sick or disabled;

(b) "disability living allowance" means a disability living allowance within the meaning of section 71 of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or section 71 of the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992;

(c) "mobility supplement" means a mobility supplement within the meaning of article 26A of the [S.I. 1983/883.] Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 1983, article 25A of the [S.I. 1983/686.] Personal Injuries (Civilians) Scheme 1983, article 3 of the [S.I. 1985/722.] Motor Vehicles (Exemption from Vehicles Excise Duty) Order 1985 or article 3 of the [S.I. 1985/723.] Motor Vehicles (Exemption from Vehicles Excise Duty) (Northern Ireland) Order 1985.

(11) This section has effect subject to section 71 below.

(12) This section and section 71 below have effect for the purposes of this Part.

71 Taxable insurance contracts: power to change definition

(1) Provision may be made by order that--

(a) a contract of insurance that would otherwise not be a taxable insurance contract shall be a taxable insurance contract if it falls within a particular description;

(b) a contract of insurance that would otherwise be a taxable insurance contract shall not be a taxable insurance contract if it falls within a particular description.

(2) A description referred to in subsection (1) above may be by reference to the nature of the insured or by reference to such other factors as the Treasury think fit.

(3) Provision under this section may be made in such way as the Treasury think fit, and in particular may be made by amending this Part.

(4) An order under this section may amend or modify the effect of section 69 above in such way as the Treasury think fit.

72 Interpretation: premium

(1) In relation to a taxable insurance contract, a premium is any payment received under the contract by the insurer, and in particular includes any payment wholly or partly referable to--

(a) any risk,

(b) costs of administration,

(d) any facility for paying in instalments or making deferred payment (whether or not payment for the facility is called interest), or

(e) tax.

(2) A premium may consist wholly or partly of anything other than money, and references to payment in subsection (1) above shall be construed accordingly.

(3) Where a premium is to any extent received in a form other than money, its amount shall be taken to be--

(a) an amount equal to the value of whatever is received in a form other than money, or

(b) if money is also received, the aggregate of the amount found under paragraph (a) above and the amount received in the form of money.

(4) The value to be taken for the purposes of subsection (3) above is open market value at the time of the receipt by the insurer.

(5) The open market value of anything at any time shall be taken to be an amount equal to such consideration in money as would be payable on a sale of it at that time to a person standing in no such relationship with any person as would affect that consideration.

(6) Where (apart from this subsection) anything received under a contract by the insurer would be taken to be an instalment of a premium, it shall be taken to be a separate premium.

(7) Where anything is received by any person on behalf of the insurer--

(a) it shall be treated as received by the insurer when it is received by the other person, and

(b) the later receipt of the whole or any part of it by the insurer shall be disregarded.

(8) In a case where--

(a) a payment under a taxable insurance contract is made to a person (the intermediary) by or on behalf of the insured, and

(b) the whole or part of the payment is referable to commission to which the intermediary is entitled,

in determining for the purposes of subsection (7) above whether, or how much of, the payment is received by the intermediary on behalf of the insurer any of the payment that is referable to that commission shall be regarded as received by the intermediary on behalf of the insurer notwithstanding the intermediary's entitlement.

(9) References in subsection (8) above to a payment include references to a payment in a form other than money.

(10) This section has effect for the purposes of this Part.

73 Interpretation: other provisions

(1) Unless the context otherwise requires--

"accounting period" shall be construed in accordance with section 54 above;
"appeal tribunal" means a VAT and duties tribunal;
"authorised person" means any person acting under the authority of the Commissioners;
"the Commissioners" means the Commissioners of Customs and Excise;
"conduct" includes any act, omission or statement;
"insurer" means a person or body of persons (whether incorporated or not) carrying on insurance business;
"legislation relating to insurance premium tax" means this Part (as defined by subsection (9) below), any other enactment (whenever passed) relating to insurance premium tax, and any subordinate legislation made under any such enactment;
"prescribed" means prescribed by an order or regulations under this Part;
"tax" means insurance premium tax;
"tax representative" shall be construed in accordance with section 57 above;
"taxable business" means a business which consists of or includes the provision of insurance under taxable insurance contracts;
"taxable insurance contract" shall be construed in accordance with section 70 above.

(2) A risk is situated in the United Kingdom if, by virtue of section 96A(3) of the [1982 c. 50.] Insurance Companies Act 1982, it is situated in the United Kingdom for the purposes of that Act.

(3) A registrable person is a person who--

(a) is registered under section 53 above, or

(b) is liable to be registered under that section.

(4) A commercial ship is a ship which is--

(a) of a gross tonnage of 15 tons or more, and

(b) not designed or adapted for use for recreation or pleasure.

(5) A commercial aircraft is an aircraft which is--

(a) of a weight of 8,000 kilogrammes or more, and

(b) not designed or adapted for use for recreation or pleasure.

(6) A lifeboat is a vessel used or to be used solely for rescue or assistance at sea; and lifeboat equipment is anything used or to be used solely in connection with a lifeboat.

(7) Foreign or international railway rolling stock is railway rolling stock used principally for journeys taking place wholly or partly outside the United Kingdom.

(8) Goods in foreign or international transit are goods in transit where their carriage--

(a) begins and ends outside the United Kingdom,

(b) begins outside but ends in the United Kingdom, or

(9) A reference to this Part includes a reference to any order or regulations made under it and a reference to a provision of this Part includes a reference to any order or regulations made under the provision, unless otherwise required by the context or any order or regulations.

(10) This section has effect for the purposes of this Part.

74 Orders and regulations

(1) The power to make an order under section 61 above shall be exercisable by the Commissioners, and the power to make an order under any other provision of this Part shall be exercisable by the Treasury.

(2) Any power to make regulations under this Part shall be exercisable by the Commissioners.

(3) Any power to make an order or regulations under this Part shall be exercisable by statutory instrument.

(4) An order under section 71 above shall be laid before the House of Commons; and unless it is approved by that House before the expiration of a period of 28 days beginning with the date on which it was made it shall cease to have effect on the expiration of that period, but without prejudice to anything previously done under the order or to the making of a new order.

(5) In reckoning any such period as is mentioned in subsection (4) above no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than four days.

(6) A statutory instrument containing an order or regulations under this Part (other than an order under section 71 above) shall be subject to annulment in pursuance of a resolution of the House of Commons.

(7) Any power to make an order or regulations under this Part--

(a) may be exercised as regards prescribed cases or descriptions of case;

(b) may be exercised differently in relation to different cases or descriptions of case.

(8) An order or regulations under this Part may include such supplementary, incidental, consequential or transitional provisions as appear to the Treasury or the Commissioners (as the case may be) to be necessary or expedient.

(9) No specific provision of this Part about an order or regulations shall prejudice the generality of subsections (7) and (8) above.

Part IV Income Tax, Corporation Tax and Capital Gains Tax

Chapter I General

Income tax: charge, rates and reliefs

75 Charge and rates of income tax for 1994-95

(1) Income tax shall be charged for the year 1994-95, and for that year--

(a) the lower rate shall be 20 per cent.,

(b) the basic rate shall be 25 per cent., and

(2) For the year 1994-95 section 1(2) of the Taxes Act 1988 shall apply as if--

(a) the amount specified in paragraph (aa) were £3,000 (the lower rate limit), and

(b) the amount specified in paragraph (b) were £23,700 (the basic rate limit);

and accordingly section 1(4) of that Act (indexation) shall not apply for the year 1994-95.

76 Personal allowance

Section 257 of the Taxes Act 1988 (personal allowance) shall apply for the year 1994-95 as if the amounts specified in it were the same as the amounts specified in it as it applies for the year 1993-94, and accordingly section 257C(1) of that Act (indexation) so far as relating to section 257 shall not apply for the year 1994-95.

77 Rate of relief to married couples etc

(1) The provisions of section 256 of the Taxes Act 1988 (general provision as to personal reliefs) shall become subsection (1) of that section and after that subsection there shall be inserted the following subsections--

" (2) Where under any provision of this Chapter the relief to which a person is entitled for any year of assessment consists in an income tax reduction calculated by reference to a specified amount, the effect of that relief shall be that the amount of that person's liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from that provision less whichever is the smaller of--

(a) the amount equal to 20 per cent. of the specified amount; and

(b) the amount which reduces his liability to nil.

(3) In determining for the purposes of subsection (2) above the amount of income tax to which a person would be liable apart from any provision providing for an income tax reduction, no account shall be taken--

(a) where that provision is section 259 or 261A, of any income tax reduction under any of the other provisions of this Chapter;

(b) where that provision is section 262(1), of any income tax reduction under any of the other provisions of this Chapter except section 259 or 261A; or

(i) of any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(ii) of any tax at the basic rate on so much of that person's income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment;

but paragraph (a) above, so far as it relates to any income tax reduction under section 261A, is without prejudice to the provisions of subsection (2) of that section. "

(2) In section 257A of that Act (married couple's allowance)--

(a) in subsection (1), for the words from "to a deduction" onwards there shall be substituted "for that year to an income tax reduction calculated by reference to £1,720";

(b) in subsection (2), for the words from "to a deduction" to "the deduction" there shall be substituted "for that year to an income tax reduction calculated by reference to £2,665 (instead of to the reduction"; and

(c) in subsection (3), for the words from "to a deduction" to "the deduction" there shall be substituted "for that year to an income tax reduction calculated by reference to £2,705 (instead of to the reduction".

(3) In section 259(2) of that Act (additional personal allowance), for "to a deduction from his total income of" there shall be substituted "for that year to an income tax reduction calculated by reference to".

(4) In section 261A(1) of that Act (additional personal allowance for a year in which spouses separate), for "to a deduction from his total income of" there shall be substituted "for that year to an income tax reduction calculated by reference to".

(5) In subsection (1) of section 262 of that Act (widow's bereavement allowance)--

(a) in paragraph (a), for "to a deduction from her total income of" there shall be substituted "to an income tax reduction calculated by reference to"; and

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