The Income and Corporation Taxes Act 1988, also known as ICTA, was the foremost

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

Act of Parliament concerned with taxation until the Income Tax Act 2007 and the Corporation Tax Act 2010. ICTA was enacted in order to consolidate a number of earlier legislative provisions covering taxation. Originally, ICTA primarily covered

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

(paid principally by individuals) and

corporation tax A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but i ...

(paid principally by

companies A company, abbreviated as co., is a legal entity representing an association of legal people, whether natural, juridical or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specifi ...

). It is the longest Act of Parliament to have ever been written.

Overview

Section 660A

In its United Kingdom Tax Bulletin 64 (April 2003), the Inland Revenue (now

HM Revenue and Customs His Majesty's Revenue and Customs (commonly HM Revenue and Customs, or HMRC, and formerly Her Majesty's Revenue and Customs) is a department of the UK government responsible for the collection of taxes, the payment of some forms of stat ...

) announced new guidance on the "settlements legislation". This is a body of law which seeks to prevent someone (known as the "

settlor In trust law, a settlor is a person who settles (i.e. gives into trust) their property for the benefit of the beneficiary. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is ...

") from avoiding tax by reclassifying income as belonging to someone else (known as the beneficiary). The income is then taxed at the beneficiary's lower rate although the settlor continues to benefit from it. The legislation targets spouses and also parents seeking to divert income via their minor children. Section 660A of the Act (added by the Finance Act 1995) covered this issue.UK Legislation
Income and Corporation Taxes Act 1988
section 660A, accessed 16 May 2022 Using the revised (April 2003) interpretation of s.660A, UK HMRC have been targeting businesses set up by spouses where they are aware that income is split between the spouses, and only one of them directly generates that income. In theory s.660A can apply to partnerships as well as limited companies, this has yet to be tested in the UK courts. In 2007 the interpretation was finally rejected by the Law Lords,
/nowiki> EWCA Civ 1553 aka "Arctic Systems"] resulting in the government proposing new legalisation to tackle the perceived abuse. This section was repealed by the Income Tax (Trading and Other Income) Act 2005 with effect from 6 April 2005.

Amendments

Following the Tax Law Rewrite Project, sections relating to income tax have been substituted by the Income Tax (Earnings and Pensions) Act 2003, the

Income Tax (Trading and Other Income) Act 2005 The Income Tax (Trading and Other Income) Act 2005 (c 5) is an Acts of Parliament in the United Kingdom, Act of the Parliament of the United Kingdom. It restated certain legislation relating to income tax, with minor changes that were mainly int ...

and the Income Tax Act 2007. These acts have abolished the schedular system of taxation for

; however, the schedular system still applies for the purposes of

. ICTA has also been frequently amended by the

Finance Act A Finance Act is the headline fiscal (budgetary) legislation enacted by the UK Parliament, containing multiple provisions as to taxes, duties, exemptions and reliefs at least once per year, and in particular setting out the principal tax rates f ...

s that are enacted annually in the UK. Sections relating to the House of Commons Members' Fund were amended by the House of Commons Members' Fund Act 2016.

References

External links

* United Kingdom Acts of Parliament 1988 Tax legislation in the United Kingdom 1988 in economic history Income tax in the United Kingdom {{Tax-stub

Overview

Section 660A

Amendments

See also

References

External links