1. This clause provides for the abolition of the non age-related married couple's allowance (MCA) from April 2000. However, the higher amounts of MCA for people who are 65-74 and 75 or more will continue to be available to married couples where at least one of the spouses is 65 on or before 5 April 2000. These allowances will continue to be tapered away from people with income above a specified limit, down to a new minimum level of MCA (set, in 1999-00, at the same level as the basic married couple's allowance). This clause also provides that where someone people who retains their entitlement to the MCA after 5 April 2001 neither they nor their spouse willnot be able to claim the new children's tax credit unless they elect not to claim the married couple's allowance.

2. The abolition of the MCA from April 2000 is part of a package of income tax reforms introduced by this Bill. Allowances associated with the MCA (the additional personal allowance, the widow's bereavement allowance, and relief for maintenance payments) will also be abolished.

____________________

3. Sub-sections (2), (3) and (4) amend sections 257A(1), (2), and (3) of the Income and Corporation Taxes Act (ICTA) 1988. They abolish the married couple's allowance for couples where neither spouse is aged 65 or over on or before 5 April 2000. They provide that, MCA shall continue to be available to for couples where at least one of the spouses is aged 65 or over on or before this date, and that this MCA will shalcontinue and will to be at the enhanced levels currently available to couples where at least one spouse is aged 65 to 74 and 75 or more.shall

4. Sub-section (5) makes a consequential amendment to section 257A(4) of ICTA 1988. Since the MCA will now only be available where at least one spouse was born before 6 April 1935, only section 257A(3) will mention a specific age: that of 75 or more. So section 257A(4) need only refer to the case where a person died in a year of assessment before reaching the age of 75 but is regarded for that year as having attained that age, thus becoming entitled to the higher allowance. Sub-section (5) of this clause amends section 257A(4) to achieve that effect.shall

5. Sub-section (6) makes a consequential amendment to section 257A(5) of ICTA 1988, which provides for the enhanced amounts of MCA available to older people to be tapered down to the level of MCA available to people under 65, where the claimant's income exceeds a specified income limit. From 6 April 2000, no MCA will be available to people aged under 65, and it will therefore become meaningless to set the amount of this basic MCA as a minimum level. This sub-section therefore removes the relevant wording.

6. Sub-section (7) inserts sub-section (5A) into section 257A of ICTA 1988. Section 257A(5A) will set a new minimum level below which MCA cannot be reduced, irrespective of the level of the claimant's income. The level will be specified as £1,970, equivalent to the basic MCA for 1999-00. This sub-section, and sub-section (6) above will have effect for the year 1999-00 and subsequent years of assessment. They make no difference to the amount of MCA to which a married couple are entitled in 1999-00.

7. Sub-section (8) makes a consequential amendment to section 257A(6) of ICTA 1988, to reflect the fact that MCA for people aged under 65 on 6 April 2000 will be abolished from that date. Section 257A(6) provides that no claimant shall be entitled to more than one MCA in any year of assessment, and also that the amount of the allowance should be time-apportioned in the year of marriage.

8. Sub-section (9) inserts new sub-sections (7), (8), and (9) into section 257A of ICTA 1988 to cover the situation where a man might be entitled to claim the MCA for the same year as he or his wife could claim the new children's tax credit. New sub-section (7) provides that a man should not be entitled to claim the children's tax credit if he is entitled to claim the MCA for the same year. New sub-section (8) provides that no qualifying child for the purposes of the children's tax credit should be regarded as living with a woman at any time in a year of assessment when she is married to and living with a husband entitled to claim the MCA. The effect of this is to enable the woman to claim the children's tax credit if, for part of the year of assessment, she is not living with a husband who is so entitled. New sub-section (9) allows a person entitled to the MCA to elect to give up his entitlement to it. That would allow him (or his wife) to claim the children's tax credit instead, if that would be more beneficial.sh

9. Sub-sections (10) to (12) specify when the changes introduced by this clause shall take effect. The introduction of the new minimum level of MCA takes effect in 1999-00. The abolition of the MCA for couples where neither spouse has reached 65 years of age before 6 April 2000 takes effect for 2000-01. The new sub-sections covering the interaction of the MCA and the children's tax credit take effect in 2001-02.

________________________

10. Married couple's allowance is currently available to a couple in one of three amounts, depending on the age of spouses. For couples where neither spouse is aged 65 or more in the year of assessment, the basic MCA is available. The basic MCA will be £1,970 given as an income tax reduction at a rate of 10 per cent in 1999-00. For couples where one or both spouses is aged 65-74 in the year of assessment, an enhanced allowance is available. This will be up to £5,125 at 10 per cent in 1999-00. The allowance is further enhanced for couples where one or both of the spouses is aged 75 or more in the year of assessment. For these couples, MCA will be up to £5,195 at 10 per cent in 1999-00.

11. MCA must be claimed by the husband. Once he has made a claim, his wife can elect to receive half the basic allowance as of right, or the couple can jointly elect to transfer the whole of the basic allowance to her. Any extra amount due because of age must go to the husband unless he does not have sufficient income to use it.

12. The enhanced allowances due because of age are gradually tapered away from claimants who have income above a specified income limit. In 1999-00, this limit will be £16,800, and the enhanced allowances are tapered away at a rate of £1 of allowance for every £2 of income above this limit. However, age-related MCA can only be reduced on the basis of the husband's income, and only starts to be reduced once any age-related personal allowance to which he may be entitled has already been reduced to the level at which it is available to someone aged under 65.