SUMMARY

1. This clause introduces amendments to the order in which income tax reductions are given. These are consequential amendments, necessitated by the reform of the structure of income tax allowances.

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2. Sub-section (1)(a) amends section 256(3)(a) of the Income and Corporation Taxes Act (ICTA) 1988, replacing the reference to 'section 259 [additional relief in respect of children] or section 261A [additional relief in respect of children in the year of separation]' with a reference to section 257AA. Sections 259 and 261A of ICTA 1988 are repealed by clause 30 of this Bill. [should the '257AA reference read: 'section 257A(5A) - in which case, insert: 'Section 257A(5A) of ICTA 1988 sets the new minimum amount of the married couple's allowance for 2000-01 and subsequent years of assessment, and will be inserted by clause 28(7) of this Bill.']

3. Sub-section (1)(b) repeals section 256(3)(b) of ICTA 1988, which refers to income tax reductions under sections 262(1) (widow's bereavement allowance), 259, and 261A of ICTA 1988. Sections 262, 259, and 261A of ICTA 1988 are repealed by clauses 30 and 31 of this Bill.

4. Sub-section (1)(c) repeals the words after paragraph (c) in section 256(3) of ICTA 1988, which refer to paragraph (a) of that section (repealed by sub-section (1)(a) of this clause).

5. Sub-sections (2) and (3) specify the years for which the changes in sub-section (1) will shall have effect. Sub-section (1)(a) and (b) shall have effect for the year 2001-02 and subsequent years of assessment. Sub-section (1)(c) will shall have effect for the year 2000-01 and subsequent years of assessment.

6. Sub-section (4) provides that, in the year 2000-01, section 256(3) of ICTA 1988 shall have effect with the omission of paragraph (a) (which will be finally repealed for 2001-02 and subsequent years by sub-section (1)(a) of this clause) and of the words 'except section 259 or 261A' in paragraph (b) (paragraph (b) of section 256(3) of ICTA 1988 will be finally repealed for 2001-02 and subsequent years by sub-section (1)(b) of this clause).

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7. Sub-sections (2) and (3) of ICTA 1988 set out the general rules applying to income tax reductions. Reliefs given as income tax reductions are given as deductions from an individual's tax liability, rather than from his or her income before applying tax. The married couple's allowance and related allowances are given as income tax reductions. The children's tax credit, to be introduced for 2001-02 and subsequent years of assessment by clause 27 of this Bill, will also be given in this way.