Budget Notes

BN62 ARMED FORCES COUNCIL TAX RELIEF

Who is likely to be affected?

1. Members of the Armed Forces serving in operational locations specified by the Ministry of Defence.

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to ensure that payments under the new Armed Forces Council Tax Relief scheme will be tax-exempt.

Operative date

3. The legislation will have effect on and after 1 April 2008.

Current law and proposed revisions

4. Payments currently fall within section 62 of the Income Tax (Earnings and (Pensions) Act 2003 (ITEPA) and would be taxed in full.

5. Legislation in Finance Bill 2008 will ensure that the payments will be specifically exempt from tax by the insertion of a further exemption at Part 4 of Chapter 8 (Exemptions: Special Kinds of Employees) of ITEPA. Parallel disregards are being introduced in secondary legislation for National Insurance contributions and Tax Credits purposes.

Further advice

6. If you have any questions about this change, please contact the Employer Helpline on 0845 7143 143. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk