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Tax, Marriage and the 1988 Budget
Published online by Cambridge University Press: 16 January 2009
Extract
There appeared in the March issue of the Cambridge Law Journal an article criticising the rules under which married, separated and divorced people were taxed in the United Kingdom. The article dealt with the position as it was in the tax year 1987/88, before the 1988 Busdget. The 1988 Budget made radical proposals for change and, at the time of writing, these proposals have just been enacted as part of the Finance Act 1988. On the whole the changes are to be welcomed. They will introduce rules which will be both simpler and fairer than those they replace. Having said this, the new system will include or retain some rules which are, in effect, left-overs from the old and which will make both for unnecessary complications and continued unfairness.
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References
1 They are ss.32–40 of the Finance Act 1988.
2 Finance Act 1988, ss.32 and 33.
3 [1988] C.L.J. 77, 81.
4 [1988] C.L.J. at pp. 98–99.
5 [1988] C.L.J. at pp. 94–97.
6 Cmnd 8093 and Cmnd 9756.
7 See example in [1988] C.L.J. at pp. 86 and 87.
8 Some court orders made before the end of June 1988 will be deemed to be pre-Budget if made on the basis of applications made before Budget day—there is insufficient space here to go into detail. And replacement orders and agreements will count as pre-Budget.
9 The worst abuse of the old system—and based on very doubtful foundations: see [1988] C.L.J. pp. 88–92.
10 To save space, in this article the expressions “ex-spouse,” “ex-husband,” “ex-marriage,” etc. are intended to cover cases of separation as well as divorce.
11 If the wife had had unearned income that would have complicated the calculations—but not necessarily have changed the position.
12 It could happen, for example, if one party had an income of £20,000 p.a. and the other £7,000 p.a., or where much larger, but unequal, incomes were involved; the possibilities are endless. The significance of paying at the same marginal rate is that they would have gained nothing under the old rules if they were separated or divorced.
13 The additional child allowance will continue to exist under the new rules, though it does not fit in well with the new scheme.
14 Cmnd 9756.
15 [1988] C.L.J. at pp. 98, 99.
16 Orders in the pipeline on Budget day may be deemed to be pre-Budget. There is insufficient space to cover this here.
17 See example in [1988] C.L.J. at pp. 86, 87.
18 As to why this is a disincentive, see [1988] C.L.J. at pp. 82, 83.
19 The trouble with this kind of counterbalancing is that the weights may not be equal.
20 Finance Act 1988, s.42.