Finance (No. 2) Bill - continued        House of Commons
Schedule A, - continued
PART I, MAIN CHARGING PROVISIONS - continued

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     5. After section 21B of the Taxes Act 1988 (inserted by paragraph 4 above) insert-
 
 
"The Schedule A charge and mutual business.     21C. - (1) The following provisions have effect for the purpose of applying the charge to tax under Schedule A in relation to mutual business.
 
    (2) The transactions or relationships involved in mutual business are treated as if they were transactions or relationships between persons between whom no relationship of mutuality existed.
 
      (3) Any surplus arising from the business is regarded as a profit (and any deficit as a loss) if it would be so regarded if the business were not mutual.
 
      (4) The person-
 
 
    (a) to whom the profit arises for corporation tax purposes, or
 
    (b) who is regarded as receiving or entitled to the profit for income tax purposes,
  is the person who would satisfy that description if the business were not mutual business.
 
      (5) Nothing in this section affects the operation of section 488 (co-operative housing associations).".
 
     6. Section 25 of the Taxes Act 1988 (deductions from rent: general rules) shall cease to have effect.
 
     7. - (1) Section 26 of the Taxes Act 1988 (land managed as one estate) is amended as follows.
 
      (2) In subsection (1)-
 
 
    (a) in paragraph (a), omit the words "at a full rent (not being a tenant's repairing lease)", and
 
    (b) for the words from "not being" in paragraph (b) to the end of the subsection substitute "as if the rent, so far as it relates to that part and would otherwise be treated as being at a lower rate, were at a rate per annum equal to the relevant annual value."
      (3) In subsection (2), omit paragraph (a).
 
      (4) After subsection (2) insert-
 
 
    "(2A) Where subsection (1) above applies, the following rules apply in computing the profits on which the owner is charged under Schedule A-
 
 
    (a) disbursements and expenses relating to any of that part of the estate which comprises land the rent in respect of which is determined under that subsection ("the relevant part of the estate") shall not be deductible from any receipts which are not so determined except to the extent that-
 
      (i) the amount of the disbursements and expenses exceeds the amount of the rent so determined, and
 
      (ii) the receipts against which the remainder is set are receipts in respect of land comprised in the estate;
 
    (b) any excess for a chargeable period of the disbursements and expenses relating to the relevant part of the estate (including any excess carried forward under this paragraph) over the receipts for that period from which they are deductible in accordance with paragraph (a) above-
 
      (i) shall be disregarded in computing any loss in respect of which relief may be given under section 379A or 392A, but
 
      (ii) may be carried forward to the following chargeable period and treated in relation to the later period as if it were a disbursement or expense relating to the relevant part of the estate;
 
    (c) disbursements and expenses relating to any land not comprised in the relevant part of the estate shall be deductible from the deemed receipts in respect of the land which is so comprised to the extent only that the deemed receipts exceed the aggregate of-
 
      (i) the actual disbursements and expenses for that period relating to the relevant part of the estate, and
 
      (ii) any amounts carried forward to that period under paragraph (b) above;
 
    and
 
    (d) any excess of the disbursements and expenses for that period relating to land not comprised in the relevant part of the estate over the amounts from which they are deductible shall be treated for the purposes of section 379A or 392A as a loss for that period in the Schedule A business in question.".
 
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