Finance (No.2) Bill - continued        House of Commons
Schedule A, RENT AND OTHER RECEIPTS FROM LAND - continued
PART I, MAIN CHARGING PROVISIONS - continued

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     17. - (1) Section 36 of the Taxes Act 1988 (charge on sale of land with right to reconveyance) is amended as follows.
 
      (2) In the sidenote for "Schedule D charge" substitute "Charge".
 
      (3) In subsection (1)-
 
 
    (a) for "the vendor shall be chargeable to tax under Case VI of Schedule D on" substitute "the following amount shall be deemed to have been received as income by the vendor and to have been received by him in consequence of his having entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A, that is to say"; and
 
    (b) for "on that excess" substitute "the amount of the excess".
      (4) After subsection (4) insert-
 
 
    "(4A) An amount deemed under this section to have been received as income by the vendor-
 
 
    (a) is treated as received when the estate or interest is sold, and
 
    (b) shall be taken into account in computing the profits of the Schedule A business in question for the chargeable period in which it is treated as received.
      (4B) For the purposes of subsection (4A)(a) an estate or interest in land is treated as sold when any of the following occurs-
 
 
    (a) an unconditional contract for its sale is entered into,
 
    (b) a conditional contract for its sale becomes unconditional, or
 
    (c) an option or right of pre-emption is exercised requiring the vendor to enter into an unconditional contract for its sale.".
     18. - (1) Section 37 of the Taxes Act 1988 (deductions from premiums and rents received) is amended as follows.
 
      (2) In subsection (1) for paragraphs (a) and (b) substitute-
 
 
    "(a) any amount falls to be treated as a receipt of a Schedule A business by virtue of section 34 or 35, or
 
    (b) any amount would fall to be so treated but for the operation of subsection (2) or (3) below,".
      (3) In subsection (2)-
 
 
    (a) in paragraph (b), for the words from "be" to "any amount" substitute "be treated by virtue of section 34 or 35 as receiving any amount as income in the course of carrying on a Schedule A business"; and
 
    (b) in the closing words, for "on which he is so chargeable" substitute "which he shall be treated as having so received".
      (4) In subsection (3)-
 
 
    (a) for "chargeable under section 34 or 35" substitute "treated by virtue of section 34 or 35 as having received any amount as income in the course of carrying on a Schedule A business and falls to be so treated"; and
 
    (b) for "on which he is so chargeable" substitute "which he shall be treated as having so received".
      (5) In subsection (4) for the words from "purposes" to "other premises" substitute "purpose, in computing the profits of a Schedule A business, of making deductions in respect of the disbursements and expenses of that business".
 
     19. For the heading before section 40 of the Taxes Act 1988 substitute "Supplementary provisions".
 
     20. - (1) Section 40 of the Taxes Act 1988 (tax treatment of receipts and outgoings on sale of land) is amended as follows.
 
      (2) In subsection (1) for "become receivable or payable on his behalf" substitute "been received or paid by him".
 
      (3) In subsection (3)(b), for the words from "had become receivable" to the end substitute "had been received or paid directly by him immediately before the time to which the apportionment is made".
 
      (4) After subsection (4) insert-
 
 
    "(4A) An amount deemed under this section to have been received or paid shall be taken into account in computing the profits of the Schedule A business in question for the period in which it is treated as received or paid.".
 
      (5) Omit subsection (5).
 
     21. Section 41 of the Taxes Act 1988 (relief for rent not paid, etc.) shall cease to have effect.
 
     22. In section 42A of the Taxes Act 1988 (non-residents and their representatives), omit subsection (8).
 
     23. In section 65 of the Taxes Act 1988 (Case IV and V assessments: general)-
 
 
    (a) omit subsections (2A) and (2B), and
 
    (b) in subsection (4), after "Subsections (1) to (3) above" insert "and section 65A below".
     24. For section 65A of the Taxes Act 1988 (Case V income from land overseas, etc.) substitute-
 
 
"Case V income from land outside UK: income tax.     65A. - (1) This section applies where a person is chargeable to income tax under Case V of Schedule D in respect of income which-
 
    (a) arises from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land outside the United Kingdom, and
 
    (b) is not income to which section 65(3) applies (income immediately derived from carrying on a trade, profession or vocation).
      (2) The provisions of Schedule A apply to determine whether income falls within subsection (1)(a) above as they would apply to determine whether the income fell within paragraph 1(1) of that Schedule if-
 
 
    (a) the land in question were in the United Kingdom, or
 
    (b) a caravan or houseboat which is to be used at a location outside the United Kingdom were to be used at a location in the United Kingdom.
      (3) Any provision of the Taxes Acts which deems there to be a Schedule A business in the case of land in the United Kingdom applies where the corresponding circumstances arise with respect to land outside the United Kingdom so as to deem there to be a business within subsection (1)(a) above.
 
      (4) All businesses and transactions carried on or entered into by a particular person or partnership, so far as they are businesses or transactions the income from which is chargeable to tax under Case V of Schedule D in accordance with this section, are treated for the purposes of the charge to tax under Case V as, or as entered into in the course of carrying on, a single business (an "overseas property business").
 
      (5) The income from an overseas property business shall be computed for the purposes of Case V of Schedule D in accordance with the rules applicable to the computation of the profits of a Schedule A business.
 
  Those rules apply separately in relation to-
 
 
    (a) an overseas property business, and
 
    (b) any actual Schedule A business of the person chargeable,
  as if each were the only Schedule A business carried on by that person.
 
      (6) Sections 80 and 81 (expenses in connection with foreign trades and travel between trades etc.) do not apply in relation to the computation of the profits of an overseas property business.
 
      (7) Sections 503 and 504 of this Act and section 29 of the 1990 Act (provisions relating to furnished holiday accommodation) do not apply to the profits or losses of an overseas property business.
 
      (8) Where under this section rules expressed by reference to domestic concepts of law apply in relation to land outside the United Kingdom, they shall be interpreted so as to produce the result that most closely corresponds with the result produced for Schedule A purposes in relation to land in the United Kingdom.".
 
     25. After section 70 of the Taxes Act 1988 (corporation tax: basis of assessment, etc.) insert-
 
 
"Case V income from land outside UK: corporation tax.     70A. - (1) This section applies where a company is chargeable to corporation tax under Case V of Schedule D in respect of income which-
 
    (a) arises from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land outside the United Kingdom, and
 
    (b) is not income to which section 70(2) applies (income from a trade or vocation).
      (2) The provisions of Schedule A apply to determine whether income falls within subsection (1)(a) above as they would apply to determine whether the income fell within paragraph 1(1) of that Schedule if-
 
 
    (a) the land in question were in the United Kingdom, or
 
    (b) a caravan or houseboat which is to be used at a location outside the United Kingdom were to be used at a location in the United Kingdom.
      (3) Any provision of the Taxes Acts which deems there to be a Schedule A business in the case of land in the United Kingdom applies where the corresponding circumstances arise with respect to land outside the United Kingdom so as to deem there to be a business within subsection (1)(a) above.
 
      (4) All businesses and transactions carried on or entered into by a particular company or partnership, so far as they are businesses or transactions the income from which is chargeable to tax under Case V of Schedule D in accordance with this section, are treated for the purposes of the charge to tax under Case V as, or as entered into in the course of carrying on, a single business (an "overseas property business").
 
      (5) The income from an overseas property business shall be computed for the purposes of Case V of Schedule D in accordance with the rules applicable to the computation of the profits of a Schedule A business.
 
  Those rules apply separately in relation to-
 
 
    (a) an overseas property business, and
 
    (b) any actual Schedule A business of the company chargeable,
  as if each were the only Schedule A business carried on by that company.
 
      (6) Sections 503 and 504 of this Act and section 29 of the 1990 Act (provisions relating to furnished holiday accommodation) do not apply to the profits or losses of an overseas property business.
 
      (7) Where under this section rules expressed by reference to domestic concepts of law apply in relation to land outside the United Kingdom, they shall be interpreted so as to produce the result that most closely corresponds with the result produced for Schedule A purposes in relation to land in the United Kingdom.".
 
 
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