Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 10 — Post-cessation receipts
156

348
Person liable
The person liable for any tax charged under this Chapter is the person
receiving or entitled to the rent.
Chapter 10
Post-cessation receipts
5
Charge to tax on post-cessation receipts
349
Charge to tax on post-cessation receipts
Income tax is charged on post-cessation receipts arising from a UK property
business.
350
Extent of charge to tax
10
(1)
A post-cessation receipt is chargeable to tax under this Chapter only so far as
the receipt is not otherwise chargeable to income or corporation tax.
(2)
Accordingly, a post-cessation receipt arising from a UK property business is
not chargeable to tax under this Chapter so far as it is brought into account in
calculating the profits of the business for any period.
15
351
Income charged
(1)
Tax is charged under this Chapter on the full amount of the receipts received
in the tax year.
(2)
This is subject to—
(a)
sections 254 and 255 (allowable deductions), and
20
(b)
section 257 (election to carry back),

which apply for the purposes of this Chapter as they apply for the purposes of
Chapter 18 of Part 2 (but as if any reference to a trade were to a UK property
business).
352
Person liable
25
The person liable for any tax charged under this Chapter is the person
receiving or entitled to the receipts.
Meaning of "post-cessation receipts"
353
Basic meaning of “post-cessation receipt”
(1)
In this Chapter “post-cessation receipt” means a sum—
30
(a)
which is received after a person permanently ceases to carry on a UK
property business, and
(b)
which arises from the carrying on of the business before the cessation.
(2)
Subsection (3) applies if—
(a)
a firm carries on a UK property business,
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Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 10 — Post-cessation receipts
157

(b)
a person ceases to be a partner in the firm, and
(c)
at least one of the persons with whom the partner carried on the
business before ceasing to be a partner continues to carry it on
afterwards.
(3)
The partner is treated for the purposes of this Chapter as permanently ceasing
5
to carry on the business.
354
Other rules about what counts as a “post-cessation receipt”
(1)
Section 355 (transfer of rights if transferee does not carry on UK property
business) treats certain amounts as being, or not being, post-cessation receipts
for the purposes of this Chapter.
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(2)
The following provisions (which treat certain amounts as post-cessation
receipts) apply for the purposes of this Chapter as they apply for the purposes
of Chapter 18 of Part 2 (but as if any reference to a trade were to a UK property
business)—
section 82(6) (contributions to local enterprise organisations or urban
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regeneration companies),
section 104(3) (distribution of assets of mutual concerns),
section 109(2) (receipt by donor or connected person of benefit
attributable to certain gifts),
section 248 (debts paid after cessation),
20
section 249 (debts released after cessation), as qualified, where
appropriate, by section 48(4) (car or motor cycle hire), and
section 250 (receipts relating to post-cessation expenditure).
(3)
This Chapter also needs to be read with—
(a)
section 310(3) (which treats certain amounts as not being post-cessation
25
receipts), and
(b)
section 844 (which treats certain income as a post-cessation receipt:
unremittable income).
355
Transfer of rights if transferee does not carry on UK property business
(1)
This section applies if—
30
(a)
a person (“the transferor”) permanently ceases to carry on a UK
property business,
(b)
the transferor transfers to another person (“the transferee”) for value
the right to receive sums arising from the carrying on of any business
(“the transferred business”) comprised in the transferor’s UK property
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business, and
(c)
the transferee does not subsequently carry on the transferred business.
(2)
The transferor is treated as receiving a post-cessation receipt.
(3)
The amount of the receipt is—
(a)
the amount or value of the consideration for the transfer, if the transfer
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is at arm’s length, or
(b)
the value of the rights transferred as between parties at arm’s length, if
the transfer is not at arm’s length.

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 11 — Overseas property income
158

(4)
Any sums mentioned in subsection (1)(b) which are received after the cessation
of the property business are not post-cessation receipts.
Supplementary
356
Application to Schedule A businesses
(1)
In this Chapter (except in section 355) any reference to a UK property business
5
includes a Schedule A business.
(2)
In this Chapter (except in section 355) any reference to a person permanently
ceasing to carry on a UK property business includes the occurrence of an event
which under section 337 of ICTA is treated as the discontinuance of a Schedule
A business.
10
(3)
In applying any provision of Chapter 18 of Part 2 for the purposes of this
Chapter references to the calculation of the profits of a trade for corporation tax
purposes are to be read as references to the calculation of the profits of a
Schedule A business for corporation tax purposes.
Chapter 11
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Overseas property income
357
Charge to tax on overseas property income
Income tax is charged on the overseas property income of a person to whom
the remittance basis applies.
358
Meaning of “overseas property income”
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In this Chapter “overseas property income”, in relation to a person to whom
the remittance basis applies, means amounts which—
(a)
are not brought into account in calculating the profits of any overseas
property business of the person, but
(b)
would be if section 269(3) (charge to tax on profits of an overseas
25
property business of a person to whom the remittance basis applies
only in respect of land in the Republic of Ireland) were omitted.
359
Income charged
Tax is charged under this Chapter on the amount specified by section 832
(relevant foreign income charged on the remittance basis).
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360
Person liable
The person liable for any tax charged under this Chapter is the person
receiving or entitled to the income.

Income Tax (Trading and Other Income) Bill
Part 3 — Property income
Chapter 12 — Supplementary
159

Chapter 12
Supplementary
361
Changes in trustees and personal representatives
(1)
This section applies if there is a change—
(a)
in the trustees of a trust, or
5
(b)
in the personal representatives of a person,

at a time when they are carrying on a property business.
(2)
For income tax purposes, the change does not result in—
(a)
any of the trustees or personal representatives before the change
permanently ceasing to carry on the business, or
10
(b)
any of the trustees or personal representatives after the change starting
to carry on the business.
362
Effect of company starting or ceasing to be within charge to income tax
(1)
This section applies if a company starts or ceases to be within the charge to
income tax under Chapter 3 of this Part in respect of a UK property business.
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(2)
The company is treated for the purposes of this Part—
(a)
as starting to carry on the business when it starts to be within the
charge, or
(b)
as permanently ceasing to carry on the business when it ceases to be
within the charge.
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363
Overseas property businesses and overseas land: adaptation of rules
(1)
This section applies if a provision of this Part—
(a)
applies to an overseas property business or land outside the United
Kingdom, but
(b)
is expressed by reference to a domestic concept of law.
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(2)
In relation to that business or land, the provision is to be read so as to produce
the result most closely corresponding with that produced by the provision in
relation to a UK property business or land in the United Kingdom.
364
Meaning of “lease” and “premises”
(1)
In this Part “lease” includes—
30
(a)
an agreement for a lease (so far as the context permits), and
(b)
any tenancy,

but does not include a mortgage.
(2)
In this Part “premises” includes land.

Income Tax (Trading and Other Income) Bill
Part 4 — Savings and investment income
Chapter 1 — Introduction
160

Part 4
Savings and investment income
Chapter 1
Introduction
365
Overview of Part 4
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(1)
This Part imposes charges to income tax under—
(a)
Chapter 2 (interest),
(b)
Chapter 3 (dividends etc. from UK resident companies etc.),
(c)
Chapter 4 (dividends from non-UK resident companies),
(d)
Chapter 5 (stock dividends from UK resident companies),
10
(e)
Chapter 6 (release of loan to participator in close company),
(f)
Chapter 7 (purchased life annuity payments),
(g)
Chapter 8 (profits from deeply discounted securities),
(h)
Chapter 9 (gains from contracts for life insurance etc.),
(i)
Chapter 10 (distributions from unauthorised unit trusts),
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(j)
Chapter 11 (transactions in deposits),
(k)
Chapter 12 (disposals of futures and options involving guaranteed
returns), and
(l)
Chapter 13 (sales of foreign dividend coupons).
(2)
Part 6 deals with exemptions from the charges under this Part.
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(3)
See, in particular, any exemptions mentioned in the particular Chapters.
(4)
The charges under this Part apply to non-UK residents as well as UK residents
but this is subject to section 368(2) (charges on non-UK residents only on UK
source income).
(5)
This section needs to be read with the relevant priority rules (see sections 2 and
25
366).
366
Provisions which must be given priority over Part 4
(1)
Any income, so far as it falls within—
(a)
any Chapter of this Part, and
(b)
Chapter 2 of Part 2 (receipts of a trade, profession or vocation),
30

is dealt with under Part 2.
(2)
Any income, so far as it falls within—
(a)
any Chapter of this Part, and
(b)
Chapter 3 of Part 3 so far as the Chapter relates to a UK property
business,
35

is dealt with under Part 3.
(3)
Any income, so far as it falls within—
(a)
any Chapter of this Part other than Chapter 3 or 6, and
(b)
Part 2, 9 or 10 of ITEPA 2003 (employment income, pension income or
social security income),
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Income Tax (Trading and Other Income) Bill
Part 4 — Savings and investment income
Chapter 2 — Interest
161


is dealt with under the relevant Part of ITEPA 2003.
(4)
Nothing in this section prevents amounts both—
(a)
being counted as income for the purposes of Chapter 9 of this Part
(gains from contracts for life insurance etc.), and
(b)
being taken into account in calculating income, or counting as income,
5
for the purposes of other Parts of this Act,

but see section 527 (reduction for sums taken into account otherwise than
under Chapter 9).
367
Priority between Chapters within Part 4
(1)
Any income, so far as it falls within Chapter 2 (interest) and Chapter 8 (profits
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from deeply discounted securities), is dealt with under Chapter 8.
(2)
Any income, so far as it falls within Chapter 3 (dividends etc. from UK resident
companies etc.) and another Chapter, is dealt with under Chapter 3 (but this is
subject to subsection (3)).
(3)
Any income, so far as it falls within—
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(a)
Chapter 2 (interest) as a result of section 372 (building society
dividends) or 379 (industrial and provident society payments), and
(b)
Chapter 3,

is dealt with under Chapter 2.
368
Territorial scope of Part 4 charges
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(1)
Income arising to a UK resident is chargeable to tax under this Part whether or
not it is from a source in the United Kingdom.
(2)
Income arising to a non-UK resident is chargeable to tax under this Part only if
it is from a source in the United Kingdom.
(3)
References in this section to income which is from a source in the United
25
Kingdom include, in the case of any income which does not have a source,
references to income which has a comparable connection to the United
Kingdom.
(4)
This section is subject to any express or implied provision to the contrary in this
Part (or elsewhere in the Income Tax Acts).
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Chapter 2
Interest
Charge to tax on interest
369
Charge to tax on interest
(1)
Income tax is charged on interest.
35
(2)
The following sections extend what is treated as interest for certain purposes—
section 372 (building society dividends),
section 373 (open-ended investment company interest distributions),

Income Tax (Trading and Other Income) Bill
Part 4 — Savings and investment income
Chapter 2 — Interest
162

section 376 (authorised unit trust interest distributions),
section 379 (industrial and provident society payments),
section 380 (funding bonds), and
section 381 (discounts).
(3)
For exemptions, see in particular—
5
(a)
Chapter 2 of Part 6 (national savings income),
(b)
Chapter 3 of Part 6 (income from individual investment plans),
(c)
Chapter 4 of Part 6 (SAYE interest),
(d)
Chapter 6 of Part 6 (income from FOTRA securities),
(e)
sections 749 to 756 (interest arising from repayment supplements, tax
10
reserve certificates, damages for personal injury, employees’ share
schemes, repayments of student loans, the redemption of funding
bonds and interest on certain foreign currency securities), and
(f)
sections 757 to 767 (interest and royalty payments).
(4)
Subsection (1) is also subject to sections 714(5), 716(4) and 720(7) of ICTA
15
(exemptions for interest on securities within the accrued income scheme).
370
Income charged
(1)
Tax is charged under this Chapter on the full amount of the interest arising in
the tax year.
(2)
Subsection (1) is subject to Part 8 (foreign income: special rules).
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371
Person liable
The person liable for any tax charged under this Chapter is the person
receiving or entitled to the interest.
Other income taxed as interest
372
Building society dividends
25
(1)
Any dividend paid by a building society is treated as interest for the purposes
of this Act.
(2)
In this section “dividend” has the meaning given by regulations made under
section 477A(1) of ICTA (building societies: regulations for the deduction of
tax).
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373
Open-ended investment company interest distributions
(1)
This section applies if the distribution accounts of an open-ended investment
company show the total amount available for distribution to owners of shares
in the company as available for distribution as yearly interest.
(2)
Subsection (1) is subject to subsections (6) and (7).
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(3)
For income tax purposes payments of yearly interest are treated as made to the
owners of the shares by the company.
(4)
Subsection (3) is subject to the qualifications in section 468L(4) of ICTA (which
modifies the obligation for a person by or through whom a payment of interest