Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 2 — General calculation rules etc.
376

(b)
section 272 (in relation to property businesses).
Apportionment of profits
871
Apportionment etc. of miscellaneous profits to tax year
(1)
This section applies if—
(a)
income is chargeable to income tax under or by virtue of any provision
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to which section 836B of ICTA applies, and
(b)
any period for which the accounts are drawn up (a “period of account”)
does not coincide with a tax year.
(2)
For this purpose the reference to any provision to which section 836B of ICTA
applies is to be read as if subsection (4)(a) of that section were omitted
10
(exclusion for relevant foreign income charged under this Act).
(3)
Any of the following steps may be taken if they are necessary in order to arrive
at the profits or losses of the tax year—
(a)
apportioning the profits or losses of a period of account to the parts of
that period falling in different tax years, and
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(b)
adding the profits or losses of a period of account (or part of a period)
to profits or losses of other periods of account (or parts).
(4)
The steps must be taken by reference to the number of days in the periods
concerned.
(5)
But the person to whom the profits or losses arise may use a different way of
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measuring the length of the periods concerned if—
(a)
it is reasonable to do so, and
(b)
the way of measuring the length of periods is used consistently for the
purpose of charging to income tax the income in question.
Calculation of losses
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872
Losses calculated on same basis as miscellaneous income
(1)
The same rules apply for income tax purposes in calculating miscellaneous
losses as apply in calculating corresponding miscellaneous income.
(2)
This is subject to any express provision to the contrary.
(3)
In this section—
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(a)
“miscellaneous income” means profits or other income charged to
income tax under or by virtue of a provision to which section 836B of
ICTA applies, and
(b)
“miscellaneous losses” means losses arising from a transaction which is
of such a nature that, if profits or other income had arisen from it, the
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income would have been charged to income tax under or by virtue of
such a provision.
(4)
Provision corresponding to that made by this section is made by—
(a)
section 26 (in relation to trades, professions and vocations), and
(b)
section 272 (in relation to property businesses).
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Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
377

Chapter 3
Supplementary and general provisions
Orders and regulations
873
Orders and regulations made by Treasury or Board
(1)
Any power of the Treasury or the Board of Inland Revenue to make any order
5
or regulations under this Act is exercisable by statutory instrument.
(2)
Any statutory instrument containing any order or regulations made by the
Treasury or the Board of Inland Revenue under this Act is subject to annulment
in pursuance of a resolution of the House of Commons.
(3)
Subsection (2) does not apply in relation to any order or regulations made
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under—
(a)
section 86 (meaning of “urban regeneration company”),
(b)
section 724 (purchased life annuity payments),
(c)
section 774 (income from securities issued by designated international
organisations), or
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(d)
section 883(5) (transitional or saving provision).
Interpretation
874
Activities in UK sector of continental shelf
(1)
Any profits—
(a)
from exploration or exploitation activities carried on in the UK sector of
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the continental shelf, or
(b)
from exploration or exploitation rights,

are treated for income tax purposes as profits from activities or property in the
United Kingdom.
(2)
In this section—
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“exploration or exploitation activities” means activities carried on in
connection with the exploration or exploitation of so much of the
seabed and subsoil and their natural resources as is situated in the
United Kingdom or the UK sector of the continental shelf,
“exploration or exploitation rights” means rights to assets to be produced
30
by exploration or exploitation activities or interests in or to the benefit
of such assets, and
“the UK sector of the continental shelf” means the areas designated by
Order in Council under section 1(7) of the Continental Shelf Act 1964
(c. 29).
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875
Meaning of “caravan”
(1)
In this Act “caravan” means—
(a)
a structure designed or adapted for human habitation which is capable
of being moved by being towed or being transported on a motor vehicle
or trailer, or
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(b)
a motor vehicle designed or adapted for human habitation,

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
378


but does not include railway rolling stock which is on rails forming part of a
railway system or any tent.
(2)
A structure composed of two sections—
(a)
separately constructed, and
(b)
designed to be assembled on a site by means of bolts, clamps or other
5
devices,

is not prevented from being a caravan just because it cannot, when assembled,
be lawfully moved on a highway (or, in Scotland or Northern Ireland, road) by
being towed or being transported on a motor vehicle or trailer.
876
Meaning of “farming” and related expressions
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(1)
In this Act “farming” means the occupation of land wholly or mainly for the
purposes of husbandry, but does not include market gardening (see subsection
(5)).
(2)
Husbandry includes (for example)—
(a)
hop growing, and
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(b)
the breeding and rearing of horses and the grazing of horses in
connection with those activities.
(3)
For the purposes of this Act the cultivation of short rotation coppice is
regarded as farming and not as forestry.
(4)
In this Act “woodlands” does not include land on which short rotation coppice
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is cultivated.
(5)
In this Act “market gardening” means the occupation of land as a garden or
nursery for the purpose of growing produce for sale.
(6)
For the purposes of this section “short rotation coppice” means a perennial
crop of tree species planted at high density, the stems of which are harvested
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above ground level at intervals of less than 10 years.
877
Meaning of grossing up
(1)
In this Act references to grossing up by reference to a rate of tax are to
calculating the amount (“the gross amount”) which after deduction of income
tax at that rate would equal the amount to be grossed up (“the net amount”).
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(2)
The gross amount is the sum of the net amount and the tax deducted.
(3)
The gross amount may also be expressed as—

where—
GA is the gross amount,
NA is the net amount, and
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R is the percentage rate of tax by reference to which the net amount is to
be grossed up.

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
379

878
Other definitions
(1)
In this Act, unless otherwise indicated (whether expressly or by implication)—
“the Board of Inland Revenue” means the Commissioners of Inland
Revenue,
“charity” means a body of persons or trust established for charitable
5
purposes only,
“houseboat” means a boat or similar structure designed or adapted for use
as a place of human habitation,
“income” includes amounts treated as income (whether expressly or by
implication),
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“the Inland Revenue” means any officer of the Board of Inland Revenue,
“non-UK resident” means not resident in the United Kingdom (and
references to a non-UK resident or a non-UK resident person are to a
person who is not resident there),
“normal self-assessment filing date”, in relation to a tax year, means the
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31st January following the tax year,
“personal representatives”, in relation to a person who has died, means—
(a)
in the United Kingdom, persons responsible for administering
the estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having
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functions under its law equivalent to those of administering the
estate of the deceased,
“tax year”, in relation to income tax, means a year for which any Act
provides for income tax to be charged,
“the tax year 2005-06” means the tax year beginning on 6th April 2005
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(and any corresponding expression in which two years are similarly
mentioned is to be read in the same way), and
“UK resident” means resident in the United Kingdom (and references to a
UK resident or a UK resident person are to a person who is resident
there).
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(2)
For the purposes of this Act, the remittance basis applies to a person for a tax
year for which the person makes a claim under section 831 (claims for relevant
foreign income to be charged on the remittance basis).
(3)
In this Act any reference to a claim or election is to a claim or election in writing
or in any form authorised (in relation to the case in question) by directions
35
under section 118 of FA 1998.
(4)
For further information about claims and elections, see TMA 1970 (in
particular, section 42(2), (10) and (11) and Schedule 1A).
(5)
Section 839 of ICTA (how to tell whether persons are connected) applies for the
purposes of this Act unless otherwise indicated (whether expressly or by
40
implication).
(6)
Section 840 of ICTA (meaning of control in relation to a body corporate) applies
for the purposes of this Act unless otherwise indicated (whether expressly or
by implication).
879
Interpretation: Scotland
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(1)
In the application of this Act to Scotland—
“assignment” means an assignation,

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
380

“mortgage” means—
(a)
a standard security, or
(b)
a heritable security, as defined in the Conveyancing (Scotland)
Act 1924 (c. 27), but including a security constituted by ex facie
absolute disposition or assignation, and
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“surrender” includes renunciation.
(2)
In the application of this Act to Scotland, any reference to property or rights
being held on trust or on trusts is a reference to the property or rights being
held in trust.
(3)
In the application of section 755 (interest on foreign currency securities etc.
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owned by non-UK residents) to Scotland, “Act” includes an Act of the Scottish
Parliament.
(4)
In the application of sections 769 (housing grants) and 882 (consequential
amendments) and Part 1 of Schedule 2 (transitionals and savings: general
provisions) to Scotland, “enactment” includes an enactment comprised in, or in
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an instrument made under, an Act of the Scottish Parliament.
(5)
The express provision made by subsection (3) does not affect the construction
of “enactment” in the application of section 631 (retained and accumulated
income) to Scotland.
880
Interpretation: Northern Ireland
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(1)
In the application of section 755 (interest on foreign currency securities etc.
owned by non-UK residents) to Northern Ireland, “Act” includes any Act,
Order in Council or Measure constituting Northern Ireland legislation.
(2)
In the application of section 769 (housing grants) and 882 (consequential
amendments) and Part 1 of Schedule 2 (transitionals and savings: general
25
provisions) to Northern Ireland, “enactment” includes an enactment
comprised in, or in an instrument made under, Northern Ireland legislation.
(3)
The express provision made by subsection (2) does not affect the construction
of “enactment” in the application of section 631 (retained and accumulated
income) to Northern Ireland.
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General and final
881
Disapplication of corporation tax: section 9 of ICTA
Section 9 of ICTA (computation of income for corporation tax purposes:
application of income tax principles) does not operate on the provisions of this
Act so as to convert them into provisions of the Corporation Tax Acts.
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882
Consequential amendments
(1)
Schedule 1 (which contains consequential amendments) has effect.
(2)
The Treasury may by order make such modifications of any enactment or
provision made under an enactment as the Treasury consider appropriate in
consequence of this Act.
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(3)
In subsection (2) “modifications” includes amendments or repeals.

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
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(4)
An order under subsection (2)—
(a)
must not change the effect of the law as it was immediately before 6th
April 2005, and
(b)
may include such transitional or saving provision as the Treasury
consider appropriate.
5
(5)
Subsection (4)(a) does not apply so far as an order contains provision made in
consequence of a change already made by this Act in the effect of the law.
883
Commencement and transitional provisions etc.
(1)
This Act comes into force on 6th April 2005 and has effect—
(a)
for income tax purposes, for the tax year 2005-06 and subsequent tax
10
years, and
(b)
for corporation tax purposes, for accounting periods ending after 5th
April 2005.
(2)
Subsection (1) is subject to subsections (3) to (5) (including Schedule 2).
(3)
Subsection (1) does not apply to the following provisions of this Act (which
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therefore come into force on the passing of this Act)—
(a)
section 873 (orders and regulations made by Treasury or Board),
(b)
sections 875 to 881 (certain interpretation and general provisions),
(c)
section 882(2) to (5) (power to make consequential amendments),
(d)
this section other than subsection (4) below,
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(e)
section 885 and Schedule 4 (abbreviations and general index),
(f)
section 886 (short title), and
(g)
paragraphs 78 and 148(5) of Schedule 2 (powers relating to open-ended
investment companies and periodical payments of personal injury
damages etc.) and subsection (4) below so far as it applies for the
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purposes of those provisions.
(4)
Schedule 2 (which contains transitional provisions and savings etc.) has effect.
(5)
The Treasury may by order make such transitional or saving provision as the
Treasury consider appropriate in connection with the coming into force of this
Act.
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884
Repeals and revocations
Schedule 3 (which contains repeals and revocations of enactments including
certain spent enactments) has effect.
885
Abbreviations and general index in Schedule 4
(1)
Schedule 4 (which contains abbreviations and defined expressions that apply
35
for the purposes of this Act) has effect.
(2)
Part 1 of that Schedule gives the meaning of the abbreviated references to Acts
used in this Act.
(3)
Part 2 of that Schedule lists the places where expressions used in this Act are
defined or otherwise explained—
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(a)
in this Act for the purposes of this Act or for purposes including this
Act,

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
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(b)
in this Act for the purposes of a Part or Chapter of this Act, or
(c)
in ICTA or ITEPA 2003 for the purposes of this Act.
886
Short title
This Act may be cited as the Income Tax (Trading and Other Income) Act 2005.