Income Tax (Trading and Other Income) Bill

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

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
397

(b)
for “, profession or vocation” substitute “or profession”.
      (3)
In subsection (2), in the definition of “deductible”, after “charged” insert “to
corporation tax”.
61
In section 86A (charitable donations: contributions to agent’s expenses) —
(a)
in subsection (1) for “a person” substitute “a company”, and
5
(b)
in subsection (2)(a) for “, profession or vocation” substitute “or
profession”.
62    (1)
Amend section 87 (taxable premiums etc.) as follows.
      (2)
In subsection (1)—
(a)
for “trade, profession or vocation” substitute “trade or profession”,
10
(b)
omit “or” at the end of paragraph (a),
(c)
after paragraph (b) insert—
“(c)
any amount falls to be treated as a receipt of a UK
property business by virtue of any of sections 277 to
282 of ITTOIA 2005 (receipts in respect of lease
15
premiums, sums payable instead of rent, for
surrender of lease and for variation or waiver of term
of lease and assignments), or
(d)
any amount would fall to be so treated but for the
operation of the rule in section 288 of that Act (the
20
additional calculation rule),”, and
(d)
after “below” insert “and in section 87A”.
      (3)
In subsection (2)—
(a)
for “the person” substitute “a company which is”,
(b)
for “trade, profession or vocation”, in both places where it occurs,
25
substitute “trade or profession”,
(c)
for “him” substitute “the company”,
(d)
for “he” substitute “the company”, and
(e)
for “tax” substitute “corporation tax”.
      (4)
In subsection (4)—
30
(a)
for “person” substitute “company”,
(b)
for “his” substitute “the company’s”,
(c)
for “trade, profession or vocation” substitute “trade or profession”,
and
(d)
for “him”, in both places where it occurs, substitute “the company”.
35
      (5)
In subsection (6)—
(a)
for “chargeable period”, wherever it occurs, substitute “accounting
period”,
(b)
for “person” substitute “company”, and
(c)
for “him” substitute “the company”.
40
      (6)
In subsection (7)—
(a)
for “his” substitute “the company’s”,
(b)
for “person” substitute “company”,
(c)
for “chargeable period”, wherever it occurs, substitute “accounting
period”, and
45
(d)
for “him”, in both places where it occurs, substitute “the company”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
398

      (7)
In subsection (8) after “section 34(2)” insert “or under section 277 of ITTOIA
2005 by virtue of section 278 of that Act (amount treated as lease premium
where work required)”.
      (8)
In subsection (9) after paragraph (b) insert—
“(c)
where the amount chargeable arose under Chapter 4 of Part
5
3 of ITTOIA 2005 (profits of property businesses: lease
premiums etc.), its receipt period (within the meaning of that
Chapter (see section 288(6)).”
      (9)
After subsection (9) insert—
“(9A)
In the application of this section and section 87A to Scotland—
10
(a)
the reference to a lease being granted out of the interest
referred to in subsection (4) above is to the grant of a sublease
of land subject to that interest, and
(b)
references to the lease so granted are to be construed as
references to the sublease.”
15
63
After section 87 insert—
“87A
Section 87(2) and (3) and reductions in receipts under ITTOIA 2005
(1)
This section applies if—
(a)
a lease has been granted out of the interest referred to in
section 87(4),
20
(b)
in calculating the amount that falls to be treated as a receipt
of a UK property business under Chapter 4 of Part 3 of
ITTOIA 2005 in respect of the lease, there is a reduction under
section 288 of that Act by reference to a taxed receipt, and
(c)
the taxed receipt is the amount chargeable for the purposes of
25
section 87.
(2)
Section 37A (section 37(4) and reductions in receipts under ITTOIA
2005) shall apply for modifying the operation of section 87(2) and (3)
as it applies for modifying the operation of section 37(4).
(3)
In this section the following expressions have the same meaning as
30
in Chapter 4 of Part 3 of ITTOIA 2005—
“reduction under section 288 by reference to a taxed receipt”
(see section 290(6) of that Act), and
“taxed receipt” (see section 287(4) of that Act).”
64
In section 88 (payments to Export Credits Guarantee Department)—
35
(a)
for “a person” substitute “a company”,
(b)
for “trade, profession or vocation carried on by that person”
substitute “trade or profession carried on by that company”, and
(c)
for “if that person” substitute “if that company”.
65
For section 89 (debts proving irrecoverable after event treated as
40
discontinuance) substitute—
“89
Debts proving to be irrecoverable after discontinuance etc
(1)
This section applies if—
(a)
section 337(1) applies to treat a trade as discontinued by
reason of any event, or
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
399

(b)
a person permanently ceases to carry on a trade or profession,

and a company carries on the trade or profession after that event or
cessation.
(2)
In computing for corporation tax purposes the profits of the trade or
profession in any period after the event or cessation, there may be
5
deducted a sum equal to any amount proved during that period to
be irrecoverable in respect of any debts—
(a)
which were credited in computing for tax purposes the
profits for any period before the event or cessation, and
(b)
in respect of which the benefit was assigned to the company
10
carrying on the trade or profession after the event or
cessation.
(3)
Subsection (2) applies only so far as the total amount proved to be
irrecoverable in respect of the debts exceeds any deduction allowed
in respect of them under—
15
(a)
section 74(1)(j), or
(b)
section 35 of ITTOIA 2005,

in a computation for any period before the event or cessation.”
66    (1)
Amend section 90 (additional payments to redundant employees) as
follows.
20
      (2)
In subsection (1)—
(a)
for “, profession or vocation” substitute “or profession”, and
(b)
for “profession, vocation or business”, in both places, substitute
“profession or business”.
      (3)
In subsection (3)—
25
(a)
for “profession, vocation or business” substitute “profession or
business”, and
(b)
omit “113(1) or”.
67    (1)
Amend section 91 (cemeteries) as follows.
      (2)
In subsection (1)—
30
(a)
after “computing” insert “for corporation tax purposes”, and
(b)
for “the person” substitute “the company”.
      (3)
In subsection (2) for “the person” substitute “the company”.
      (4)
In subsection (4)(a)(i)—
(a)
after “above” insert “, or under section 170(2)(b) of ITTOIA 2005
35
(relief for income tax purposes)”, and
(b)
after “computing” insert “for tax purposes”.
      (5)
In subsection (4)(a)(ii)—
(a)
for “the person” substitute “the company”, and
(b)
for “him” substitute “it”.
40
      (6)
In subsection (5)—
(a)
for “the persons carrying on the trade after the change” substitute
“the company carrying on the trade after the change”,
(b)
for “they” substitute “the company”,
(c)
for “their” substitute “its”, and
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
400

(d)
for “them” substitute “it”.
      (7)
For subsection (6) substitute—
“(6)
No expenditure shall be taken into account—
(a)
under both paragraphs (a) and (b) of subsection (1) above, or
(b)
under both subsection (1)(a) above and section 170(2)(b) of
5
ITTOIA 2005 or under both subsection (1)(b) above and
section 170(2)(a) of ITTOIA 2005,

whether for the same or different periods.”
68
In section 91A (waste disposal: restoration payments)—
(a)
in subsection (1) for “person” substitute “company”, and
10
(b)
in subsection (2) omit “income tax or”.
69
In section 91B (waste: disposal: preparation expenditure)—
(a)
in subsection (1) for “person”, in both places where it occurs,
substitute “company”,
(b)
in subsection (2) omit “income tax or”,
15
(c)
in subsection (4) for “person” substitute “company”,
(d)
in subsection (5)(a) after “computing” insert “for the purposes of
corporation tax or income tax”,
(e)
in subsection (5)(b) after “made” insert “for the purposes of
corporation tax or income tax”,
20
(f)
in subsection (6) after “this section” insert “or section 165 of ITTOIA
2005 (relief for income tax purposes)” and after “computing” insert
“for the purposes of corporation tax or income tax”, and
(g)
in subsection (10A) for “person”, in both places where it occurs,
substitute “company” and for “he” substitute “it”.
25
70
In section 91BA (waste disposal: entitlement of successor to allowances)—
(a)
in subsection (1) after “another person” insert “that is a company”,
and
(b)
in subsection (4) for “he” substitute “it”.
71
In section 91C (mineral exploration and access) for “person” substitute
30
“company” and for “tax” substitute “corporation tax”.
72
In section 93(1) (other grants under Industrial Development Act 1982 etc.)—
(a)
for “person” substitute “company”, and
(b)
after “chargeable” insert “to corporation tax”.
73
In section 94(1) (debts deducted and subsequently released)—
35
(a)
for “tax purposes” substitute “corporation tax purposes”, and
(b)
for “trade, profession or vocation”, wherever it occurs, substitute
“trade or profession”.
74    (1)
Amend section 95 (taxation of dealers in respect of distributions etc.) as
follows.
40
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (1A) omit paragraph (a).
      (4)
In subsection (2) for “tax” substitute “corporation tax”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
401

75
Omit section 95A (creative artists: relief for fluctuating profits).
76
Omit section 96 (farming and market gardening: relief for fluctuating
profits).
77
In section 98(1) (tied premises: receipts and expenses treated as those of a
trade)—
5
(a)
after “This section applies” insert “for corporation tax purposes”,
(b)
for “a person (“the trader”)” substitute “a company (“the trader”)”,
and
(c)
for “another person” substitute “a person other than the trader”.
78    (1)
Amend section 99 (dealers in land) as follows.
10
      (2)
In subsection (1) for “tax purposes” substitute “corporation tax purposes”.
      (3)
In subsection (2) for “tax” substitute “corporation tax”.
      (4)
In subsection (3)—
(a)
for “tax”, in each place where it occurs, substitute “corporation tax”,
(b)
for “chargeable periods” substitute “accounting periods”, and
15
(c)
for “chargeable period” substitute “accounting period”.
79    (1)
Amend section 100 (valuation of trading stock at discontinuance of trade) as
follows.
      (2)
In subsection (1) for “any tax purpose”, in the first place where it occurs,
substitute “any corporation tax purpose”.
20
      (3)
In subsection (1A)—
(a)
for “the person who” substitute “the company which”, and
(b)
for “those persons” substitute “that person and that company”.
      (4)
In subsection (1C)(c) for “chargeable period” substitute “accounting period”.
      (5)
In subsection (1D) after “in computing for any” insert “corporation”.
25
      (6)
In subsection (1E)—
(a)
for the words from the beginning to “subsections (1A) to (1C) above
to be” substitute “Where the value of the trading stock is determined
in accordance with subsections (1A) to (1C) above, or sections 176 to
178 of ITTOIA 2005 or section 127 of that Act (by virtue of section
30
175(3)) (corresponding provisions for income tax purposes),” and
(b)
after “for the purpose of making” insert “for corporation tax
purposes”.
      (7)
In subsection (2)(b) omit “or vocation” in both places where it occurs.
80    (1)
Amend section 101 (valuation of work in progress at discontinuance of
35
profession or vocation) as follows.
      (2)
In subsection (1)—
(a)
for “any tax purpose”, in the first place where it occurs, substitute
“any corporation tax purpose”, and
(b)
omit “or vocation”, wherever it occurs.
40
      (3)
In subsection (2) omit “or vocation” and for “person by whom” substitute
“company by which”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
402

      (4)
In subsection (2A)—
(a)
omit paragraph (a), and
(b)
in paragraph (b), omit “in the case of an election for the purposes of
corporation tax,” and “or vocation”.
      (5)
In subsection (3) omit “or vocation”, wherever it occurs.
5
81    (1)
Amend section 102 (provisions supplementary to sections 100 and 101) as
follows.
      (2)
In subsection (1)—
(a)
omit “or vocations”, and
(b)
for “trade, profession or vocation” substitute “trade or profession”.
10
      (3)
In subsection (2)—
(a)
omit “113 or”,
(b)
for “trade, profession or vocation” substitute “trade or profession”,
(c)
after “computing” insert “corporation”, and
(d)
omit the words from “but those sections” to the end.
15
82    (1)
Amend section 103 (receipts after discontinuance: earnings basis charge and
related charge affecting conventional basis) as follows.
      (2)
In subsection (1)—
(a)
after “vocation” insert “carried on wholly or partly in the United
Kingdom”,
20
(b)
omit “under Case I or II of Schedule D”, and
(c)
for “tax shall be charged under Case VI of that Schedule” substitute
“corporation tax shall be charged under Case VI of Schedule D”.
      (3)
In subsection (3)—
(a)
in paragraph (a)—
25
(i)
for “person”, in the first place where it occurs, substitute
“company”,
(ii)
for “who” substitute “which”, and
(iii)
for “his” substitute “its”,
(b)
omit paragraphs (b) and (bb), and
30
(c)
omit the words from “Paragraph (b) above shall” to the end.
      (4)
In subsection (5) at the end insert “above or under section 35 of ITTOIA
2005”.
83    (1)
Amend section 104 (conventional basis: general charge on receipts after
discontinuance or change of basis) as follows.
35
      (2)
In subsection (1)—
(a)
after “vocation” insert “carried on wholly or partly in the United
Kingdom”,
(b)
omit “under Case I or II of Schedule D”, and
(c)
for “tax shall be charged under Case VI of that Schedule” substitute
40
“corporation tax shall be charged under Case VI of Schedule D”.
      (3)
In subsection (3)—
(a)
for “tax”, in the second place where it occurs, substitute “corporation
tax”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
403

(b)
omit “and (b)”.
84    (1)
Amend section 105 (allowable deductions) as follows.
      (2)
In subsection (1)—
(a)
for “tax”, in the first three places where it occurs, substitute
“corporation tax”,
5
(b)
for “person”, in the first place where it occurs, substitute “company”,
and
(c)
for “him” substitute “it”.
      (3)
In subsection (3) for “chargeable period”, in each place where it occurs,
substitute “accounting period”.
10
85    (1)
Amend section 106 (application of charges where rights to payments
transferred) as follows.
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (2)—
(a)
for “the persons carrying on the trade,” substitute “the company
15
carrying on the trade,”
(b)
for “tax” substitute “corporation tax”,
(c)
for “those persons” substitute “that company”, and
(d)
for “all purposes” substitute “corporation tax purposes”.
86
Omit section 107 (treatment of receipts as earned income).
20
87
Omit section 108 (election for carry-back).
88
Omit section 109 (charge under section 104: relief for individuals born before
6th April 1917).
89    (1)
Amend section 109A (relief for post-cessation expenditure) as follows.
      (2)
Omit subsection (3).
25
      (3)
In subsection (4) omit the unnumbered paragraph beginning with “If any
sum”.
      (4)
In subsection (4A) omit the unnumbered paragraph beginning with “If any
sum”.
      (5)
In subsection (6) for “section 105” substitute “section 254 of ITTOIA 2005
30
(allowable deductions against post-cessation receipts charged to income
tax)”.
      (6)
After subsection (6) insert—
“(6A)
This section applies in relation to a UK property business as it applies
in relation to a trade, profession or vocation.”
35
90
In section 110 (interpretation etc) for subsection (2) substitute—
“(1A)
In the case of a trade carried on by a person other than a company or
a profession or vocation within the charge to income tax carried on
by any person, any reference to the permanent discontinuance of a
trade, profession or vocation includes a reference to—
40
(a)
a person permanently ceasing to carry on a trade, profession
or vocation, or