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
404

(b)
in relation to a trade or profession carried on by a person in
partnership with other persons, the occurrence of an event
treated under section 246(4) of ITTOIA 2005 (basic meaning
of “post-cessation receipt”) as a person permanently ceasing
to carry on a trade or profession.
5
(1B)
In the case of a trade carried on by a company, any reference to the
permanent discontinuance of a trade includes a reference to the
occurrence of an event treated under section 337(1) below as a
discontinuance or treated under section 18 of ITTOIA 2005
(companies beginning or ceasing to carry on trade) as the company
10
permanently ceasing to carry on the trade.
(1C)
In the case of a UK property business carried on by a person other
than a company, any reference to the permanent discontinuance of a
UK property business includes a reference to—
(a)
a person permanently ceasing to carry on a UK property
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business, or
(b)
in relation to a UK property business carried on by a person
in partnership with other persons, the occurrence of an event
treated under section 353(3) of ITTOIA 2005 (basic meaning
of “post-cessation receipt”) as a person permanently ceasing
20
to carry on a UK property business.
(1D)
In the case of a UK property business carried on by a company, any
reference to the permanent discontinuance of a UK property
business includes a reference to the occurrence of an event treated
under section 362 of ITTOIA 2005 (companies beginning or ceasing
25
to be within the charge to income tax) as the company permanently
ceasing to carry on the business.”
91
Omit section 110A (change of residence) and the italic cross-heading before
it.
92    (1)
Amend section 111 (treatment of partnerships) as follows.
30
      (2)
In subsection (1) for “the purposes of the Tax Acts” substitute “corporation
tax purposes”.
      (3)
Omit subsections (2) to (13).
93
Omit section 112 (partnerships controlled abroad).
94
Omit section 113 (effect for income tax of change in ownership of trade,
35
profession or vocation).
95    (1)
Amend section 115 (provisions supplementary to section 114) as follows.
      (2)
For subsection (5) substitute—
“(5)
Subsections (5A) and (5B) apply if—
(a)
a company resident in the United Kingdom (“the resident
40
partner”) is a member of a partnership which resides outside
the United Kingdom or which carries on any trade,
profession or business the control and management of which
is situated outside the United Kingdom, and
(b)
by virtue of any arrangements falling within section 788 (“the
45
arrangements”) any of the income or capital gains of the

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
405

partnership is relieved from corporation tax in the United
Kingdom.
(5A)
The arrangements do not affect any liability to corporation tax in
respect of the resident partner’s share of any income or capital gains
of the partnership (and section 114 has effect accordingly).
5
(5B)
If the resident partner’s share of the income of the partnership
consists of or includes a share in a qualifying distribution made by a
company resident in the United Kingdom, the resident partner (and
not the partnership) is, despite the arrangements, entitled to the
share of the tax credit in respect of the distribution which
10
corresponds to the partner’s share of the distribution (and section
114 has effect accordingly).”
96
In section 116(4) (arrangements for transferring relief) before “tax” insert
“corporation”.
97
In section 118ZA (treatment of limited liability partnerships)—
15
(a)
in subsection (1) for “the purposes of the Tax Acts” substitute
“corporation tax purposes”, and
(b)
in subsection (2) for “the Tax Acts” substitute “the Corporation Tax
Acts”.
98    (1)
Amend section 118ZE (restriction on relief for non-active partners) as
20
follows.
      (2)
In subsection (5) for the words from “sections 60 to 63” to the end substitute
“Chapter 15 of Part 2 of ITTOIA 2005 as applied by section 853 of that Act”.
      (3)
In subsection (6)—
(a)
for “section 61(1)” substitute “section 199(1) of ITTOIA 2005”, and
25
(b)
after “to 118ZK” insert “below”.
99
In section 118ZH(3) (“a significant amount of time”: recovery of relief) for
“under Case VI of Schedule D” substitute “to income tax”.
100
In section 118ZL(6) (partnerships exploiting films)—
(a)
in paragraph (b)—
30
(i)
for “section 111(2)” substitute “section 849 of ITTOIA 2005
(calculation of firm’s profits or losses)”, and
(ii)
for “section 41 or 42 of the Finance (No. 2) Act 1992”
substitute “any of sections 137 to 140 of ITTOIA 2005”, and
(b)
in paragraph (c)—
35
(i)
for “section 41 or 42 of that Act” substitute “sections 137 to
140 of that Act”, and
(ii)
for “either of” substitute “any of”.
101
In section 118ZM(4) (partnerships exploiting films: supplementary) for “the
acquisition of the master negative” to the end substitute “the acquisition of
40
the original master version of the film; and this subsection is to be construed
as if contained in Chapter 9 of Part 2 of ITTOIA 2005.”
102
In section 119(1) (rent etc. payable in connection with mines, quarries and
similar concerns) after “charged to” insert “corporation”.
103
In section 120 (rent etc. payable in respect of electric line wayleaves)—
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
406

(a)
in subsection (1) after “charged to” insert “corporation”,
(b)
in subsection (1A) for “chargeable period” substitute “accounting
period”, and
(c)
in subsection (1A) after “charged to”, in both places where it occurs,
insert “corporation”.
5
104
In section 121 (management expenses of owner or mineral rights) omit
subsection (1).
105   (1)
Amend section 122 (relief in respect of mineral royalties) as follows.
      (2)
In subsection (1)—
(a)
for the words from “a person resident” to “year of assessment or”
10
substitute “a company resident in the United Kingdom which in
any”,
(b)
omit “for the purposes of income tax, or as the case may be”,
(c)
for “him” substitute “it”, and
(d)
omit “year or” in both places where it occurs.
15
      (3)
In subsection (2)—
(a)
omit the words from “brought into account” to “may be,”, and
(b)
for “subsection (2)” substitute “subsection (3)”.
      (4)
Omit subsection (4).
106   (1)
Amend section 125 (annual payments for non-taxable consideration) as
20
follows.
      (2)
In subsection (2) for paragraph (a) and the word “and” at the end of the
paragraph substitute—
“(a)
is not interest but is—
(i)
an annuity or other annual payment charged with
25
income tax under Part 5 of ITTOIA 2005 otherwise
than as relevant foreign income; or
(ii)
an annuity or other annual payment charged with
corporation tax under Case III of Schedule D; and”.
      (3)
In subsection (3)(a) for “section 660A(8) or (9)(a)” substitute “section 627(1)
30
or (2)(a) of ITTOIA 2005”.
107
Omit section 127 (enterprise allowance).
108
Omit section 127A (futures and options: transactions with guaranteed
returns).
109
In section 128 (commodity and financial futures etc: losses and gains) omit
35
subsection (1).
110   (1)
Amend section 214 (chargeable payments connected with exempt
distributions) as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a) omit “chargeable to tax under Case VI of Schedule
40
D”, and
(b)
after that paragraph insert—
“(ab)
that income shall be chargeable to tax;”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
407

      (3)
After subsection (1) insert—
“(1A)
Income tax chargeable by virtue of subsection (1) shall be charged on
the full amount or value of the payment made in the year of
assessment; and the person liable for any tax so charged is the person
receiving or entitled to the payment.
5
(1B)
Corporation tax chargeable by virtue of subsection (1) shall be
charged under Case VI of Schedule D.”
111
In section 230 (stock dividends: distributions) for the words from “as
mentioned” to “that section)” substitute “in a case where section 410(2), (3)
or (4) of ITTOIA 2005 applies”.
10
112   (1)
Amend section 231 (tax credits for certain recipients of qualifying
distributions) as follows.
      (2)
In subsection (1)—
(a)
for “sections” to “1993” substitute “sections 231AA and 231AB of this
Act”,
15
(b)
for the words from “where” to “charged” substitute “for corporation
tax purposes where”, and
(c)
omit “or a person resident in the United Kingdom, not being a
company”.
      (3)
Omit subsections (3) and (3AA).
20
      (4)
In subsection (4) for “he” in both places where it occurs substitute “that
person”.
113   (1)
Amend section 231AA (no tax credit for borrower under stock lending
arrangement or interim holder under repurchase agreement) as follows.
      (2)
In subsection (1) after “section 231” insert “above or section 397(1) of ITTOIA
25
2005”.
      (3)
In subsection (1A)—
(a)
for “a relevant person”, “section 233(1)” and “Schedule F” substitute
“a person resident in the United Kingdom”, “section 399(2) of
ITTOIA 2005” and “dividend” respectively, and
30
(b)
omit the second sentence.
114   (1)
Amend section 231AB (no tax credit for original owner under repurchase
agreement in respect of certain manufactured dividends) as follows.
      (2)
In subsection (1) after “section 231” insert “above or section 397(1) of ITTOIA
2005”.
35
      (3)
In subsection (1A)—
(a)
for “a relevant person”, “section 233(1)” and “Schedule F” substitute
“a person resident in the United Kingdom”, “section 399(2) of
ITTOIA 2005” and “dividend” respectively, and
(b)
omit the second sentence.
40
115
In section 231B(4)(b) (consequences of certain arrangements to pass on value
of a tax credit) for “section 231(3)” substitute “section 397(2) of ITTOIA
2005”.
116
Omit section 232 (tax credits for non-UK residents).

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
408

117
Omit section 233 (taxation of certain recipients of distributions and in
respect of non-qualifying distributions).
118   (1)
Amend section 249 (stock dividends treated as income) as follows.
      (2)
In subsection (1) for “subsections (7) to (9) below, this section applies”
substitute “subsections (8) and (9) below, this section applies (and
5
accordingly section 230 above and section 410 of ITTOIA 2005 apply)”.
      (3)
Omit subsections (4) to (7).
      (4)
In subsection (8)—
(a)
for “subsection (4)” substitute “section 410(2), (3) or (4) of ITTOIA
2005”, and
10
(b)
omit the words from “and subsections (5)” onwards.
      (5)
In subsection (9)(b) for “an individual” to “an amount of income” substitute
“income to be treated as arising to an individual as a result of section 410(2)
of ITTOIA 2005”.
119   (1)
Amend section 250 (returns) as follows.
15
      (2)
In subsection (5)(c) for “the appropriate amount in cash” substitute “the cash
equivalent of the share capital in accordance with section 412 of ITTOIA
2005”.
      (3)
In subsection (7) at the end insert “of this Act or Chapter 5 of Part 4 of
ITTOIA 2005”.
20
120
In section 251 (interpretation of sections 249 and 250), omit subsections (2) to
(6).
121
Omit sections 251A to 251D (approved share incentive plans).
122
In section 271(1)(a) (deemed surrender in cases of certain loans) for “under
section 547” substitute “by virtue of section 465 of ITTOIA 2005”.
25
123
In section 273 (payments securing annuities)—
(a)
renumber the existing text as subsection (1),
(b)
in that subsection after “Subject to” insert “subsection (2) and”,
(c)
in that subsection omit “, 617(3)”, and
(d)
after that subsection insert—
30
“(2)
No deduction may be made under this section in respect of
any contribution paid by any person under Part 1 of the
Social Security Contributions and Benefits Act 1992 or Part 1
of the Social Security Contributions and Benefits (Northern
Ireland) Act 1992.”
35
124
In section 282A(4)(b) (jointly held property) for “section 111” substitute “Part
9 of ITTOIA 2005 (partnerships)”.
125
In section 291A(3)(f) (connected persons: directors)—
(a)
in sub-paragraph (i) after “trade or profession” insert “carried on
wholly or partly in the United Kingdom”, and
40
(b)
in sub-paragraph (ii) for the words from “in computing” to the end
substitute “in calculating for tax purposes the profits of that trade or
profession”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
409

126
In section 307(1) (withdrawal of enterprise investment scheme relief) for “to
tax under Case VI of Schedule D” substitute “to income tax”.
127
Omit section 314 (divers and diving supervisors).
128
Omit section 322 (consular officers and employees).
129
Omit section 324 (designated international organisations).
5
130
Omit section 325 (interest on deposits with National Savings Bank).
131
Omit section 326 (interest etc. under contractual savings schemes).
132
Omit sections 326A to 326D (tax-exempt special savings accounts).
133
Omit section 327 (disabled person’s vehicle maintenance grant).
134
Omit section 327A (payments to adopters).
10
135
Omit sections 329 to 329AB (exemption of interest on damages for personal
injury and personal injury damages in the form of periodical payments).
136
Omit section 331 (scholarship income).
137
Omit section 331A (student loans: certain interest to be disregarded).
138
Omit section 332(3) (expenditure and houses of ministers of religion).
15
139
In section 332A (venture capital trusts: reliefs) omit “and distributions by
such trusts”.
140
For section 333 substitute—
“333
Investment plan regulations
Regulations under Chapter 3 of Part 6 of ITTOIA 2005 (income from
20
individual investment plans) may include provision generally for
the purpose of the administration of corporation tax in relation to
plans.”
141
Omit section 333A (personal equity plans: tax representatives).
142   (1)
Amend section 333B (involvement of insurance companies with plans and
25
accounts) as follows.
      (2)
In subsections (1), (2)(b) and (3) for “section 333 business” substitute “plan
business”.
      (3)
In subsection (4)—
(a)
after “this section” insert “or Chapter 3 of Part 6 of ITTOIA 2005
30
(except sections 697 and 698)”, and
(b)
for “section 333A” substitute “section 697 or 698 of ITTOIA 2005
(requirements concerning foreign plan managers)”.
      (4)
In subsection (5)(a) and (b) for “section 333 business” substitute “plan
business”.
35
      (5)
In subsection (8) for “section 333 business” substitute “plan business”.
      (6)
In subsection (9)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
410

(a)
after the definition of “long-term insurance fund” insert—
““plan business”, in relation to an insurance company,
means the business of the company that is attributable to
the making of investments with that company under
plans for which provision is made by regulations under
5
Chapter 3 of Part 6 (except sections 697 and 698) of
ITTOIA 2005 (income from individual investment
plans)”, and
(b)
omit the definition of “section 333 business”.
143
In section 336(1A) (exception from certain charges for temporary residents
10
in the United Kingdom) for paragraph (a) substitute—
“(a)
any charge under ITTOIA 2005 on relevant foreign income,”.
144   (1)
Amend section 337 (company beginning or ceasing to carry on trade) as
follows.
      (2)
In subsection (1) after “shall be computed” insert “for the purposes of
15
corporation tax”.
      (3)
In subsection (2) after “overseas property business” insert “(within the
meaning given by section 70A(4))”.
145   (1)
Amend section 347A (general rule: annual payments) as follows.
      (2)
In subsection (1)(b)—
20
(a)
after “not” insert “, for the purposes of corporation tax,”,
(b)
for “the person” substitute “any company”, and
(c)
for “other person” substitute “other company”.
      (3)
After subsection (2) insert—
“(2A)
This section applies to any annual payment made by an individual
25
which—
(a)
arises in the United Kingdom, and
(b)
is exempt from any charge under Part 5 of ITTOIA 2005
(miscellaneous income) as a result of section 727 of that Act.”.
      (4)
Omit subsections (4) and (5).
30
      (5)
In subsection (6) after “(2)” insert “or (2A)”.
146   (1)
Amend section 348 (payments out of profits or gains brought into charge to
income tax: deduction of tax) as follows.
      (2)
In subsection (1A), after paragraph (a), insert—
“(aa)
which—
35
(i)
is charged with tax under Chapter 7 of Part 4 of
ITTOIA 2005 (purchased life annuity payments),
Chapter 10 of that Part (distributions from
unauthorised unit trusts), section 579 of that Act
(royalties etc. from intellectual property), Chapter 4 of
40
Part 5 of that Act (certain telecommunication rights:
non-trading income) or Chapter 7 of Part 5 of that Act
(annual payments not otherwise charged), and
(ii)
is not relevant foreign income,”.