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
418

174
In section 431(2) (interpretative provisions relating to insurance companies)
in the definition of “annuity business” for the words “section 580C”
substitute “section 725 of ITTOIA 2005 (immediate needs annuities)”.
175
In section 431D(3)(b) (meaning of “overseas life assurance business”) after
“Chapter II of Part XIII” insert “or Chapter 9 of Part 4 of ITTOIA 2005”.
5
176
In section 434 (franked investment income etc.) omit subsection (1A).
177   (1)
Amend section 437 (general annuity business) as follows.
      (2)
In subsection (1C)(b)(ii) after “capital elements” insert “and amounts exempt
under section 717 of ITTOIA 2005”.
      (3)
Omit “and” at the end of subsection (1C)(b).
10
      (4)
After subsection (1C)(c) insert “and
(d)
the amounts exempt under section 717 of ITTOIA 2005 shall
be determined in accordance with Chapter 7 of Part 6 of that
Act, but for this purpose—
(i)
it is immaterial whether or not an annuitant claims
15
any relief to which the annuitant is entitled under that
section; and
(ii)
where, by virtue of section 718 of that Act, section 717
does not apply to an annuity, the annuity shall be
treated as being exempt to the same extent that it
20
would have been apart from that section.”
178   (1)
Section 468J (dividend distributions of authorised unit trusts) is amended as
follows.
      (2)
In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.
      (3)
At the end of subsection (4) insert “(including a dividend treated as paid to
25
a unit holder who is not liable to corporation tax)”.
179   (1)
Section 468L (interest distributions of authorised unit trusts) is amended as
follows.
      (2)
In subsection (1A) after “this Chapter” insert “and Chapter 2 of Part 4 of
ITTOIA 2005 (interest)”.
30
      (3)
In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.
      (4)
At the end of subsection (3) insert “(including a payment of interest treated
as made to a unit holder who is not liable to corporation tax)”.
180   (1)
Amend section 469 (other unit trusts) as follows.
      (2)
In subsection (2A) for “section 231(1)” substitute “section 397(1) of ITTOIA
35
2005”.
      (3)
For subsection (2B) substitute—
“(2B)
Section 348(4)(a) above and sections 399(2) and (6) and 400(2) and (3)
of ITTOIA 2005 shall not apply where the recipient of the
distribution in question is the trustees of the scheme.”
40
      (4)
In subsection (3)—
(a)
after “the Tax Acts” insert “other than ITTOIA 2005”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
419

(b)
at the end insert “(and see Chapter 10 of Part 4 of that Act for their
treatment under that Act)”.
      (5)
In subsection (9) for “paragraph 7 of Schedule 5AA” substitute “section 568
of ITTOIA 2005”.
181
In section 472A (trading profits etc. from securities: taxation of amounts
5
taken to reserves)—
(a)
in subsection (1) for “person” substitute “company”, and
(b)
in subsection (2) for “person’s” substitute “company’s”.
182
In section 473(1) and (4) (conversion etc. of securities held as circulating
capital) for “person” substitute “company”.
10
183   (1)
Amend section 477A (building societies: regulations for deduction of tax) as
follows.
      (2)
In subsection (1A) for “a qualifying certificate of deposit and other than”
substitute “uncertificated eligible debt security units, a qualifying certificate
of deposit or”.
15
      (3)
In subsection (4)—
(a)
for “terminal bonus” substitute “interest”, and
(b)
for “contractual savings scheme” substitute “SAYE savings
arrangement”.
      (4)
Omit subsections (5) and (6).
20
      (5)
In subsection (9) omit the words from “but” to the end of the subsection.
      (6)
In subsection (10)—
(a)
after “this section—” insert—
““certified SAYE savings arrangement” has the meaning
given by section 703 of ITTOIA 2005”, and
25
(b)
at the end insert “and
“uncertificated eligible debt security units” has the same
meaning as in section 349”.
184
Omit section 480C (relevant deposits: computation of tax on interest).
185   (1)
Amend section 481 (“deposit-taker”, “deposit” and “relevant deposit”) as
30
follows.
      (2)
In subsection (1A) for “sections 480A and 480C” substitute “section 480A”.
      (3)
In subsection (5A)—
(a)
at the end of paragraph (a) insert “above or an uncertificated right
falling within section 552(1)(c) of ITTOIA 2005”, and
35
(b)
in paragraph (c)—
(i)
for “, as defined in section 56(5), has” substitute “or
uncertificated eligible debt security units have”, and
(ii)
omit “or 480C”.
      (4)
In subsection (6) omit the word “, 480C”.
40
186   (1)
Amend section 482 (supplementary provisions) as follows.
      (2)
In subsection (6)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
420

(a)
after “481(5)” insert “and (5A)”,
(b)
after the definition of “appropriate person” insert—
““certificate of deposit” for corporation tax purposes has
the meaning given in section 56(5) above and for income
tax purposes has the meaning given in section 552(2) of
5
ITTOIA 2005,”
(c)
in the definition of “qualifying certificate of deposit” for “, as defined
in section 56(5),” substitute “or uncertificated eligible debt security
units”, and
(d)
after the definition of “qualifying time deposit” insert—
10
““uncertificated eligible debt security units” has the
meaning given in section 552(2) of ITTOIA 2005”.
      (3)
In subsection (8) for “section 56(5)” substitute “subsection (6) above”.
187   (1)
Section 486 (industrial and provident societies and co-operative
associations) is amended as follows.
15
      (2)
In subsection (1)—
(a)
after “distribution” insert “for the purposes of corporation tax”, and
(b)
for “the purposes of corporation tax” substitute “those purposes”.
      (3)
In subsection (4) at the end insert “for the purposes of corporation tax”.
      (4)
Omit subsection (5).
20
188   (1)
Amend section 491 (distribution of assets of body corporate carrying on
mutual business) as follows.
      (2)
In subsection (1) for “any person” substitute “any company”.
      (3)
In subsection (2) for “the person” substitute “the company”.
      (4)
In subsection (3)—
25
(a)
for “the purposes of tax”, wherever it occurs, substitute “the
purposes of corporation tax”,
(b)
for “the recipient”, wherever it occurs, substitute “the recipient
company”,
(c)
after “be charged” insert “to corporation tax”, and
30
(d)
for “chargeable period” substitute “accounting period”.
      (5)
In subsection (4) omit “113 or”.
      (6)
Omit subsection (5).
      (7)
In subsection (10) omit “or vocation”.
189   (1)
Amend section 492 (treatment of oil extraction activities etc for tax purposes)
35
as follows.
      (2)
In subsection (1) for “for all purposes of income tax, and for the purposes of
the charge of corporation tax on income,” substitute “for the purposes of the
charge of corporation tax on income”.
      (3)
In subsection (4)—
40
(a)
in paragraph (a) after “are treated by virtue of” insert “section 16(1)
of ITTOIA 2005 or”,

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
421

(b)
in paragraph (a) for “the purposes specified in that subsection”
substitute “income tax purposes or (as the case may be) for the
purposes of the charge of corporation tax on income”,
(c)
in paragraph (b) after “but which, apart from” insert “section 16(1) of
ITTOIA 2005 or”, and
5
(d)
after “notwithstanding anything in that” insert “section or”.
190
In section 493(2)(a)(i) (valuation of oil disposed of or appropriated in certain
circumstances) for “falling within section 492(1)(a) or (b)” substitute “falling
within the definition of “oil-related activities” in section 16(2) of ITTOIA
2005 or within section 492(1)(a) or (b) above”.
10
191
In section 495(2) (regional development grants) for “section 492(1)”
substitute “section 16(1) of ITTOIA 2005 or section 492(1) above”.
192
In section 496(1)(c) (tariff receipts and tax-exempt tariffing receipts) for
“section 492(1)” substitute “section 16(1) of ITTOIA 2005 or section 492(1)
above”.
15
193
In section 502(1) (interpretation of Chapter 5), in the definition of “ring fence
trade”—
(a)
in paragraph (a) for “any of paragraphs (a) to (c) of subsection (1) of
section 492” substitute “the definition of “oil-related activities” in
section 16(2) of ITTOIA 2005 or within section 492(1) above”, and
20
(b)
in paragraph (b) for “that subsection” substitute “section 16(1) of
ITTOIA 2005 or section 492(1) above”.
194   (1)
Amend section 503 (letting of furnished holiday accommodation treated as
a trade for certain purposes) as follows.
      (2)
In subsection (1)—
25
(a)
for “specified in subsection (2)” substitute “of Chapter 2 of Part 10
(loss relief for corporation tax)”,
(b)
omit “in the United Kingdom”,
(c)
after “chargeable to” insert “corporation”, and
(d)
for “particular person or partnership or body of persons” substitute
30
“particular company or partnership”.
      (3)
Omit subsections (2) and (3).
      (4)
In subsection (5)—
(a)
for “Part X” substitute “Chapter 2 of Part 10”, and
(b)
after “other provision of the” insert “Corporation”.
35
      (5)
In the side-note after “certain” insert “corporation tax”.
195   (1)
Amend section 504 (meaning of the “commercial letting of furnished
accommodation”) as follows.
      (2)
Omit subsection (4).
      (3)
In subsection (6)—
40
(a)
omit “year of assessment or”,
(b)
for “person” substitute “company”,
(c)
omit “year or” in each place where it occurs,
(d)
for “he” substitute “the company”, and
(e)
for “him” substitute “the company”.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
422

      (4)
In subsection (6A) for “above is—” to the end substitute “above is the period
of two years beginning at the end of the accounting period in which the
accommodation was let.”
      (5)
In subsection (7)—
(a)
omit “year of assessment or”, and
5
(b)
omit “year or” in both places where it occurs.
      (6)
In subsection (8) omit “year of assessment or”.
      (7)
In subsection (9)—
(a)
for “a person” substitute “a company”, and
(b)
for “he” substitute “it”.
10
196
After section 504 insert—
“504A
  Letting of furnished holiday accommodation treated as trade for
certain income tax purposes
(1)
For the purposes specified in subsection (2)—
(a)
a UK property business which consists in, or so far as it
15
consists in, the commercial letting of furnished holiday
accommodation is treated as if it were a trade the profits of
which are chargeable to income tax under Part 2 of ITTOIA
2005, and
(b)
all such lettings made by a particular person or partnership
20
or body of persons are treated as one trade.

The “commercial letting of furnished holiday accommodation” has
the same meaning as it has for the purposes of Chapter 6 of Part 3 of
ITTOIA 2005.
(2)
Subsection (1) applies for the purposes of—
25
(a)
Chapter 1 of Part 10 (loss relief for income tax),
(b)
section 833(4)(c) (income regarded as earned income), and
(c)
section 189(2)(b) of the Finance Act 2004 (income regarded as
relevant UK earnings for pension purposes).
(3)
Chapter 1 of Part 10 as applied by this section has effect with the
30
following adaptations—
(a)
no relief is to be given to an individual under section 381
(relief for losses in early years of trade) in respect of a year of
assessment if any of the accommodation in respect of which
the trade is carried on in that year was first let by that person
35
as furnished accommodation more than three years before
the beginning of that year of assessment;
(b)
section 384 (restrictions on right of set-off) has effect with the
omission of subsections (6) to (8) (which relate to certain
losses attributable to capital allowances);
40
(c)
section 390 (treatment of interest as loss) has effect as if the
reference to a trade carried on wholly or partly in the United
Kingdom were a reference to the UK property business so far
as it is treated as a trade.
(4)
If there is a letting of accommodation only part of which is holiday
45
accommodation, such apportionments are to be made for the
purposes of this section as are just and reasonable.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
423

(5)
Relief is not to be given for the same loss, or the same portion of a
loss, both under a provision of Chapter 1 of Part 10 as applied by this
section and under any other provision of the Income Tax Acts.”
197   (1)
Amend section 505 (charities: general) as follows.
      (2)
In subsection (1)—
5
(a)
in paragraph (a) after “Schedules A and D” insert “, or under Parts 2
and 3 of ITTOIA 2005,”,
(b)
in paragraph (c)(ii) after “Schedule D” insert “or under Chapter 2, 7,
8 or 10 of Part 4 of ITTOIA 2005 (interest, purchased life annuity
payments, profits from deeply discounted securities and
10
distributions from unauthorised unit trusts), section 579 of that Act
so far as it relates to annual payments (royalties etc. from intellectual
property), Chapter 4 of Part 5 of that Act so far as it relates to annual
payments (certain telecommunication rights: non-trading income) or
Chapter 7 of Part 5 of that Act (annual payments not otherwise
15
charged)”,
(c)
in paragraph (c)(iia) omit “IV or”,
(d)
after paragraph (c)(iia) insert—
“(iiaa)
from tax under Chapter 4 of Part 4 of ITTOIA
2005 (dividends from non-UK resident
20
companies) or from tax under Chapter 8 of
Part 5 of that Act (income not otherwise
charged) so far as it applies to relevant foreign
distributions,”,
(e)
in paragraph (c)(iib) from “income” to “and” at the end of sub-
25
paragraph (iib) substitute “such dividends as would, in the case of
income tax, be chargeable to tax under Chapter 4 of Part 4 of ITTOIA
2005 or such distributions (other than dividends) as would, in the
case of income tax, be chargeable to tax under Chapter 8 of Part 5 of
that Act so far as it would apply to what would be a relevant foreign
30
distribution,”,
(f)
in paragraph (c)(iii) for “Schedule F” substitute “Chapter 3 of Part 4
of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”,
(g)
in paragraph (d) after “Schedule D” insert “or Chapter 2 of Part 4 of
ITTOIA 2005 (interest)”,
35
(h)
in paragraph (e) after “Schedule D” insert “or Part 2 of ITTOIA 2005
(trading income)”, and
(i)
in paragraph (f) after “Schedule D” insert “or Part 2 or 5 of ITTOIA
2005 (trading and miscellaneous income)”.
      (3)
After subsection (1) insert—
40
“(1AA)
In section (1)(c)(ii)(aa) and (iib) “relevant foreign distribution” means
any distribution of a company not resident in the United Kingdom
which—
(a)
is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005,
but
45
(b)
would be chargeable under Chapter 3 of that Part of that Act
if the company were resident in the United Kingdom.”
      (4)
In subsection (2) after “chargeable to”, in the second place where it occurs,
insert “income tax under Chapter 7 of Part 5 of ITTOIA 2005 (annual

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
424

payments not otherwise charged) so far as it does not apply to relevant
foreign income and shall be chargeable to corporation”.
198
In section 512(1) (exemptions for Atomic Energy Authority and National
Radiological Protection Board)—
(a)
in paragraph (a) after “under” insert “Part 3 of ITTOIA 2005 so far as
5
it relates to the profits of a UK property business and under”,
(b)
in paragraph (b)—
(i)
after “under” insert “ITTOIA 2005 and”, and
(ii)
after “dividends” insert “or income within Chapter 10 of Part
4 of ITTOIA 2005 (distributions from unauthorised unit
10
trusts)”, and
(c)
in paragraph (c) for “Schedule F” substitute “Chapter 3 of Part 4 of
ITTOIA 2005 (dividends etc. from UK resident companies etc.)”.
199
Omit section 514 (funds for reducing the national debt).
200   (1)
Amend section 524 (taxation of receipts from sale of patent rights) as follows.
15
      (2)
In subsection (1)—
(a)
for “person”, “he” and “him” substitute “company”, “the company”
and “it” respectively,
(b)
for “tax” substitute “corporation tax”, and
(c)
for “chargeable”, in both places where it occurs, substitute
20
“accounting”.
      (3)
In subsection (2)—
(a)
for “person” substitute “company”,
(b)
after “charged to”, in both places where it occurs, insert
“corporation”, and
25
(c)
for “chargeable” substitute “accounting”.
      (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,”.
30
      (5)
In subsection (3)—
(a)
for the words from the beginning to “in the United Kingdom”
substitute “Where a relevant non-resident company”, and
(b)
in paragraph (a), for “he shall be chargeable to tax” substitute “the
company shall be chargeable to corporation tax”.
35
      (6)
Omit subsection (4).
      (7)
For subsection (5) substitute—
“(5)
In subsection (3) above “relevant non-resident company” means a
company not resident in the United Kingdom which would be
within the charge to corporation tax in respect of any proceeds of the
40
sale of the patent rights not consisting of a capital sum.”
      (8)
In subsection (6) omit “subsection (4) shall not apply, but”.
      (9)
In subsection (7)—
(a)
for “person” substitute “company”,