Income Tax (Trading and Other Income) Bill

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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
425

(b)
for “him”, in both places where it occurs, substitute “it”, and
(c)
for “he” substitute “it”.
     (10)
In subsection (8) for “him” substitute “it”.
201   (1)
Amend section 525 (receipts from sale of patent right: death, winding up or
partnership change) as follows.
5
      (2)
For subsection (1) substitute—
“(1)
Where a body corporate on which, by reason of the receipt of a
capital sum, a charge falls or would otherwise fall to be made under
section 524 commences to be wound up—
(a)
no sums shall be charged under that section on that body for
10
any accounting period subsequent to that in which the
winding up commences; and
(b)
the amount falling to be charged for the accounting period in
which the winding up commences shall be increased by the
total amounts which, but for the winding up, would have
15
fallen to be charged for subsequent accounting periods.”
      (3)
Omit subsection (2).
      (4)
In subsection (4)—
(a)
in paragraph (a)—
(i)
for “chargeable period” substitute “accounting period”,
20
(ii)
omit “(or, if he is dead, his personal representatives)”, and
(iii)
for “his” substitute “its”, and
(b)
omit paragraph (b) and the word “and” immediately preceding it.
      (5)
In the sidenote omit “death,”.
202   (1)
Amend section 526 (relief for expenses) as follows.
25
      (2)
In subsection (1)—
(a)
for “person” substitute “company”,
(b)
for “him”, in the first place where it occurs, substitute “it”,
(c)
for “him”, in the second place where it occurs, substitute “the
company for the purposes of corporation tax”, and
30
(d)
for “chargeable” substitute “accounting”.
      (3)
Omit subsection (2).
203
In section 527(4) (spreading of royalties over several years) at the end insert
“of this Act or by virtue of section 595 of ITTOIA 2005”.
204   (1)
Amend section 528 (manner of making allowances under section 526) as
35
follows.
      (2)
Omit subsection (2).
      (3)
In subsection (3) omit “as that provision applies for the purposes of
corporation tax”.
      (4)
In subsection (3A) omit “a person’s or” and “479 or”.
40
205
Omit section 529 (patent income to be earned income in certain cases).
206   (1)
Amend section 531 (disposals of know-how) as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
426

      (2)
In subsection (1)—
(a)
for “a person” substitute “a company”,
(b)
for “him”, in both places where it occurs, substitute “the company”,
(c)
for “tax”, in both places where it occurs, substitute “corporation tax”,
and
5
(d)
for “all purposes” substitute “the purposes of corporation tax”.
      (3)
For subsection (2) substitute—
“(2)
Subject to subsection (3) below, where—
(a)
a person carrying on a trade receives consideration for the
disposal of know-how which has been used in the trade, and
10
(b)
the know-how is disposed of as part of the disposal of all or
part of the trade,

the consideration shall for the purposes of corporation tax be treated
as a payment for goodwill in relation both to the person making the
disposal and to the person acquiring the know-how (if that person
15
provided the consideration).”
      (4)
In subsection (3)(a) for “to either of the persons concerned if they so elect”
substitute “if, in the case of the person disposing of the know-how being
within the charge to corporation tax, that person and the person acquiring
the know-how (whether or not within the charge to corporation tax) elect for
20
that subsection not to apply”.
      (5)
After subsection (3) insert—
“(3A)
If—
(a)
an election is made under section 194 of ITTOIA 2005
(provision corresponding to subsections (2) and (3) of this
25
section for the purposes of income tax), and
(b)
the person making the acquisition mentioned in that section
is within the charge to corporation tax,

the persons making the election under that section are treated as also
making an election under subsection (3) of this section (even though
30
the person disposing of the know-how is not within the charge to
corporation tax).”
      (6)
In subsection (4)—
(a)
for “person” substitute “company”,
(b)
for “him” substitute “the company”, and
35
(c)
for “tax”, in both places where it occurs, substitute “corporation tax”.
      (7)
In subsection (5)—
(a)
for “person” substitute “company”, and
(b)
for “tax” substitute “corporation tax”.
      (8)
Omit subsection (6).
40
      (9)
In subsection (7) for “(6)” substitute “(5)”.
207
In section 532 (application of Capital Allowances Act) for “529” substitute
“528”.
208   (1)
Amend section 533 (interpretation of intellectual property provisions) as
follows.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
427

      (2)
In subsection (1)—
(a)
for “529” substitute “528”, and
(b)
for the definition of “income from patents” substitute—
““income from patents” means—
(a)
any royalty or other sum paid in respect of the use of a
5
patent; and
(b)
any amount on which tax is payable for any accounting
period by virtue of section 524 or 525 above or section
472(5) of, or paragraph 100 of Schedule 3 to, the Capital
Allowances Act,
10

but does not include any amount chargeable to income
tax.”
      (3)
In each of subsections (2) to (5) for “529” substitute “528”.
209   (1)
Amend section 539 (life policies, life annuities and capital redemption
policies: introductory) as follows.
15
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (3) for the definition of “life annuity” substitute—
““life annuity” means—
(a)
any annuity to which section 656 (as read with section 657)
applies, or
20
(b)
any annuity that—
(i)
is a purchased life annuity for the purposes of Chapter 7 of
Part 4 of ITTOIA 2005 (see section 423 of that Act), and
(ii)
is not specified in section 718 of that Act (annuities the
payments under which are not within section 717 of that
25
Act (exemption for part of purchased life annuity
payments));”.
      (4)
Omit subsection (8).
210
After that section insert—
“539ZA
Application of this Chapter etc. to policies and contracts in which
30
persons other than companies are interested
(1)
This section applies where, for the purposes of determining the
application of this Chapter in relation to a policy or contract at any
time, it is necessary to have regard to its application at another time.
(2)
It makes no difference to the application of this Chapter at that other
35
time whether liability in respect of a gain arising at that time would
have arisen or (as the case may be) would arise because of the
application of this Chapter or Chapter 9 of Part 4 of ITTOIA 2005
(which makes provision for income tax purposes corresponding to
that made by this Chapter).
40
(3)
References in this section to this Chapter include references to
paragraph 20 of Schedule 15 to this Act and section 79 of the Finance
Act 1997 (payments under certain life insurance policies).”
211
In section 543(1)(a)(i) (life annuity contracts: computation of gain) for “one
or more payments” to the end of the sub-paragraph substitute “any
45
payments have been made on account of the annuity, by so much of those

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
428

payments as is determined to be the capital element in them under section
656 of this Act or is exempt under section 717 of ITTOIA 2005; and”.
212
In section 544(6)(a) (second and subsequent assignment of life policies and
contracts) for “section 547(1)(a)” substitute “section 547A(17)”.
213
In section 545(1)(a) (capital redemption policies) for “to tax” to the end of the
5
paragraph substitute “—
(i)
to corporation tax under Schedule D,
(ii)
to income tax under Part 9 of ITEPA 2003 (pension
income) because section 609, 610 or 611 of that Act
applies to them (certain employment related
10
annuities), or
(iii)
to income tax under Chapter 7 of Part 4 (purchased
life annuity payments) or Chapter 7 of Part 5 (annual
payments not otherwise charged) of ITTOIA 2005;”.
214
In section 546C(8) (charging the section 546 excess to tax where section 546B
15
applies)—
(a)
for “any provision of section 547” substitute “section 547(1)(b)”,
(b)
for “body or person” substitute “company”,
(c)
omit paragraph (a) and the word “or” at the end of it,
(d)
in paragraph (b) for “it” substitute “the chargeable event in
20
question”, and
(e)
omit “year of assessment or”.
215   (1)
Amend section 547 (method of charging gain to tax) as follows.
      (2)
In subsection (1) omit paragraph (a) and paragraphs (c) to (e).
      (3)
In paragraph (b) of that subsection for “that event, those rights” substitute
25
“the chargeable event in question, the rights conferred by the policy or
contract”.
      (4)
In subsection (1A)—
(a)
for “their” substitute “its”, and
(b)
for “and subsections (9) to (11) below are” substitute “is”.
30
      (5)
Omit subsections (4A) to (7A) and (9) to (14).
216   (1)
Amend section 547A (method of charging gain to tax: multiple interests) as
follows.
      (2)
For subsection (1) substitute—
“(1)
If—
35
(a)
immediately before the happening of a chargeable event, two
or more persons have relevant interests in the rights
conferred by the policy or contract in question, and
(b)
any of those persons is a company,

section 547 shall have effect in relation to each such company as if it
40
had been the only person with a relevant interest in those rights, but
with references to the amount of the gain construed as references to
the company’s proportionate share of the amount of the gain.”

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
429

      (3)
In subsection (15) for the definition of “foreign institution” substitute—
““foreign institution” means a person which is a company or
other institution resident or domiciled outside the United
Kingdom;”.
      (4)
For subsection (16) substitute—
5
“(16)
For the purposes of this section, property held for the purposes of a
foreign institution shall be regarded as in the beneficial ownership of
the foreign institution.
(17)
Any reference in this section to trusts created by an individual
includes a reference to trusts arising under—
10
(a)
section 11 of the Married Women’s Property Act 1882;
(b)
section 2 of the Married Women’s Policies of Assurance
(Scotland) Act 1880; or
(c)
section 4 of the Law Reform (Husband and Wife) Act
(Northern Ireland) 1964;
15

and references to the settlor or to the person creating the trusts shall
be construed accordingly.”
217
In section 548(1) (deemed surrender of certain loans) for paragraph (a)
substitute—
“(a)
a gain arising in connection with a policy or contract would
20
be—
(i)
treated as forming part of the income of a company
under section 547(1)(b), or
(ii)
a gain for which an individual is, or any trustees are,
liable to tax under Chapter 9 of Part 4 of ITTOIA 2005;
25
and”.
218
Omit section 549 (certain deficiencies allowable as deductions).
219
Omit section 550 (relief where gain charged at a higher rate).
220
Omit section 551 (right of individual to recover tax from trustees).
221   (1)
Amend section 552 (information: duty of insurers) as follows.
30
      (2)
In subsection (1) omit “within the meaning of this Chapter”.
      (3)
In subsection (5)—
(a)
in paragraph (b)(ii) for “, the date” to the end of the sub-paragraph
substitute “of this Act and section 514(1) of ITTOIA 2005 (chargeable
events where transaction-related calculations show gains), the date
35
on which the year and the insurance year end;”,
(b)
in paragraph (c)—
(i)
after “this Chapter” insert “and Chapter 9 of Part 4 of ITTOIA
2005”,
(ii)
after “relevant capital payments” insert “and the amount or
40
value of any capital sums of a kind referred to in section
492(1)(b) to (e) of ITTOIA 2005”,
(iii)
in sub-paragraph (iii) after “annuity” insert “determined in
accordance with section 656 and the amount of so much of
any payment previously made on account of an annuity as is
45
exempt under section 717 of ITTOIA 2005”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
430

(iv)
in sub-paragraph (v) after “year” insert “and the total of the
amounts of gains treated as arising on previous chargeable
events within section 509(1) or 514(1) of ITTOIA 2005”,
(c)
for paragraph (e) substitute—
“(e)
the number of years relevant for computing the
5
annual equivalent of the amount of the gain for the
purposes of subsection (1) of section 536 of ITTOIA
2005 (top slicing relieved liability: one chargeable
event), apart from subsections (6) and (8) of that
section;”, and
10
(d)
for paragraph (f) substitute—
“(f)
on the assumption that section 465 of ITTOIA 2005
(person liable: individuals) has effect in relation to the
gain —
(i)
whether an individual would fall to be treated
15
as having paid income tax at the lower rate on
the amount of the gain in accordance with
section 530 of that Act; and
(ii)
if so, except in a case where paragraph (c)
above applies, the amount of such tax that
20
would fall to be so treated as paid.”
      (4)
In subsection (6)—
(a)
in paragraph (b)—
(i)
after “section 546C(7)(a)” insert “of this Act (and section
514(1) of ITTOIA 2005)”, and
25
(ii)
after “year” insert “(and the insurance year)”, and
(b)
in paragraph (c) after “section 546C(7)(a)” insert “of this Act (and
section 514(1) of ITTOIA 2005)”.
      (5)
In subsection (7)(b)—
(a)
after “section 546C(7)(a)” insert “of this Act (and section 514(1) of
30
ITTOIA 2005)”, and
(b)
after “year” insert “(and the insurance year)”.
      (6)
In subsection (9)(a)—
(a)
after “section 546C(7)(b)” insert “of this Act (and section 514(1) of
ITTOIA 2005)”, and
35
(b)
after “occurs” insert “(and the end of the insurance year mentioned
in section 514(3) and (4) of ITTOIA 2005)”.
      (7)
In subsection (10)—
(a)
in the definition of “amount” after “section 553(3)” insert “of this Act
and section 528 of ITTOIA 2005”, and
40
(b)
insert in the appropriate place—
““chargeable event” means an event which is a chargeable
event within the meaning of this Chapter and Chapter 9
of Part 4 of ITTOIA 2005;”.
222
In section 552ZA(3) (information: supplementary provisions) after “section
45
546C(7)(a)” insert “of this Act and section 514(1) of ITTOIA 2005”.
223   (1)
Amend section 552A (tax representatives) as follows.
      (2)
In subsection (5) omit “in relation to which this Chapter has effect and”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
431

      (3)
In subsection (12) insert in the appropriate place—
““capital redemption policy” means a capital redemption policy
in relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 has effect;”,
““contract for a life annuity” means a contract for a life annuity
5
in relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 has effect;”, and
““policy of life insurance” means a policy of life insurance in
relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 has effect;”.
10
224
In section 552B (duties of overseas insurers’ tax representatives) after
subsection (5) insert—
“(5A)
In subsection (5) “chargeable event” has the same meaning as in
section 552 (see subsection (10) of that section).”
225   (1)
Amend section 553 (non-resident policies and off-shore capital redemption
15
policies) as follows.
      (2)
For subsection (4) substitute—
“(4)
The number of days in the period referred to in subsection (3) shall
be calculated, where appropriate, from the issue of the earliest
related policy, that is, any policy in relation to which the policy is a
20
new policy within the meaning of paragraph 17 of Schedule 15, any
policy in relation to which that policy is such a policy, and so on.”
      (3)
Omit subsections (6) to (9).
      (4)
In subsection (10) in the definition of “foreign institution” for “section 547”
substitute “section 547A”.
25
226   (1)
Amend section 553A (overseas life insurance business) as follows
      (2)
Omit subsection (3).
      (3)
In subsection (4), in the definition of “new non-resident policy” for
“subsections (2) and (3)” substitute “subsection (2)”.
227   (1)
Amend section 553C (personal portfolio bonds) as follows.
30
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (2) for “tax” in both places where it occurs substitute
“corporation tax”.
      (4)
In subsection (3)(a) for “tax”, in the first place where it occurs, substitute
“corporation tax”.
35
      (5)
In subsection (4)—
(a)
for “tax” substitute “corporation tax”,
(b)
after paragraph (b) insert “or”,
(c)
in paragraph (c) for the words from “person or body of persons” to
the end of the paragraph substitute “company”, and
40
(d)
omit paragraph (d) and the word “or” before it.