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
432

      (6)
After subsection (9) insert—
“(9A)
The Treasury may by regulations make provision, in relation to any
policy or contract to which this subsection applies, for—
(a)
treating an event described in the regulations as if it were a
chargeable event, and
5
(b)
treating an amount determined in accordance with the
regulations as if it were a gain treated as arising on the
happening of a chargeable event.
(9B)
Regulations under subsection (9A) may make such provision for the
purposes only of enabling the gain to be taken into account in the
10
application of this Chapter to the policy or contract on the later
happening of a chargeable event.
(9C)
Regulations under subsection (9A) may make any provision for the
calculation of the amount of the gain which regulations under
subsection (1) may make for the calculation of the amount charged to
15
corporation tax by virtue of regulations under that subsection.
(9D)
Subsections (6), (8) and (9) apply to regulations under subsection
(9A).
(9E)
Subsection (9A) applies to a policy or contract if—
(a)
it is a personal portfolio bond, and
20
(b)
liability in respect of a gain arising in relation to it would arise
by virtue of any of sections 464 to 468 of ITTOIA 2005
(persons liable for tax under Chapter 9 of Part 4 of that Act).”
228
Omit section 554 (borrowings on life policies to be treated as income in
certain cases).
25
229   (1)
Amend section 556 (activity treated as trade etc. and attribution of income)
as follows.
      (2)
Omit subsection (1).
      (3)
For subsection (2) substitute—
“(2)
If—
30
(a)
under section 13(5) of ITTOIA 2005 a payment made to a
person is treated as made instead to the performer, and
(b)
the person to whom the payment is actually made is a
company within the charge to corporation tax,

the company is treated for corporation tax purposes as if the
35
payment had not been made to it.”
      (4)
In subsection (3)—
(a)
omit paragraph (a), and
(b)
in paragraph (b) for “tax (whether of the entertainer or sportsman or
of another person)” substitute “corporation tax”.
40
230
Omit section 557 (charge on profits).
231
In section 568(1) (deductions from profits of contributions paid under
certified schemes)—
(a)
after “section 74” insert “of this Act or section 33 of ITTOIA 2005”,
and
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
433

(b)
after “Case I of Schedule D,” insert “or under Part 2 of ITTOIA 2005,”.
232
In section 570(4) (payments under certified schemes which are not
repayments of contributions) for “any of the provisions of section 113 or
section 337(1)” substitute “section 337(1) above or section 18 of ITTOIA 2005
(companies beginning or ceasing to carry on trade)”.
5
233
In section 571(1) (cancellation of certificates) for “under Case VI of Schedule
D” substitute “(in the case of corporation tax, under Case VI of Schedule D)”.
234   (1)
Amend section 577 (business entertaining expenses) as follows.
      (2)
In subsection (1)(a)—
(a)
for “tax” substitute “corporation tax”, and
10
(b)
for “the Tax Acts” substitute “the Corporation Tax Acts”.
      (3)
In subsection (3)—
(a)
for “any person” substitute “any company”,
(b)
for “by him”, in the first and second places where it occurs, substitute
“by the company”, and
15
(c)
for “a member of his staff” substitute “an employee of the company”.
      (4)
In subsection (5)—
(a)
for “a person” substitute “a company”,
(b)
for “a member of his staff” substitute “an employee of the company”,
(c)
for “that person” substitute “the company”,
20
(d)
for “him” substitute “the company”, and
(e)
for “members of his staff” substitute “employees of the company”.
      (5)
In subsection (7)—
(a)
in paragraph (b) for “, profession or vocation” substitute “or
profession”, and
25
(b)
in paragraph (c)—
(i)
for “the members of a person’s staff” substitute “a company’s
employees”,
(ii)
for “that person” substitute “the company”, and
(iii)
for “a company”, in both places where it occurs, substitute
30
“the company”.
      (6)
In subsection (8)(b)—
(a)
for “him”, in both places where it occurs, substitute “the donor”, and
(b)
for “relevant tax period” substitute “accounting period”.
      (7)
Omit subsection (8A).
35
      (8)
In subsection (10)—
(a)
for “any person” substitute “any company”,
(b)
for “his trade” substitute “its trade”, and
(c)
for “by him” substitute “by the company”.
235   (1)
Amend section 577A (expenditure involving crime) as follows.
40
      (2)
In subsections (1) and (1A) for “tax” substitute “corporation tax”.
      (3)
In subsection (2)(a) for “the Tax Acts” substitute “the Corporation Tax Acts”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
434

236
In section 578(1) (housing grants) for “any tax purpose” substitute
“corporation tax purposes”.
237
In section 578A(1) (expenditure on car hire) for “tax” substitute “corporation
tax”.
238   (1)
Amend section 579 (statutory redundancy payments) as follows.
5
      (2)
In subsection (2)—
(a)
after “payment is made” insert “by a company”,
(b)
for “trade, profession or vocation”, in each place, substitute “trade or
profession”, and
(c)
for “the employer” substitute “the company”.
10
      (3)
In subsection (3)—
(a)
after “payment is made” insert “by a company”, and
(b)
for “the employer” substitute “the company”.
      (4)
In subsection (5) for “tax purposes” substitute “corporation tax purposes”.
      (5)
In subsection (6) for “the employer”, in both places, substitute “the
15
company”.
239
Omit sections 580A to 580C (relief from tax on annual payments under
certain insurance policies and immediate needs annuities).
240
Omit section 581 (borrowing in foreign currency by local authorities and
statutory corporations).
20
241
After section 581 insert—
“581A
  Interest on foreign currency securities etc.
Interest within section 755(1) of ITTOIA 2005 (interest on foreign
currency securities etc.) shall be paid without deduction of income
tax.”
25
242   (1)
Section 582 (funding bonds issued in respect of interest on certain debts) is
amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a) for “all the purposes of the Tax Acts” substitute “all
the purposes of the Corporation Tax Acts”, and
30
(b)
in paragraph (b) at the beginning insert “where paragraph (a) above
or section 380 of ITTOIA 2005 (which makes provision similar to that
paragraph for income tax purposes) applies”.
      (3)
In subsection (2)—
(a)
after “subsection (1) above” insert “or section 380 of ITTOIA 2005”,
35
and
(b)
in paragraph (b)(ii)—
(i)
after “this section” insert “or section 380 of ITTOIA 2005”, and
(ii)
after “Case VI of Schedule D” insert “(corporation tax) or
under Chapter 2 of Part 4 of ITTOIA 2005 (income tax)”.
40
243
Omit section 583 (Inter-American Development Bank).
244   (1)
Section 584 (relief for unremittable overseas income) is amended as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
435

      (2)
In subsection (1)—
(a)
for “a person is chargeable to tax” substitute “a company is
chargeable to corporation tax”,
(b)
for “for the purposes of tax” substitute “for the purposes of
corporation tax”, and
5
(c)
for “he”, in each place where it occurs, substitute “the company”.
      (3)
In subsection (2)—
(a)
for “a person” substitute “a company”,
(b)
for “his” substitute “its”, and
(c)
for the words from “and tax” to “assessable,” substitute “and
10
corporation tax shall be assessable”.
      (4)
In subsection (4) for “a person becomes chargeable to income tax or”
substitute “a company becomes chargeable to”.
      (5)
Omit subsections (6)(a) and (7).
245
Omit section 585 (relief from tax on delayed remittances).
15
246
In section 586(1) (disallowance of deductions for war risk premiums) for “tax
purpose” substitute “corporation tax purpose”.
247   (1)
Amend section 587 (disallowance of certain payments in respect of war
injuries to employees) as follows.
      (2)
In subsection (1) omit “, or total income,” and for “tax purpose” substitute
20
“corporation tax purpose”.
      (3)
In subsection (2)(b) for “section 121” substitute “section 121(3).”
248
In section 587B(2) (gifts of shares, securities and real property to charities
etc.)—
(a)
in paragraph (b) after “section 83A” insert “of this Act, section 108 of
25
ITTOIA 2005”, and
(b)
for “section 550(2)(a) or (b)” substitute “sections 535 to 537 of ITTOIA
2005”.
249   (1)
Amend section 588 (training courses for employees) as follows.
      (2)
In subsection (1) for “person” substitute “company”.
30
      (3)
In subsection (3) for “trade, profession or vocation” substitute “trade or
profession”.
      (4)
In subsection (5)—
(a)
for “tax” substitute “corporation tax”,
(b)
for “year” substitute “accounting period”,
35
(c)
for “he” substitute “it”,
(d)
omit “section 29(1) of the Management Act, or”, and
(e)
for “chargeable period” substitute “accounting period”.
      (5)
In subsection (7) for “he” substitute “it”.
250   (1)
Amend section 589A (counselling services for employees) as follows.
40
      (2)
In subsection (7)—
(a)
for “(8) to (10)” substitute “(8) and (9)”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
436

(b)
for “person under whom” substitute “company under which”.
      (3)
In subsection (8) for “trade, profession or vocation” substitute “trade or
profession”.
251   (1)
Amend section 591C (cessation of approval: tax on certain schemes) as
follows.
5
      (2)
In subsection (1) for “tax shall be charged” substitute “income tax shall be
charged under and”.
      (3)
In subsection (2) omit “under Case VI of Schedule D”.
      (4)
In subsection (6A)(c)(iii) for “Schedule D” substitute “Part 2 of ITTOIA
2005”.
10
252   (1)
Amend section 592 (exempt approved schemes) as follows.
      (2)
In subsection (3)—
(a)
after “the schemes” insert “, are not relevant foreign income”, and
(b)
for “Case VI of Schedule D” substitute “Chapter 8 of Part 5 of ITTOIA
2005 (income not otherwise charged)”.
15
      (3)
In subsection (4)(a) after “for the purposes of” insert “Part 2 of ITTOIA 2005
or”.
253   (1)
Amend section 598 (charge to tax: repayment of employee’s contributions)
as follows.
      (2)
In subsection (1) after “this section,” insert “income”.
20
      (3)
In subsection (2) for the words from the beginning to “Schedule D”
substitute “The person liable for any tax chargeable under this section shall
be the administrator of the scheme”.
254   (1)
Amend section 599 (charge to tax: commutation of entire pension in special
circumstances) as follows.
25
      (2)
In subsection (1) after “whether wholly or not, under the rule,” insert
“income”.
      (3)
In subsection (1B) before “tax” insert “income”.
      (4)
In subsection (3) for the words from the beginning to “Schedule D on that
amount,” substitute “The person liable for any tax chargeable under this
30
section shall be the administrator of the scheme”.
255
In section 599A (charge to tax: payments out of surplus funds) for subsection
(2) substitute—
“(2)
On the making of a payment to which subsection (1) above applies—
(a)
income tax is charged at the relevant rate on such amount as,
35
after deduction of tax at that rate, would equal the amount of
the payment, and
(b)
the person liable for the tax so charged is the administrator of
the scheme.”
256
In section 601(5)(b) (charge to tax: payments to employers) for “to tax on the
40

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
437

amount of the payment under Case VI of Schedule D” substitute “—
(i)
to income tax on the full amount of the payment
arising in the year of assessment; or
(ii)
to corporation tax on the amount of the payment
under Case VI of Schedule D”.
5
257
In section 602(1)(a) (regulations relating to pension fund surpluses) omit
“under Case VI of Schedule D”.
258   (1)
Amend section 607 (pilots’ benefit fund) as follows.
      (2)
In subsection (2)(c) for “the provisions of Case II of Schedule D” substitute
“such of the provisions of Part 2 of ITTOIA 2005 as apply in calculating the
10
profits of a profession”.
      (3)
In subsection (3)(a) for “in assessing tax under Schedule D” substitute “in
calculating the profits of the profession”.
259
In section 608(2) (superannuation funds approved before 6th April 1980)—
(a)
in paragraph (b)—
15
(i)
after “commissions” insert “which are not relevant foreign
income and”, and
(ii)
for “Case VI of Schedule D” substitute “Chapter 8 of Part 5 of
ITTOIA 2005”, and
(b)
in paragraph (c) for the words from “under” onwards substitute
20
“under Chapter 11 of Part 4 of ITTOIA 2005 (transactions in deposits)
by virtue of a disposal of deposit rights falling within section
552(1)(b) of that Act”.
260
In section 614(2A) (exemptions and reliefs in respect of income from
investments etc. of certain pension schemes) for the words from “paragraph
25
1” to “(relevant” substitute “Chapter 8 of Part 4 of ITTOIA 2005 (profits from
deeply”.
261   (1)
Amend section 617 (social security benefits and contributions) as follows.
      (2)
In subsection (3)—
(a)
for “subsection (4) below” substitute “subsections (4) and (5) below”,
30
and
(b)
after “allowed” insert “for corporation tax purposes”.
      (3)
In subsection (4)—
(a)
at the end of paragraph (b) insert “or”, and
(b)
omit paragraphs (d) and (e).
35
      (4)
After subsection (4) insert—
“(5)
Subsection (3) above shall not apply for the purposes of deductions
under Chapter 2 of Part 5 of ITEPA 2003 (in relation to which section
360A of that Act applies).”
262   (1)
Amend section 623 (relevant earnings) as follows.
40
      (2)
In subsection (2)—
(a)
in paragraph (c) for “Schedule D” substitute “Part 2 of ITTOIA 2005”,
and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
438

(b)
for paragraph (d) substitute—
“(d)
income to which section 833(5B) (patent income)
applies;”.
      (3)
In subsection (6)—
(a)
in paragraph (a) for “section 74(m), (p) or (q)” substitute “section 51
5
of ITTOIA 2005”, and
(b)
after the “or” at the end of that paragraph insert—
“(aa)
deductions in respect of any annuity or other annual
payment (other than interest) payable out of his
profits; or”.
10
263
In section 644(2) (meaning of “relevant earnings”)—
(a)
in paragraph (c) for “Schedule D” substitute “Part 2 of ITTOIA 2005”,
and
(b)
for paragraph (d) substitute—
“(d)
income to which section 833(5B) (patent income)
15
applies.”
264
In section 646(2) (meaning of “relevant net earnings”)—
(a)
in paragraph (a) for “section 74(m), (p) or (q)” substitute “section 51
of ITTOIA 2005”,
(b)
after that paragraph insert—
20
“(aa)
deductions in respect of any annuity or other annual
payment (other than interest) payable out of his
profits;”, and
(c)
in paragraph (bb) for “section 332(3) of this Act” substitute “section
159 of ITTOIA 2005”.
25
265   (1)
Amend section 648B (return of contributions after pension date) as follows.
      (2)
In subsection (1) for “Tax” substitute “Income tax”.
      (3)
In subsection (2) for the words from the beginning to “Schedule D”
substitute “The person liable for any tax chargeable under this section shall
be the administrator of the scheme”.
30
266   (1)
Amend section 650A (charge on withdrawal of approval from
arrangements) as follows.
      (2)
In subsection (1) for “tax shall be charged” substitute “income tax shall be
charged under and”.
      (3)
In subsection (2) omit “under Case VI of Schedule D”.
35
267   (1)
Amend section 656 (purchased life annuities other than retirement
annuities) as follows.
      (2)
In subsection (1)—
(a)
for “Tax Acts”, in the first place where it occurs, substitute
“Corporation Tax Acts”, and
40
(b)
for “other purposes of the Tax Acts” substitute “other corporation tax
purposes”.
      (3)
In subsections (5) and (6) for “he”, in each place it occurs, substitute “the
person”.