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
453

      (3)
In subsection (13)—
(a)
after paragraph (a) insert—
“(aa)
a deduction in calculating the profits of a UK property
business;”,
(b)
in paragraph (c) omit “392 or”, and
5
(c)
after that paragraph insert—
“(ca)
a deduction in computing profits or other income or
gains chargeable to income tax under or by virtue of
any provision to which section 836B applies, or in
computing any loss for which relief is allowable
10
under section 392;”.
314   (1)
Amend section 780 (sale and lease-back: taxation of consideration received)
as follows.
      (2)
In subsection (3)(b) for “a profit or gain chargeable under Case VI of
Schedule D” substitute “an amount chargeable to tax in accordance with
15
subsection (3A)”.
      (3)
After subsection (3) insert—
“(3A)
The amount shall be charged—
(a)
to income tax, or
(b)
to corporation tax as a profit or gain under Case VI of
20
Schedule D.
(3B)
The income tax charged by virtue of subsection (3A)(a) above shall
be charged on the full amount of the proportion of the consideration
concerned arising in the year of assessment; and the person liable for
any tax so charged is the lessee.”
25
315   (1)
Amend section 781 (assets leased to traders and others) as follows.
      (2)
In subsection (1) for “under Case VI of Schedule D for the chargeable period
in which the sum is obtained with tax” substitute “to tax (in the case of
corporation tax, under Case VI of Schedule D) for the chargeable period in
which the sum is obtained”.
30
      (3)
In subsection (4) after paragraph (a) insert—
“(ab)
a deduction in computing profits or other income or gains
chargeable to income tax under or by virtue of any provision
to which section 836B applies, or in computing any loss for
which relief is allowable under section 392;”.
35
      (4)
In subsection (4)(b) omit “392 or”.
316
In section 782(9) (leased assets: special cases) for “section 113 or 337(1)”
substitute “section 18 of ITTOIA 2005 or section 337(1) above (companies
beginning or ceasing to carry on trade)”.
317
In section 783(10)(b) (leased assets: supplemental) for “section 660G(1) and
40
(2)” substitute “section 620 of ITTOIA 2005”.
318
In section 785 (meaning of “asset”, “capital sum” and “lease” for purposes of
sections 781 to 784), in the definition of “capital sum”, after “chargeable”
insert “to income tax under or by virtue of any provision to which section
836B applies or to corporation tax”.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
454

319   (1)
Amend section 786 (transactions associated with loans or credit) as follows.
      (2)
In subsection (3) for the words from “annuity” to “Schedule D” substitute
“relevant annual payment”.
      (3)
After that subsection insert—
“(3A)
In subsection (3) “relevant annual payment” means a payment which
5
is not interest but is—
(a)
an annuity or other annual payment falling within Part 5 of
ITTOIA 2005 and chargeable to income tax otherwise than as
relevant foreign income; or
(b)
an annuity or other annual payment chargeable to
10
corporation tax under Case III of Schedule D.”
      (4)
In subsection (5) for “he shall be chargeable to tax under Case VI of Schedule
D on a sum” substitute “he shall be chargeable—
(a)
to income tax, or
(b)
to corporation tax under Case VI of Schedule D,
15

on a sum”.
      (5)
After that subsection insert—
“(5A)
Income tax charged by virtue of subsection (5)(a) above shall be
charged on the full amount of the income assigned, surrendered,
waived or forgone in the year of assessment.”
20
320   (1)
Amend section 788 (relief by agreement with other territories) as follows.
      (2)
In subsection (3)(d) for “section 231” substitute “section 397(1) of ITTOIA
2005”.
      (3)
In subsection (7) after “and, in the case of an assessment” insert “to
corporation tax”.
25
321
In section 790(11) (unilateral relief) after “and, in the case of an assessment”
insert “to corporation tax”.
322   (1)
Amend section 804 (relief against income tax in respect of earlier years of
commencement) as follows.
      (2)
In subsections (5)(b) and (5A)(b) for “section 63A(1) or (3)” substitute
30
“section 205 or 220 of ITTOIA 2005”.
      (3)
In subsection (5B)(a)—
(a)
for “under Case VI of Schedule D” substitute “to income tax”, and
(b)
after “equal to the excess” insert “and be liable for any tax so
chargeable”.
35
      (4)
In subsection (5C) for “section 63A(1)” substitute “section 220 of ITTOIA
2005”.
      (5)
In subsection (8), in the definition of “overlap profit” for “sections 60 to 62”
substitute “Chapter 15 of Part 2 of ITTOIA 2005”.
323
In section 806K(2) (application of foreign dividend provisions to branches or
40
agencies in the UK of persons resident elsewhere) after paragraph (b)

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
455

insert—
“(bb)
in relation to income tax, take any reference to a dividend
chargeable under Case V of Schedule D as a reference to a
dividend chargeable under Chapter 4 of Part 4 of ITTOIA
2005;”.
5
324
In section 807(1)(b) (sale of securities with or without accrued interest) for
“Case IV or V of Schedule D” substitute “ITTOIA 2005 on relevant foreign
income”.
325
In section 812(1) (withdrawal of right to tax credit of certain non-resident
companies connected with unitary states)—
10
(a)
for “section 231(3)” substitute “section 397(2)(a) of ITTOIA 2005”,
and
(b)
for “or, where” substitute “nor, by virtue of section 30(9) of the
Finance (No. 2) Act 1997, where”.
326   (1)
Amend section 817 (deductions not to be allowed in computing profits or
15
gains) as follows.
      (2)
In subsection (1)—
(a)
before “tax purposes” insert “corporation”, and
(b)
for “the Tax Acts” substitute “the Corporation Tax Acts”.
      (3)
In subsection (2)—
20
(a)
after “profits or gains” insert “for corporation tax purposes”,
(b)
for “the Tax Acts” substitute “the Corporation Tax Acts”,
(c)
omit “or employment”, and
(d)
for “or in any profession, employment or vocation” substitute “or
profession”.
25
327   (1)
Amend section 818 (arrangements for payments of interest less tax or of
fixed net amount) as follows.
      (2)
In subsection (2) for the words from “interest”, in the first place where it
occurs, to “and” substitute “relevant interest”.
      (3)
After subsection (2) insert—
30
“(3)
In subsection (2) “relevant interest” means—
(a)
interest on which the recipient is chargeable to income tax,
which falls within Chapter 2 of Part 4 of ITTOIA 2005 but
which is not relevant foreign income, or
(b)
interest on which the recipient is chargeable to corporation
35
tax under Case III of Schedule D.”
328
In section 819(2) (old references to standard rate tax) for “Schedule F”, in
both places where it occurs, substitute “dividend”.
329
In section 821(1) (under-deductions from payments made before passing of
annual Act)—
40
(a)
after “assessment” insert “or accounting period”,
(b)
after “quarterly payments” insert “(or half-periodic or quarterly
payments)”,
(c)
after “income” insert “or corporation”,

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
456

(d)
after “year”, in the second and third places where it occurs, insert “or
period”,
(e)
after “charged”, in the fourth place where it occurs, insert “in respect
of those payments to income tax under Chapter 2 of Part 4 of ITTOIA
2005 (interest) or shall be charged to corporation tax under”, and
5
(f)
omit “in respect of those payments”.
330   (1)
Section 824 (repayment supplements: individuals and others) is amended as
follows.
      (2)
In subsection (4A)(b) for “section 231” substitute “section 397(1) of ITTOIA
2005”.
10
      (3)
Omit subsection (8).
      (4)
In subsection (9) for “to (8)” substitute “to (7)”.
331
In section 827 (VAT penalties etc.)—
(a)
for “for any tax purposes”, in each place where it occurs, substitute
“for any corporation tax purposes (but see also subsection (3)(a)
15
below)”,
(b)
in subsection (2) for “and income tax” substitute “(but see also
subsection (3)(b) below)”, and
(c)
at the end insert—
“(3)
For income tax purposes—
20
(a)
provision corresponding to that made by this section
(other than subsection (2) above) is made by sections
54 and 869 of ITTOIA 2005, and
(b)
provision corresponding to that made by subsection
(2) above is made by section 777 of ITTOIA 2005 (as
25
read with Chapter 10 of Part 6 of that Act).”
332
After section 827 insert—
“827A
  Territorial scope of charges under certain provisions to which
section 836B applies
(1)
This section applies in relation to any amount chargeable to income
30
tax under or by virtue of any provision to which section 836B applies
(other than a provision listed in Part 2 of the table in that section).
(2)
An amount arising to a person who is resident in the United
Kingdom is chargeable to tax whether or not it is from a source in the
United Kingdom.
35
(3)
An amount arising to a person who is not resident in the United
Kingdom is chargeable to tax only if it is from a source in the United
Kingdom.
(4)
References in this section to amounts which are from a source in the
United Kingdom include, in the case of any amount which does not
40
have a source, references to amounts which have a comparable
connection to the United Kingdom.
(5)
This section is subject to any express or implied provision to the
contrary in any provision of the Income Tax Acts.
(6)
This section does not apply for the purposes of corporation tax.”
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
457

333   (1)
Amend section 828 (orders and regulations made by the Treasury or the
Board) as follows.
      (2)
In subsection (4) omit “324,”.
      (3)
In subsection (5)—
(a)
after “section 717 of ITEPA 2003” insert “or section 873 of ITTOIA
5
2005”,
(b)
after “under ITEPA 2003” insert “or ITTOIA 2005”, and
(c)
for “that Act” substitute “either of those Acts”.
334
In section 830(3) (territorial sea and designated areas) omit “income tax or”.
335
In section 831(3) (interpretation of ICTA) after the entry relating to “ITEPA
10
2003” insert—
““ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005;”.
336
In section 832(1) (interpretation of the Tax Acts)—
(a)
for the definition of “overseas property business” substitute—
15
““overseas property business”—
(a)
for the purposes of income tax, has the meaning given
by Chapter 2 of Part 3 of ITTOIA 2005;
(b)
for the purposes of corporation tax, has the meaning
given by section 70A(4);”,
20
(b)
in the appropriate place insert—
““relevant foreign income” has the meaning given by
subsections (1) to (3) of section 830 of ITTOIA 2005 but
also includes, for any purpose mentioned in any
provision listed in subsection (4) of that section, income
25
treated as relevant foreign income for that purpose by
that provision;”.
(c)
in the definition of “Schedule A business” for “income tax” substitute
“corporation tax”,
(d)
in the definitions of “the Schedule F ordinary rate”, “the Schedule F
30
trust rate” and “the Schedule F upper rate” for “Schedule F”
substitute “dividend”,
(e)
for the definition of “tax credit” substitute—
““tax credit” means—
(a)
a tax credit under section 231 for the purposes of
35
corporation tax; and
(b)
a tax credit under section 397(1) of ITTOIA 2005 for the
purposes of income tax;”,
(f)
in the appropriate place insert—
““UK property business” has the meaning given by
40
Chapter 2 of Part 3 of ITTOIA 2005;”, and
(g)
omit the definition of “Ulster Savings Certificates”.
337   (1)
Amend section 833 (interpretation of Income Tax Acts) as follows.
      (2)
In subsection (3)—
(a)
for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and
45
(b)
in paragraph (b)—
(i)
for “547(1)(a)” substitute “465 of ITTOIA 2005”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
458

(ii)
for “547(5)” substitute “530 of that Act”.
      (3)
In subsection (4)—
(a)
for “and” in the first place where it occurs substitute “to”, and
(b)
in paragraph (c) for the words from “under” to “D” substitute “under
Part 2 of ITTOIA 2005 (trading income)”.
5
      (4)
In subsection (5) for “income which is earned income by virtue of section
529” substitute “—
(a)
income to which subsection (5A) applies, and
(b)
income to which subsection (5B) applies.”
      (5)
After that subsection insert—
10
“(5A)
This subsection applies to income arising to the individual if—
(a)
it is charged to tax under section 583 of ITTOIA 2005 (income
from disposals of know-how), and
(b)
the individual, alone or jointly, devised the know-how in
question.
15
(5B)
This subsection applies to income arising to the individual if—
(a)
it is patent income, and
(b)
the individual, alone or jointly, devised the invention for
which the patent in question was granted.

This is subject to subsection (5C).
20
(5C)
If—
(a)
any part of the rights in respect of the patent, or of any rights
out of which they were granted, has at any time belonged to
any other person, and
(b)
any part of the income is properly attributable to the rights
25
which have belonged to that other person,

subsection (5B) does not apply to that part of the income (and so it is
not earned income).
(5D)
In subsection (5B) “patent income” means—
(a)
royalties or other sums paid in respect of the use of a patent
30
charged to tax under section 579 of ITTOIA 2005,
(b)
amounts on which tax is payable under section 587 or 593 of
ITTOIA 2005, and
(c)
amounts on which tax is payable under—
(i)
section 472(5) of the Capital Allowances Act (patent
35
allowances: balancing charges), or
(ii)
paragraph 100 of Schedule 3 to that Act (balancing
charges in respect of pre-1st April 1986 expenditure
on the purchase of patent rights).
(5E)
References in subsection (5C) to the rights in respect of the patent are
40
to any right to do or authorise the doing of anything which would,
but for the right, be an infringement of the patent.”
338
In section 835(6)(a) (“total income” in the Income Tax Acts) for “Schedule F”
substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK
resident companies etc.)”.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
459

339
After section 836A insert—
“836B
  Table of provisions to which this section applies
(1)
In the Tax Acts references to any provision to which this section
applies are references to any provision listed in the following table so
far as it relates to income tax (but subject to any applicable limitation
5
in subsections (3) to (5)).
(2)
This is the table—
PART 1

Provisions of this Act
Description

Section 214(1)(ab)
Chargeable payments

10

connected with exempt

distributions

Section 571(1)
Cancellation of certificates:

schemes for rationalising

industry

15

Section 591C(1)
Cessation of approval

(retirement benefits scheme)

Section 598(1)
Repayment of employee’s

contribution

Section 599(1) or (1B)
Commutation of entire

20

pension in special

circumstances

Section 599A(2)
Payment out of surplus funds

Section 601(2) (as read with
Payments to employers

section 602(1)(a)) or (5)
(retirement benefits scheme)

25

Section 648B(1)
Return of contributions after

pension date (approved

personal pension scheme)

Section 650A(1)
Withdrawal of approval from

arrangements (approved

30

personal pension scheme)

Section 714(2)
Transfer of securities within

accrued income scheme with

or without accrued interest

Section 716(3)
Transfer of securities with

35

unrealised interest where

settlement day follows last

interest period

Section 723(4)
Proceeds of transfer of foreign

securities within the accrued

40

income scheme ceasing to be

unremittable