Income Tax (Trading and Other Income) Bill

House of Commons

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
460

Provisions of this Act
Description

Section 730(4)
Transfers of income arising

from securities

Section 740(2)(a) or (b)
Transfer of assets abroad

(liability of non-transferors)

5

Section 743(1)
Transfer of assets abroad

(liability of transferors)

Section 761(1)(b)(i)
Offshore income gains

Section 774(1)
Transactions between dealing

company and associated

10

company

Section 775(2A)
Sale by individual of income

derived from his personal

activities

Section 776(3A)(a)
Transactions in land

15

Section 780(3A)(a)
Sale and lease-back (taxation

of consideration received)

Section 781(1)
Assets leased to traders and

others

Section 786(5)(a)
Transactions associated with

20

loans or credit

Section 804(5B)(a)
Double taxation relief

PART 2

Provision of ITTOIA 2005
Description

Chapter 18 of Part 2
Post-cessation receipts: trades,

25

professions and vocations

Chapter 8 of Part 3
Rent receivable in connection

with a UK section 12(4)

concern

Chapter 9 of Part 3
Rent receivable for UK

30

electric-line wayleaves

Chapter 10 of Part 3
Post-cessation receipts: UK

property businesses

Chapter 2 of Part 4
Interest

Chapter 9 of Part 4
Gains from contracts for life

35

insurance etc.

Chapter 11 of Part 4
Transactions in deposits

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
461

Provision of ITTOIA 2005
Description

Chapter 12 of Part 4
Disposals of futures and

options involving guaranteed

returns

Section 579
Royalties and other income

5

from intellectual property

Section 583
Income from disposals of

know-how

Section 587
Income from sales of patent

rights

10

Chapter 3 of Part 5
Films and sound recordings:

non-trade businesses

Chapter 4 of Part 5
Certain telecommunication

rights: non-trading income

Chapter 5 of Part 5
Settlements: amounts treated

15

as income of settlor

Section 682(3)
Adjustments after the

administration period

Chapter 8 of Part 5
Income not otherwise charged

PART 3
20

Other provisions
Description

Paragraph 8(2)(i) of Schedule 3
Occupational pension schemes

to the Finance Act 1971
(refunds of contributions and

commutation payments)

Section 68(2) of the Finance Act
Employee share ownership

25

1989
trust (chargeable event)

Section 71(4) of the Finance Act
Employee share ownership

1989
trust (borrowing)

Paragraph 11(3) of Schedule 20
Self-assessment transitional

to the Finance Act 1994

30

Section 258(4) of the Capital
Special leasing

Allowances Act

Section 479(4) of the Capital
Persons having qualifying

Allowances Act
non-trade expenditure

Section 394(2) of ITEPA 2003
Charge on administrator of

35

non-approved pension scheme

Section 476(5) of ITEPA 2003
Charge on occurrence of

chargeable event

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
462

Other provisions
Description

Section 583 of ITEPA 2003
certain pension income

(approved retirement benefits

schemes: unauthorised

payments)

5

Section 623 of ITEPA 2003
certain pension income (return

of surplus employee AVCs)

Section 119(4) of the Finance
Individuals benefited by film

Act 2004
relief

Section 127(2) of the Finance
Losses derived from exploiting

10

Act 2004
licence: individuals in

partnership

(3)
For the purposes of this section the reference to section 743 of this Act
does not include that section so far as relating to income falling
within subsection (1A) of that section.
15
(4)
For the purposes of this section—
(a)
any reference to any provision of ITTOIA 2005 does not
include that provision so far as relating to relevant foreign
income,
(b)
the reference to Chapter 2 of Part 4 of ITTOIA 2005 is a
20
reference to that Chapter only so far as relating to interest
falling within section 582(2)(b)(ii) of this Act (funding bonds
issued in respect of interest on certain debts),
(c)
the reference to Chapter 9 of Part 4 of ITTOIA 2005 is a
reference to that Chapter only so far as relating to gains—
25
(i)
which are from a policy or contract specified in
section 531(3) of that Act, and
(ii)
which do not fall within section 532 or 534 of that Act,
(d)
the reference to section 579 of ITTOIA 2005 does not include
that section so far as relating to any annual payment,
30
(e)
the reference to Chapter 4 of Part 5 of ITTOIA 2005 does not
include that Chapter so far as relating to any annual
payment, and
(f)
the reference to Chapter 5 of Part 5 of ITTOIA 2005 does not
include that Chapter so far as relating to income which falls
35
within section 619(3) of that Act.
(5)
For the purposes of this section the reference to section 583 of ITEPA
2003 is a reference to that section only where the paying scheme (see
subsection (3) of that section) is a pilots’ benefit fund (see section 587
of that Act).”
40
340
In section 839(3) (connected persons) for “Chapter 1A of Part XV (see section
660G(1) and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section
620 of that Act)”.
341
Omit Schedule 4A (creative artists: relief for fluctuating profits).

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
463

342   (1)
Amend Schedule 5 (treatment of farm animals etc for the purposes of Case I
of Schedule D) as follows.
      (2)
In paragraph 1—
(a)
after “profits” insert “chargeable to corporation tax”, and
(b)
for “his” substitute “its”.
5
      (3)
In paragraph 2—
(a)
in sub-paragraph (1) for “he” substitute “the farmer”,
(b)
omit sub-paragraphs (3)(a), (4)(a) and (5), and
(c)
in sub-paragraph (6), omit the definitions of “commencement year”
and “qualifying year of assessment”.
10
      (4)
In paragraph 3—
(a)
in sub-paragraph (1) after “profits” insert “chargeable to corporation
tax”,
(b)
in sub-paragraph (3)(b) for “him” substitute “the farmer”,
(c)
in sub-paragraph (9)(a) for “his” substitute “the seller’s”, and
15
(d)
in sub-paragraph (10)(b) for “him” substitute “the farmer”.
      (5)
In paragraph 4—
(a)
for “him” substitute “the farmer”, and
(b)
for “he” substitute “the farmer”.
      (6)
In paragraph 5(1) after “profits” insert “chargeable to corporation tax”.
20
      (7)
In paragraph 6—
(a)
in sub-paragraph (1)—
(i)
for “his” substitute “its”, and
(ii)
for “him” substitute “the farmer”,
(b)
omit sub-paragraphs (2)(a), and (3)(a), and
25
(c)
in sub-paragraph (4), omit the definition of “qualifying year of
assessment”.
      (8)
In paragraph 8—
(a)
for “him”, in each place it occurs, substitute “the farmer”,
(b)
in sub-paragraph (7)—
30
(i)
before “tax” insert “corporation”, and
(ii)
for “chargeable period” substitute “accounting period”.
      (9)
In paragraph 11 for “chargeable period” substitute “accounting period”.
343
Omit Schedule 5AA (guaranteed returns on transactions in futures and
options).
35
344
Omit Schedule 15A (contractual savings schemes).
345   (1)
Amend Schedule 15B (venture capital trusts: relief from income tax) as
follows.
      (2)
In paragraph 4(1) and (2) omit “under Case VI of Schedule D”.
      (3)
Omit paragraphs 7 to 9.
40
346   (1)
Amend Schedule 20 (charities: qualifying investments and loans) as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
464

      (2)
After paragraph 7 insert—
“7A
Uncertificated eligible debt security units as defined in section
552(2) of ITTOIA 2005.”
      (3)
In paragraph 8 for “section 56(5)” substitute “for corporation tax purposes in
section 56(5) above and for income tax purposes in section 552(2) of ITTOIA
5
2005”.
347   (1)
Amend Schedule 22 (reduction of pension fund surpluses) as follows.
      (2)
In paragraph 7(3)(c) for the words from “section 56” to “that section”
substitute “section 551 of ITTOIA 2005 shall by virtue of section 56(3)(b) of
this Act”.
10
      (3)
After paragraph 7 insert—
“7A   (1)
This paragraph applies if a calculation falls to be made under
paragraph 7 above in a case where—
(a)
relief is to be given under section 454 of ITTOIA 2005
(listed deeply discounted securities held since 26th March
15
2003: relief for losses) in respect of a loss sustained on the
disposal of securities, and
(b)
had there been a profit on the disposal it would have been
eligible for relief from tax for the year of assessment in
which the loss is sustained by virtue of section 592(2).
20
      (2)
That relief is to be given before the calculation under paragraph 7
above is made.
      (3)
Then the amount of income to which the specified percentage is
applied by virtue of sub-paragraph (3)(a) of that paragraph is
reduced by the amount of that relief.
25
      (4)
In this paragraph “disposal” has the same meaning as in Chapter
8 of Part 4 of ITTOIA 2005.”
348
In paragraph 11A(4) of Schedule 24 (assumptions for calculating chargeable
profits etc. of foreign companies) after “the Capital Allowances Act” insert
“or section 48 of ITTOIA 2005”.
30
349   (1)
Amend Schedule 27 (distributing funds) as follows.
      (2)
In paragraph 1(1)(d) after “under” insert “—
(i)
Chapter 4 of Part 4 of ITTOIA 2005 (dividends from
non-UK resident companies),
(ii)
Chapter 8 of Part 5 of that Act (income not
35
otherwise charged) so far as it relates to relevant
foreign distributions (within the meaning given by
section 1A(8) of this Act), or
(iii)
”.
      (3)
In paragraph 3(1)(a)(i)—
40
(a)
omit “Case IV or”, and
(b)
after “Schedule D” insert “, or under ITTOIA 2005 on relevant foreign
income,”.
      (4)
In paragraph 5(5) after “1996” insert “or section 714 or 715 of ITTOIA 2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
465

350   (1)
Amend Schedule 28AA (provision not at arm’s length) as follows.
      (2)
In paragraph 6A(3) for “(valuation of trading stock at discontinuance of
trade) (see subsection (2) of that section)” substitute “above (see subsection
(2) of that section) or Chapter 12 of Part 2 of ITTOIA 2005 (see section 174 of
that Act) (valuation of trading stock at discontinuance of trade)”.
5
      (3)
In paragraph 6E after “Schedule D” insert “or Chapter 2 of Part 4 of ITTOIA
2005”.
      (4)
In paragraph 11(1) after “section 492(1)” insert “above or section 16(1) of
ITTOIA 2005”.
351   (1)
Amend Schedule 30 (transitional provisions and savings) as follows.
10
      (2)
In paragraph 5—
(a)
in sub-paragraph (6) omit paragraph (b) and the word “or” before it,
(b)
in sub-paragraph (8) omit “section 113 of this Act or”,
(c)
in sub-paragraph (11) omit “or vocation”, and
(d)
after sub-paragraph (12) insert—
15
   “(13)
This paragraph does not apply for the purposes of income
tax.”
      (3)
Omit paragraphs 18 and 18A.
Part 2
Other enactments
20
Finance Act 1950 (c.15)
352
The Finance Act 1950 is amended as follows.
353
In section 40(3) (modification of section 39 in case of recoveries by assignees
and in certain cases of subsidiary companies)—
(a)
omit “by the Special Commissioners under Case VI of Schedule D”,
25
and
(b)
omit “under that Case”.
Chevening Estate Act 1959 (c.49)
354
The Chevening Estate Act 1959 is amended as follows.
355   (1)
Amend section 2 (provisions as to income tax, estate duty and stamp duty)
30
as follows.
      (2)
In subsection (1)—
(a)
omit paragraph (a),
(b)
in paragraph (b) for “Schedule D” substitute “Part 3 of the Income
Tax (Trading and Other Income) Act 2005”, and
35
(c)
in paragraph (c) for the words from “Schedule C” to “annual
payment” substitute “the provisions of the Income Tax (Trading and
Other Income) Act 2005 specified in subsection (1A) in respect of the
income chargeable under those provisions”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
466

      (3)
After subsection (1) insert—
“(1A)
The provisions are—
(a)
Chapter 2 of Part 4 (interest) so far as the income is yearly
interest or public revenue dividends (as defined in section
505(1A) of the Income and Corporation Taxes Act 1988),
5
(b)
Chapter 7 of that Part (purchased life annuity payments),
(c)
Chapter 10 of that Part (distributions from unauthorised unit
trusts),
(d)
Chapter 13 of that Part (sales of foreign dividend coupons) so
far as the income arises from foreign holdings within section
10
571(1)(a) (meaning of “foreign holdings” in that Chapter),
(e)
Chapter 2 of Part 5, so far as it relates to annual payments
(receipts from intellectual property),
(f)
Chapter 4 of that Part, so far as it relates to annual payments
(certain telecommunication rights: non-trading income), and
15
(g)
Chapter 7 of that Part (annual payments not otherwise
charged).”
Taxes Management Act 1970 (c.9)
356
The Taxes Management Act 1970 is amended as follows.
357   (1)
Amend section 7 (notice of liability to income tax and capital gains tax) as
20
follows.
      (2)
In subsection (6)—
(a)
in paragraph (c) for “Schedule F” substitute “Chapter 3 of Part 4 of
ITTOIA 2005 (dividends etc. from UK resident companies etc.)”, and
(b)
for “Schedule F”, in the second place where it occurs, substitute
25
“dividend”.
      (3)
In subsection (9) in each of paragraphs (a) and (aa) for “Chapter II of Part XIII
of the principal Act” substitute “Chapter 9 of Part 4 of ITTOIA 2005”.
358
In section 8(1AA)(b) (personal returns) for “section 231 of the principal Act”
substitute “section 397(1) of ITTOIA 2005”.
30
359
In section 8A(1AA)(b) (trustee’s returns) for “section 231 of the principal
Act” substitute “section 397(1) of ITTOIA 2005”.
360
In section 9(1) (returns to include self-assessment)—
(a)
in paragraph (b) for “section 231 of the principal Act” substitute
“section 397(1) of ITTOIA 2005”,
35
(b)
omit “233(1),” and “, 249(4), 421(1) or 547(5)”, and
(c)
for “or section 626 of ITEPA 2003” substitute “, section 626 of ITEPA
2003 or section 399(2), 400(2), 414(1), 421(1) or 530(1) of ITTOIA
2005”.
361
Omit section 9D (choice between different Cases of Schedule D).
40
362
In section 12AA(1A)(b) (partnership returns) for “section 231 of the principal
Act” substitute “section 397(1) of ITTOIA 2005”.