Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
474

Treasury under section 581 of ICTA) for “section 581 of the 1988 Act”
substitute “section 755 of the Income Tax (Trading and Other Income) Act
2005”.
Finance Act 1990 (c. 29)
413
The Finance Act 1990 is amended as follows.
5
414   (1)
Amend section 25 (donations to charity by individuals) as follows.
      (2)
In subsection (6) for “section 550(2)(a) or (b) of that Act (relief where gain
charged at higher rate)” substitute “sections 535 to 537 of the Income Tax
(Trading and Other Income) Act 2005 (top slicing relief)”.
      (3)
In subsection (9)—
10
(a)
for paragraph (b) substitute—
“(b)
any tax treated as having been paid under—
(i)
section 399(2) or 400(2) of the Income Tax
(Trading and Other Income) Act 2005
(distributions from UK resident companies
15
etc. on which there is no tax credit);
(ii)
section 414(1) of that Act (stock dividend
income); or
(iii)
section 530(1) of that Act (gains from contracts
for life insurance etc);”,
20
(b)
in paragraph (c) for “of that Act” substitute “of the Taxes Act 1988”,
(c)
in paragraph (e) omit sub-paragraph (i) and the word “or” at the end
of that sub-paragraph, and
(d)
in paragraph (e)(ii) for the words from “a relevant amount” to
“Schedule F” substitute “estate income under section 656(3) or 657(4)
25
of the Income Tax (Trading and Other Income) Act 2005, so far as that
income is treated under section 679 of that Act as paid from sums
within section 680(3)(b) or (4) of that Act”.
415   (1)
Amend section 126 (pools payments for football ground improvements) as
follows.
30
      (2)
In subsection (2)—
(a)
for “person” substitute “company”, and
(b)
for “tax purposes” substitute “corporation tax purposes”.
      (3)
In subsection (3) after “not” insert “, for corporation tax purposes,”.
      (4)
In subsection (4) after “2001” insert “(general rule excluding contributions:
35
income and corporation tax)”.
Finance Act 1991 (c. 31)
416
The Finance Act 1991 is amended as follows.
417   (1)
Amend section 121 (pools payments to support games etc.) as follows.
      (2)
In subsection (2)—
40
(a)
for “person” substitute “company”, and
(b)
for “tax purposes” substitute “corporation tax purposes”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
475

      (3)
In subsection (3) after “not” insert “, for corporation tax purposes,”.
Social Security Contributions and Benefits Act 1992 (c. 4)
418
The Social Security Contributions and Benefits Act 1992 is amended as
follows.
419   (1)
Amend section 15 (Class 4 contributions recoverable under the Income Tax
5
Acts) as follows.
      (2)
In subsection (1)—
(a)
for “annual profits or gains” substitute “profits”,
(b)
omit the “and” at the end of paragraph (a),
(c)
in paragraph (b) for “are profits or gains chargeable to income tax
10
under Case I or Case II of Schedule D” substitute “are profits
chargeable to income tax under Chapter 2 of Part 2 of the Income Tax
(Trading and Other Income) Act 2005”, and
(d)
at the end of that paragraph insert “and
(c)
are not profits of a trade, profession or vocation
15
carried on wholly outside the United Kingdom.”
      (3)
In subsections (2), (3) and (3A) omit “or gains” in each place where they
occur.
      (4)
Omit subsection (4).
420
In section 16(1) (application of Income Tax Acts and destination of Class 4
20
contributions) for “Case I or II of Schedule D” substitute “Chapter 2 of Part
2 of the Income Tax (Trading and Other Income) Act 2005 in respect of the
profits of a trade, profession or vocation which is not carried on wholly
outside the United Kingdom”.
421   (1)
Amend Schedule 2 (levy of Class 4 contributions with income tax) as
25
follows.
      (2)
In paragraph 1 after paragraph (a) insert—
“(ab)
“ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005;”.
      (3)
In paragraph 2 for “profits or gains” to the end substitute “profits—
30
(a)
which are the profits of any relevant trade, profession or
vocation which is not carried on wholly outside the United
Kingdom, and
(b)
which are chargeable to income tax under Chapter 2 of Part
2 of ITTOIA 2005.”
35
      (4)
In paragraphs 3(1), (4) and (5) and 4 omit “or gains” in each place where they
occur.
      (5)
In paragraph 5—
(a)
in paragraph (a) omit “or gains”, and
(b)
in paragraph (b)—
40
(i)
for “section 59 of the 1988 Act” substitute “section 8 of
ITTOIA 2005”, and
(ii)
omit “or gains”.
      (6)
In paragraph 7 omit “or gains”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
476

Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)
422
The Social Security Contributions and Benefits (Northern Ireland) Act 1992
is amended as follows.
423   (1)
Amend section 15 (Class 4 contributions recoverable under the Income Tax
Acts) as follows.
5
      (2)
In subsection (1)—
(a)
for “annual profits or gains” substitute “profits”,
(b)
omit the “and” at the end of paragraph (a),
(c)
in paragraph (b) for “are profits or gains chargeable to income tax
under Case I or Case II of Schedule D” substitute “are profits
10
chargeable to income tax under Chapter 2 of Part 2 of the Income Tax
(Trading and Other Income) Act 2005”, and
(d)
at the end of that paragraph insert “and
(c)
are not profits of a trade, profession or vocation
carried on wholly outside the United Kingdom.”
15
      (3)
In subsections (2), (3) and (3A) omit “or gains” in each place where they
occur.
      (4)
Omit subsection (4).
424   (1)
Amend Schedule 2 (Schedule 2 to the Social Security Contributions and
Benefits Act 1992: levy of Class 4 contributions with income tax) as follows.
20
      (2)
In paragraph 1 after paragraph (a) insert—
“(ab)
“ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005;”.
      (3)
In paragraph 2 for “profits or gains” to the end substitute “profits—
(a)
which are the profits of any relevant trade, profession or
25
vocation which is not carried on wholly outside the United
Kingdom, and
(b)
which are chargeable to income tax under Chapter 2 of Part
2 of ITTOIA 2005.”
      (4)
In paragraphs 3(1), (4) and (5) and 4 omit “or gains” in each place where they
30
occur.
      (5)
In paragraph 5—
(a)
in paragraph (a) omit “or gains”, and
(b)
in paragraph (b)—
(i)
for “section 59 of the 1988 Act” substitute “section 8 of
35
ITTOIA 2005”, and
(ii)
omit “or gains”.
      (6)
In paragraph 7 omit “or gains”.
Taxation of Chargeable Gains Act 1992 (c. 12)
425
The Taxation of Chargeable Gains Act 1992 is amended as follows.
40
426
In section 4(2) and (3) (rates of capital gains tax) for “Schedule F” substitute
“dividend”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
477

427   (1)
Amend section 6 (rates of capital gains tax: special cases) as follows.
      (2)
In subsection (2)—
(a)
in paragraph (a)—
(i)
for “549(2) of the Taxes Act (gains under life policy or life
annuity contract)” substitute “539 of ITTOIA 2005 (gains
5
from contracts for life insurance etc)”, and
(ii)
for “excess” substitute “extra”, and
(b)
in paragraph (c), for “699(1) of that Act (income accruing before
death)” substitute “669(1) and (2) of ITTOIA 2005 (reduction in
residuary income: inheritance tax on accrued income)”.
10
      (3)
In subsection (3)—
(a)
for “547(1)(a) of the Taxes Act (gains from insurance policies etc)”
substitute “465 of ITTOIA 2005 (gains from contracts for life
insurance etc)”,
(b)
in paragraph (a) for “appropriate fraction within the meaning of
15
section 550(3)” substitute “annual equivalent within the meaning of
section 536(1) of that Act or (as the case may be) the total annual
equivalent within the meaning of section 537”, and
(c)
in paragraph (b)—
(i)
for “550” substitute “535”,
20
(ii)
for “required by section 550(2)(b)” substitute “under section
536(1) of that Act or (as the case may be) section 537 of that
Act”, and
(iii)
for “Schedule F” substitute “dividend”.
428
In section 12(2) (foreign assets of person with foreign domicile) for the words
25
from “, and subsections (6) to (9)” to the end substitute “, and sections 833
and 834 of ITTOIA 2005 shall apply as they would apply for the purposes of
section 832 of that Act (remittance basis) if the gain were relevant foreign
income.”
429
In section 41(4) (restriction of losses by reference to capital allowances and
30
renewals allowances)—
(a)
in paragraph (b) after “Taxes Act” insert “or any deduction under
section 315 of ITTOIA 2005”, and
(b)
in paragraph (c) after “Taxes Act” insert “or section 170 of ITTOIA
2005”.
35
430   (1)
Amend section 59 (partnerships) as follows.
      (2)
Renumber the existing text as subsection (1).
      (3)
After that subsection insert—
“(2)
Subsection (3) applies if—
(a)
a person resident in the United Kingdom (“the resident
40
partner”) is a member of a partnership which resides outside
the United Kingdom or which carries on any trade,
profession or business the control and management of which
is situated outside the United Kingdom, and
(b)
by virtue of any arrangements falling within section 788 of
45
the Taxes Act (“the arrangements”) any of the capital gains of

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
478

the partnership are relieved from capital gains tax in the
United Kingdom.
(3)
The arrangements do not affect any liability to capital gains tax in
respect of the resident partner’s share of any capital gains of the
partnership.”
5
431
In section 97(7) (supplementary provisions) for “section 660G(1) and (2) of
the Taxes Act” substitute “section 620 of ITTOIA 2005”.
432   (1)
Amend section 117 (meaning of qualifying corporate bond) as follows.
      (2)
In subsection (2AA) for “relevant discounted security for the purposes of
Schedule 13 to the Finance Act 1996” substitute “deeply discounted security
10
for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 (see section 430)”.
      (3)
In subsection (6C) for “Schedule 13 to the Finance Act 1996 (relevant
discounted securities)” substitute “Chapter 8 of Part 4 of ITTOIA 2005
(profits from deeply discounted securities) (see section 433)”.
433   (1)
Amend section 142 (capital gains on stock dividends) as follows.
15
      (2)
In subsection (1) for the words from “section 249” to “that section” substitute
“section 410(2), (3) or (4) of ITTOIA 2005 applies”.
      (3)
In subsection (3) for “the appropriate amount in cash” substitute “the cash
equivalent of the share capital in accordance with section 412 of ITTOIA
2005”.
20
434
After section 148 insert—
“148A
  Futures and options involving guaranteed returns
(1)
Profits and gains that are chargeable under Chapter 12 of Part 4 of
ITTOIA 2005 are not to be brought into account for the purposes of
capital gains tax, except where section 148B applies.
25
(2)
Where—
(a)
losses are sustained by a person from a disposal, and
(b)
had profits or gains arisen to the person from the disposal,
they would be chargeable under that Chapter,

the losses are not to be brought into account for the purposes of
30
capital gains tax, except where section 148C applies.
148B
  Deemed disposals at a gain under section 564(4) of ITTOIA 2005
(1)
This section deals with how this Act applies where profits or gains
arising to a person from such a disposal as is referred to in section
564(4) of ITTOIA 2005 (“the deemed disposal”) are chargeable to tax
35
under Chapter 12 of Part 4 of that Act.
(2)
Amounts taken into account or allowable as deductions in
calculating the profits or gains are not to be excluded from any
calculation made for the purposes of this Act as a result of section 37
or 39.
40
(3)
For the purposes of this Act the amount of the consideration for the
acquisition by the person of any asset the person disposes of by the
future running to delivery or the exercise of the option is increased

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
479

by the amount of the profits or gains chargeable under Chapter 12 of
Part 4 of ITTOIA 2005.
(4)
Any increase made as a result of subsection (3) is to be disregarded
in calculating any indexation allowance.
(5)
For the purposes of this Act the amount of the consideration for the
5
acquisition of any asset acquired by the person by means of the
future running to delivery or the exercise of the option is increased
by the amount of the profits or gains chargeable under Chapter 12 of
Part 4 of ITTOIA 2005.
(6)
If the deemed disposal is a disposal of an option by the grantor, for
10
the purposes of subsections (3) to (5) any determination—
(a)
whether profits or gains arose to the grantor from that
disposal, and
(b)
of the amount of those profits or gains,

is to be made as if the deemed disposal and the disposal by which the
15
option was granted were a single transaction.
(7)
Section 565 of ITTOIA 2005 (interpretation of section 564 of that Act)
applies for the purposes of this section as it applies for the purposes
of section 564 of that Act.
148C
  Deemed disposals at a loss under section 564(4) of ITTOIA 2005
20
(1)
This section deals with how this Act applies where a loss sustained
by a person from such a disposal as is referred to in section 564(4) of
ITTOIA 2005 (“the deemed disposal”) is brought into account for the
purposes of section 392 of ICTA (losses).
(2)
Amounts taken into account or allowable as deductions in
25
calculating that loss are not to be excluded from any calculation
made for the purposes of this Act as a result of section 37 or 39.
(3)
If the deemed disposal is a disposal of an option by the grantor, for
the purposes of subsections (4) and (5) any determination—
(a)
whether the grantor sustained a loss from that disposal, and
30
(b)
of the amount of that loss,

is to be made as if the deemed disposal and the disposal by which the
option was granted were a single transaction.
(4)
If the loss from the deemed disposal equals or is less than—
(a)
the amount of the consideration for the acquisition of any
35
asset acquired by the person sustaining the loss by means of
the future running to delivery or the exercise of the option, or
(b)
the amount of the consideration for the acquisition by that
person of any asset the person disposes of by the future
running to delivery or the exercise of the option,
40

for the purposes of this Act the amount of that consideration is
reduced by the amount of the loss.
(5)
If the loss from the deemed disposal exceeds the amount of that
consideration—
(a)
that consideration is reduced to nil, and
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
480

(b)
an amount equal to the excess is treated for the purposes of
this Act as a chargeable gain accruing to the person
sustaining the loss on the appropriate occasion.
(6)
In a case where the consideration mentioned in subsection (4)(a) is
reduced under subsection (5)(a), the appropriate occasion is the first
5
occasion after the acquisition mentioned in subsection (4)(a) when
there is a disposal of the asset in question.
(7)
In a case where the consideration mentioned in subsection (4)(b) is so
reduced, the appropriate occasion is the disposal the person
sustaining the loss makes by the future running to delivery or the
10
exercise of the option, as the case may be.
(8)
In subsection (6) the reference to a disposal of the asset in question
includes a reference to anything that would be such a disposal but for
section 116(10) or 127.
(9)
In subsections (6) and (7) the references to a disposal include
15
references to a disposal which, in accordance with this Act, would
(apart from subsection (5)(b)) be a disposal on which neither a gain
nor a loss accrues.
(10)
Section 565 of ITTOIA 2005 (interpretation of section 564) applies for
the purposes of this section as it applies for the purposes of section
20
564.”
435
In section 151 (personal equity plans) for subsections (2) and (2A)
substitute—
“(2)
The provisions of Chapter 3 of Part 6 of ITTOIA 2005 (income from
individual investment plans), except section 694(1) and (2), shall
25
apply in relation to regulations made under subsection (1) as they
apply to regulations made under section 694(1), but with the
substitution for any reference to income tax of a reference to capital
gains tax.”
436
In section 151A(6) (venture capital trusts: reliefs) for the words from “in
30
accordance” to the end of the subsection substitute “as references to shares
not acquired within the limit in section 709(4) of ITTOIA 2005; and the
question whether shares are acquired within that limit shall be determined
as it is for the purposes of Chapter 5 of Part 6 of that Act.”
437
After section 151B insert—
35
“151C
  Strips: manipulation of price: associated payment giving rise to loss
(1)
This section applies if—
(a)
as a result of any scheme or arrangement which has an
unallowable purpose, the circumstances are, or might have
been, as mentioned in paragraph (a), (b) or (c) of section
40
449(2) of ITTOIA 2005,
(b)
under the scheme or arrangement, a payment falls to be made
otherwise than in respect of the acquisition or disposal of a
strip, and
(c)
as a result of that payment or the circumstances in which it is
45
made, a loss accrues to any person.
(2)
The loss shall not be an allowable loss.