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 2 — Other enactments
481

(3)
For the purposes of this section a scheme or arrangement has an
unallowable purpose if the main benefit, or one of the main benefits
that might have been expected to result from, or from any provision
of, the scheme or arrangement (apart from section 449 of ITTOIA
2005 and this section) is—
5
(a)
the obtaining of a tax advantage by any person, or
(b)
the accrual to any person of an allowable loss.
(4)
The reference in subsection (1)(b) to the acquisition or disposal of a
strip shall be construed as if it were in Chapter 8 of Part 4 of ITTOIA
2005 (profits from deeply discounted securities) (see, in particular,
10
sections 437 and 445 of that Act for the meaning of “disposal” and
“acquisition” and section 444 of that Act for the meaning of “strip”).
(5)
In subsection (3)(a) “tax advantage” has the meaning given by
section 709(1) of the Taxes Act.
(6)
This section applies to losses accruing on or after 17th March 2004.”
15
438
In section 156(4) (assets of Class 1) after “Taxes Act” insert “or section 19 of
ITTOIA 2005”.
439
In section 198(5)(b) (replacement of business assets used in connection with
oil fields) after “the Taxes Act” insert “or defined as “oil-related activities” in
section 16(2) of ITTOIA 2005”.
20
440   (1)
Amend section 241 (furnished holiday lettings) as follows.
      (2)
For subsection (2) substitute—
“(2)
For the purposes of this section as it applies to capital gains tax the
“commercial letting of furnished holiday accommodation” has the
same meaning as it has for the purposes of Chapter 6 of Part 3 of
25
ITTOIA 2005.

For the purposes of this section as it applies to corporation tax in
respect of chargeable gains the “commercial letting of furnished
holiday accommodation” has the meaning given by section 504 of the
Taxes Act.”
30
      (3)
In subsection (3)(a) for the words from “Schedule A business” to “Kingdom”
substitute “UK property business (within the meaning of the Taxes Act), or
any Schedule A business (within the meaning of that Act), which consists of,
or so far as it consists of, the commercial letting of furnished holiday
accommodation”.
35
441
In section 251(8)(b) (general provisions concerning debts) for “relevant
discounted security for the purposes of Schedule 13 to that Act if paragraph
3(2)(c) of that Schedule” substitute “deeply discounted security for the
purposes of Chapter 8 of Part 4 of ITTOIA 2005 if section 432(2) of that Act”.
442
In section 254(1)(c) (definition of “a qualifying loan” for relief for debts on
40
qualifying corporate bonds) for “relevant” and “Schedule 13 to the Finance
Act 1996” substitute respectively “deeply” and “Chapter 8 of Part 4 of
ITTOIA 2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
482

443
After section 261 insert—
“Know-how
261A
Disposal of know-how as part of disposal of all or part of a trade
(1)
This section applies if—
(a)
a person carrying on a trade receives consideration for the
5
disposal of know-how which has been used in the trade, and
(b)
the know-how is disposed of as part of the disposal of all or
part of the trade.
(2)
If, as a result of section 194 of ITTOIA 2005, the consideration is
treated for income tax purposes as—
10
(a)
a capital receipt for goodwill (in relation to the person
disposing of the know-how), or
(b)
a capital payment for goodwill (in relation to the person
acquiring the know-how),

the consideration is treated for capital gains tax purposes in the same
15
way.
(3)
This section has effect as if it were contained in Chapter 14 of Part 2
of ITTOIA 2005.”
444   (1)
Amend section 271 (miscellaneous exemptions) as follows.
      (2)
In subsection (1)(f) for “section 322 of the Taxes Act” substitute “section 771
20
of ITTOIA 2005”.
      (3)
In subsection (4)—
(a)
for “bonus”, in both places, substitute “interest”,
(b)
for “section 326 or 326A of the Taxes Act (certified contractual
savings schemes and tax-exempt special savings accounts)”
25
substitute “section 702 of ITTOIA 2005 (certified SAYE savings
arrangements)”,
(c)
for “savings scheme”, in the first place where it occurs, substitute
“savings arrangement”,
(d)
for “certified contractual savings scheme” substitute “certified SAYE
30
savings arrangement”,
(e)
for “scheme” in the last place where it occurs, substitute
“arrangement”, and
(f)
at end insert—

“In this subsection “certified SAYE savings arrangement” has the
35
meaning given by section 703 of ITTOIA 2005.”
445
In section 286(3) (connected persons: interpretation) for “Chapter 1A of Part
XV of the Taxes Act (see section 660G(1) and (2) of that Act)” substitute
“Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.
446   (1)
Amend section 288 (interpretation) as follows.
40
      (2)
In subsection (1) after the definition of “ITEPA 2003” insert—
““ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005;”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
483

      (3)
After subsection (7) insert—
“(7A)
In the application of this Act to Scotland “surrender” includes
renunciation.”
447
In Schedule A1 (application of taper relief), in paragraph 17(6), for “section
660G(1) and (2) of the Taxes Act” substitute “section 620 of ITTOIA 2005”.
5
448
In Schedule 1 (application of exempt amount and reporting limits in cases
involving settled property), in paragraph 2(7), for “section 660G(1) and (2) of
the Taxes Act” substitute “section 620 of ITTOIA 2005”.
449
In paragraph 13(7)(h) of Schedule 5B (enterprise investment scheme: re-
investment)—
10
(a)
in sub-paragraph (i) after “trade or profession” insert “carried on
wholly or partly in the United Kingdom”, and
(b)
in sub-paragraph (ii) for the words from “in computing” to the end
substitute “in calculating for tax purposes the profits of that trade or
profession”.
15
450   (1)
Amend Schedule 8 (leases) as follows.
      (2)
In paragraph 5—
(a)
in sub-paragraph (1) after “that Act)” insert “or by virtue of any of
sections 277 to 281 of ITTOIA 2005 as a receipt of a UK property
business (within the meaning of that Act)”,
20
(b)
in sub-paragraph (2) after “that Act)” insert “or by virtue of any of
sections 277 to 281 of ITTOIA 2005 as a receipt of a UK property
business (within the meaning of that Act)”,
(c)
in sub-paragraph (3) after “that Act)” insert “or by virtue of section
284 or 285 of ITTOIA 2005 (sale of land with right to reconveyance or
25
leaseback) as a receipt of a UK property business (within the
meaning of that Act),” and
(d)
for sub-paragraph (5) substitute—
    “(5)
References in sub-paragraphs (1) and (2) above to a
premium include references to—
30
(a)
a premium deemed to have been received under
subsection (4) or (5) of section 34 of the Taxes Act
(which correspond to paragraph 3(2) and (3) of this
Schedule),
(b)
a sum that becomes payable by the tenant under
35
the terms subject to which a lease is granted in lieu
of the whole or a part of the rent for any period,
(c)
a sum that becomes payable by the tenant under
the terms subject to which a lease is granted as
consideration for the surrender of the lease, and
40
(d)
a sum that becomes payable by the tenant
(otherwise than by way of rent) as consideration for
the variation or waiver of any of the terms of a
lease.”
      (3)
In paragraph 6—
45
(a)
for sub-paragraph (1) substitute—
    “(1)
If—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
484

(a)
under section 37(4) of the Taxes Act (allowance
where, by the grant of a sublease, a lessee has
converted a capital amount into a right to income)
a person is to be treated as paying additional rent
in consequence of having granted a sublease, or
5
(b)
under section 292 of ITTOIA 2005 a person is to be
treated as incurring expenses in consequence of
having granted a sublease,

the amount of any loss accruing to the person on the
disposal by way of the grant of the sublease shall be
10
reduced by the total amount of rent which the person is
thereby treated as paying, or the total amount of expenses
which the person is thereby treated as incurring, over the
term of the sublease (and without regard to whether relief
is thereby effectively given over the term of the sublease),
15
but not so as to convert the loss into a gain, or to increase
any gain.”,
(b)
in sub-paragraph (2) at the end insert “or by virtue of section 282 of
ITTOIA 2005 (assignments for profit of lease granted at undervalue)
as a receipt of a UK property business (within the meaning of that
20
Act)”, and
(c)
in sub-paragraph (3) after “that paragraph” insert “or under section
301 or 302 of ITTOIA 2005 on a claim under that section,”.
      (4)
For paragraph 7 substitute—
“7
If—
25
(a)
under section 34(2) and (3) of the Taxes Act any amount is
brought into account by virtue of section 34(2) and (3) of
the Taxes Act as a receipt of a Schedule A business (within
the meaning of that Act) which is or is treated as carried on
by any person, or
30
(b)
under section 277 of ITTOIA 2005 any amount is brought
into account by virtue of section 278 of that Act as a receipt
of a UK property business (within the meaning of that Act)
which is carried on by any person,

that person shall be treated for the purposes of the computation of
35
any gain accruing to him as having incurred at the time the lease
was granted expenditure of that amount (in addition to any other
expenditure) attributable to the asset under section 38(1)(b).”
      (5)
In paragraph 7A after “Schedule A business” insert “or UK property
business”.
40
Finance (No. 2) Act 1992 (c. 48)
451
The Finance (No. 2) Act 1992 is amended as follows.
452   (1)
Amend section 40A (revenue nature of expenditure on master versions of
films) as follows.
      (2)
In subsection (1)—
45
(a)
for “the purposes of the Tax Acts” substitute “corporation tax
purposes”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
485

(b)
after “section 40D below” insert “or section 143 of ITTOIA 2005
(corresponding income tax provision)”.
      (3)
In subsection (2) for “the purposes of the Tax Acts” substitute “corporation
tax purposes”.
      (4)
In the definition of “expenditure of a revenue nature” in subsection (4)(a)
5
after “chargeable to” insert “corporation”.
453   (1)
Amend section 40B (allocation of expenditure to periods) as follows.
      (2)
In subsection (1) for “person” substitute “company within the charge to
corporation tax”.
      (3)
In subsection (2) after “section 40D below” insert “or section 143 of ITTOIA
10
2005”.
      (4)
In subsection (3)(b) for “up for a period—” to the end substitute “up for a
period, the accounting period of the company.”
      (5)
In subsection (6) for “made—” to the end substitute “made not later than two
years after the end of the relevant period to which the claim relates.”
15
      (6)
In subsection (7)(b) at the end insert “or section 135 of ITTOIA 2005 (income
tax provision corresponding to this section)”.
454
In section 40C(1) (cases where section 40B does not apply) after “section 42
below” insert “or under any of sections 138 to 140 of ITTOIA 2005
(corresponding income tax provisions)”.
20
455   (1)
Amend section 40D (election for sections 40A and 40B not to apply) as
follows.
      (2)
In subsection (1)(a) after “this section” insert “or under section 143 of ITTOIA
2005”.
      (3)
In subsection (2)(a)(i) for “a person who carries” substitute “a company
25
within the charge to corporation tax carrying”.
      (4)
In subsection (4) for “given—” to the end substitute “given not later than two
years after the end of the relevant period in which the master version of the
film is completed.”
      (5)
In subsection (7) at the end insert “or any of that expenditure is deducted
30
under any of sections 137 to 140 of ITTOIA 2005 (corresponding income tax
provisions)”.
456   (1)
Amend section 41 (relief for preliminary expenditure) as follows.
      (2)
In subsection (1)—
(a)
for “tax purposes”, in the first place where it occurs, substitute “the
35
purposes of corporation tax”,
(b)
for “a person” substitute “a company within the charge to
corporation tax”,
(c)
for “that person” substitute “the company”,
(d)
for “him” substitute “it”, and
40
(e)
after “section 40D above” insert “or section 143 of ITTOIA 2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
486

      (3)
In subsection (6) for “made—” to the end substitute “made not later than two
years after the end of the relevant period in which the expenditure to which
it relates becomes payable.”
      (4)
In subsection (7)—
(a)
after “this section” insert “or section 137 of ITTOIA 2005
5
(corresponding income tax provision)”, and
(b)
for “tax purposes” substitute “the purposes of corporation tax”.
457   (1)
Amend section 42 (relief for production or acquisition expenditure) as
follows.
      (2)
In subsection (1)—
10
(a)
for “tax purposes” substitute “the purposes of corporation tax”,
(b)
for “a person” substitute “a company”,
(c)
for “that person” substitute “the company”,
(d)
after “section 40B above” insert “or section 135 of ITTOIA 2005”, and
(e)
after “section 40D above” insert “or section 143 of ITTOIA 2005”.
15
      (3)
In subsection (4)—
(a)
in paragraph (b) after “section 41 above” insert “or section 137 of
ITTOIA 2005”,
(b)
in paragraph (c) after “this section” insert “or any provision of
Chapter 9 of Part 2 of ITTOIA 2005”.
20
      (4)
In subsection (6) for “shall be made—” to the end substitute “—
(a)
shall be made not later than two years after the end of the
relevant period to which the claim relates, and
(b)
shall be irrevocable.”
      (5)
In subsection (7) after “section 40B above” insert “or section 135 of ITTOIA
25
2005”.
458
In section 43(1) after the definition of “expenditure of a revenue nature”
insert—
““ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005,”.
30
459
Omit section 59 (furnished accommodation).
460
Omit Schedule 10 (furnished accommodation).
Finance Act 1993 (c. 34)
461
The Finance Act 1993 is amended as follows.
462
In section 112(7) (employers’ pension contributions) in the definition of
35
“basis period” after “Schedule D” insert “or under Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
463   (1)
Amend section 171 (Lloyd’s underwriters etc: taxation of income tax profits)
as follows.
      (2)
In subsection (2) for paragraphs (a) and (b) substitute—
40
“(a)
the aggregate of those profits shall be chargeable to tax under
Chapter 2 of Part 2 of the Income Tax (Trading and Other

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
487

Income) Act 2005 as the profits of a trade carried on in the
United Kingdom; and
(b)
accordingly, no part of those profits shall be treated as
relevant foreign income, or be charged to tax under any other
Part of that Act or any Part of the Income Tax (Earnings and
5
Pensions) Act 2003;”.
      (3)
In subsection (2B) for “section 231(1) of the Taxes Act 1988” substitute
“section 397(1) of the Income Tax (Trading and Other Income) Act 2005”.
464
In paragraph 13(4) of Schedule 19 (Lloyd’s underwriters etc: repayment of
tax deducted etc. from investment income) after “others)” insert “and section
10
749 of the Income Tax (Trading and Other Income) Act 2005 (exemption of
interest paid under repayment supplements) so far as it relates to interest
paid under section 824 of the Taxes Act 1988”.
465   (1)
Amend Schedule 20A (Lloyd’s underwriters: conversion to limited liability
underwriting) as follows.
15
      (2)
In paragraph 2(2) for “Schedule D” substitute “Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
      (3)
In paragraph 7(2) for “Schedule D” substitute “Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
Pension Schemes Act 1993 (c. 48)
20
466
The Pension Schemes Act 1993 is amended as follows.
467
In section 158(4) (disclosure of information between government
departments etc.)—
(a)
after “carrying on or have carried on” insert “wholly or partly in the
United Kingdom”, and
25
(b)
after “chargeable to tax under” insert “Part 2 of the Income Tax
(Trading and Other Income) Act 2005 or”.
Pension Schemes (Northern Ireland) Act 1993 (c. 49)
468
The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
469
In section 154(4) (disclosure of information between government
30
departments etc.)—
(a)
after “carrying on or have carried on” insert “wholly or partly in the
United Kingdom”, and
(b)
after “chargeable to tax under” insert “Part 2 of the Income Tax
(Trading and Other Income) Act 2005 or”.
35
Finance Act 1994 (c. 9)
470
The Finance Act 1994 is amended as follows.
471   (1)
Amend Schedule 20 (changes for facilitating self-assessment: transitional
provisions and savings) as follows.
      (2)
Omit paragraphs 1 to 10.
40
      (3)
In paragraph 11—