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
509

593
In Chapter 2 of Part 5, after section 360 insert—
“360A
  Social security contributions
(1)
No deduction from earnings is allowed under this Chapter for any
contribution paid by any person under Part 1 of SSCBA 1992 or Part
1 of SSCB(NI)A 1992.
5
(2)
But this prohibition does not apply to an employer’s contribution
(see subsection (3)) which is allowable as a deduction —
(a)
under section 336 (the general rule),
(b)
under any of sections 337 to 342 (travel expenses), or
(c)
under section 351(1) (expenses of ministers of religion).
10
(3)
For this purpose “an employer’s contribution” means—
(a)
a secondary Class 1 contribution,
(b)
a Class 1A contribution, or
(c)
a Class 1B contribution,

within the meaning of Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A
15
1992.”
594
In section 394(2) (charge on benefit to which Chapter 2 of Part 6 applies) for
“to tax under Case VI of Schedule D” substitute “to income tax”.
595
In section 397(1) (certain lump sums: calculation of amount taxed by virtue
of section 394) for “Case VI of Schedule D” substitute “subsection (2) of that
20
section”.
596
In section 399(1)(b) (employment-related loans: interest treated as paid) omit
“under Case VI of Schedule D”.
597
In section 476 (charge on occurrence of chargeable event) for subsection (5)
substitute—
25
“(5)
If the employee has been divested of the employment-related
securities option by operation of law—
(a)
income tax is charged on the amount determined under
section 478, and
(b)
the person liable for any tax so charged is the relevant person
30
in relation to the chargeable event (see section 477(7)).”
598
In section 477(7) (chargeable events) for “(charge under Case VI of Schedule
D)” substitute “(charge to income tax)”.
599   (1)
Amend section 493 (no charge on acquisition of dividend shares) as follows.
      (2)
Omit subsections (1), (2) and (4).
35
      (3)
After subsection (3) insert—
“(3A)
For the exemption of such amounts from income tax, see section 770
of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend
shares or retained for reinvestment).”
600
For section 496 (no charge on cash dividend retained for reinvestment)
40

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
510

substitute—
“496
No charge on cash dividend retained for reinvestment
For the exemption from income tax of amounts retained under
paragraph 68(2) of Schedule 2 (amount of cash dividend not
reinvested), see section 770 of ITTOIA 2005 (amounts applied by SIP
5
trustees acquiring dividend shares or retained for reinvestment).”
601
In section 497(3) (limitations on charges on shares ceasing to be subject to
plan) for the words from “as” to the end substitute “under Chapter 3 or 4 of
Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident
companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution
10
or dividend payment when dividend shares cease to be subject to plan).”
602
In section 502(4)(a) (meaning of “capital receipt” in section 501) at the end
insert “or section 770 of ITTOIA 2005 (exemption for amounts applied by SIP
trustees acquiring dividend shares or retained for reinvestment)”.
603   (1)
Amend section 515 (tax advantages and charges under other Acts) as
15
follows.
      (2)
In subsection (1) omit paragraph (a).
      (3)
In subsection (2) omit “and” at the end of paragraph (a).
      (4)
In subsection (2) at the end of paragraph (b) insert “, and
(c)
sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs:
20
special rules for charges under Chapters 3 and 4 of Part 4 of
that Act (dividends etc. from UK or non-UK resident
companies etc.)) and section 770 of that Act (exemption for
amounts applied by SIP trustees acquiring dividend shares
or retained for reinvestment).”
25
604
In section 516(4) (approved SAYE option schemes), in the definition of
“SAYE option scheme”, for “approved savings schemes” substitute
“approved savings arrangements”.
605   (1)
Amend section 575 (taxable pension income: foreign pensions) as follows.
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
30
amount of the pension income arising in the tax year, but subject to
subsections (2) and (3).”
      (3)
For subsection (2) substitute—
“(2)
The full amount of the pension income arising in the tax year is to be
calculated on the basis that the pension is 90% of its actual amount,
35
unless as a result of subsection (3) the pension income is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
charged on the remittance basis).
(3)
That pension income is treated as relevant foreign income for the
purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign
40
income: remittance basis and deductions and reliefs).
(4)
But if that pension income arises in the Republic of Ireland, section
839 of that Act (annual payments payable out of relevant foreign
income) applies with the omission of condition B and subsection
(5)(a).
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
511

(5)
See also Chapter 4 of that Part (unremittable income).”
606   (1)
Amend section 613 (taxable pension income: foreign annuities) as follows.
      (2)
In subsection (2) for the words “the amount” onwards substitute “the full
amount of the annuity arising in the tax year, but subject to subsections (3)
and (4).”
5
      (3)
For subsections (3) and (4) substitute—
“(3)
The full amount of the annuity arising in the tax year is to be
calculated on the basis that the annuity is 90% of its actual amount,
unless as a result of subsection (4) the annuity is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
10
charged on the remittance basis).
(4)
The annuity is treated as relevant foreign income for the purposes of
Chapters 2 and 3 of Part 8 of that Act (relevant foreign income:
remittance basis and deductions and reliefs).
(5)
But if the annuity arises in the Republic of Ireland, section 839 of that
15
Act (annual payments payable out of relevant foreign income)
applies with the omission of condition B and subsection (5)(a).
(6)
See also Chapter 4 of that Part (unremittable income).
607   (1)
Amend section 631 (taxable pension income: pre-1973 pensions paid under
the Overseas Pensions Act 1973) as follows.
20
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
amount of the pension income arising in the tax year”.
      (3)
For subsection (2) substitute—
“(2)
The full amount of the pension income arising in the tax year is to be
calculated on the basis that the pension is 90% of its actual amount.
25
(3)
The pension income is treated as relevant foreign income for the
purposes of section 838 of that Act (expenses attributable to
collection or payment of relevant foreign income).”
608   (1)
Amend section 635 (taxable pension income: foreign voluntary annual
payments) as follows.
30
      (2)
In subsection (2) for the words “the amount” onwards substitute “the full
amount of the pension income arising in the tax year, but subject to
subsections (3) and (4)”.
      (3)
For subsection (3) substitute—
“(3)
The full amount of the pension income arising in the tax year is to be
35
calculated on the basis that the pension is 90% of its actual amount,
unless as a result of subsection (4) the pension income is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
charged on the remittance basis).
(4)
That pension income is treated as relevant foreign income for the
40
purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign
income: remittance basis and deductions and reliefs).

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
512

(5)
But if that pension income arises in the Republic of Ireland, section
839 of that Act (annual payments payable out of relevant foreign
income) applies with the omission of condition B and subsection
(5)(a).
(6)
See also Chapter 4 of that Part (unremittable income).”
5
609
After section 644 insert—
“644A
  Health and employment insurance payments
(1)
No liability to income tax arises in respect of a pension or annuity
payment if or to the extent that—
(a)
were the payment an annual payment falling within Chapter
10
7 of Part 5 of ITTOIA 2005, it would be exempt from income
tax under section 735 of that Act (health and employment
insurance payments), and
(b)
it meets conditions A and B.
(2)
Condition A is that the payments are made—
15
(a)
to a person (“the pensioner”) who made payments or
contributions in respect of premiums under an insurance
policy which another person took out wholly or partly for the
pensioner’s benefit, or
(b)
to the pensioner’s husband or wife.
20
(3)
Condition B is that the payments are attributable on a just and
reasonable basis to the payments or contributions in respect of
premiums.”
610
After section 646 insert—
“646A
  Foreign pensions of consular employees
25
(1)
No liability to income tax arises in respect of foreign pension income
of a consular officer or employee in the United Kingdom for a foreign
state if—
(a)
Her Majesty by Order in Council directs that this section
applies to the foreign state for the purpose of giving effect to
30
a reciprocal arrangement with that state, and
(b)
the officer or employee meets conditions A to C.
(2)
Condition A is that the officer or employee is not—
(a)
a British citizen,
(b)
a British overseas territories citizen,
35
(c)
a British National (Overseas), or
(d)
a British Overseas citizen.
(3)
Condition B is that the officer or employee is not engaged in any
trade, profession, vocation or employment in the United Kingdom,
otherwise than as a consular officer or employee of the state in
40
question.
(4)
Condition C is that the officer or employee—
(a)
is a permanent employee of that state, or

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
513

(b)
was not ordinarily resident in the United Kingdom
immediately before becoming a consular officer or employee
in the United Kingdom of that state.
(5)
In this section—
“consular officer or employee” includes any person employed
5
for the purposes of the official business of a consular officer
at—
(a)
any consulate,
(b)
any consular establishment, or
(c)
any other premises used for those purposes,
10
“foreign pension income” means—
(a)
income to which section 573 or 629 applies, and
(b)
income arising from a source outside the United
Kingdom to which section 609, 610, 611 or 633 applies;
and
15
“reciprocal agreement” has the same meaning as in section 302.
(6)
Section 302(5) to (7) apply to an Order under subsection (1) and the
operation of this section as they apply to an Order under section
302(1) and the operation of section 302.”
611
In section 655(2) (structure of Part 10) for the entries relating to sections 84
20
and 85 of FA 2000 substitute—

“section 781 of ITTOIA 2005 (exemption from income tax for
payments under New Deal 50plus);

section 782 of ITTOIA 2005 (exemption from income tax for
payments under employment zone programmes).”
25
612   (1)
Amend section 679 (taxable social security income: foreign benefits) as
follows.
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
amount of the social security income arising in the tax year, but subject to
subsection (2).”
30
      (3)
For subsection (2) substitute—
“(2)
That income is treated as relevant foreign income for the purposes of
Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income:
remittance basis and deductions and reliefs).
(3)
See also Chapter 4 of that Part (unremittable income).”
35
613
After section 681 insert—
“681A
  Foreign benefits of consular employees
(1)
No liability to income tax arises in respect of any benefit to which
section 678 applies of a consular officer or employee in the United
Kingdom for a foreign state if—
40
(a)
Her Majesty by Order in Council directs that this section
applies to the foreign state for the purpose of giving effect to
a reciprocal arrangement with that state, and
(b)
the officer or employee meets conditions A to C.
(2)
Condition A is that the officer or employee is not—
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
514

(a)
a British citizen,
(b)
a British overseas territories citizen,
(c)
a British National (Overseas), or
(d)
a British Overseas citizen.
(3)
Condition B is that the officer or employee is not engaged in any
5
trade, profession, vocation or employment in the United Kingdom,
otherwise than as a consular officer or employee of the state in
question.
(4)
Condition C is that the officer or employee—
(a)
is a permanent employee of that state, or
10
(b)
was not ordinarily resident in the United Kingdom
immediately before becoming a consular officer or employee
in the United Kingdom of that state.
(5)
In this section—
“consular officer or employee” includes any person employed
15
for the purposes of the official business of a consular officer
at—
(a)
any consulate,
(b)
any consular establishment, or
(c)
any other premises used for those purposes, and
20
“reciprocal agreement” has the same meaning as in section 302.
(6)
Section 302(5) to (7) apply to an Order under subsection (1) and the
operation of this section as they apply to an Order under section
302(1) and the operation of section 302.”
614
After section 716 (alteration of amounts by Treasury order) insert—
25
“Priority rule for certain dividends etc
716A
Priority rule for dividends etc. of UK resident companies etc.

Any income, so far as it falls within—
(a)
Part 2, 9 or 10 of this Act, and
(b)
Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK
30
resident companies etc.),
is dealt with under Chapter 3 of Part 4 of ITTOIA 2005.”
615   (1)
Amend Schedule 1 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 in the appropriate place insert—

“ITTOIA 2005
The Income Tax (Trading and Other

35

Income) Act 2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
515

      (3)
In Part 2 in the appropriate place insert—

“UK property business
section 832(1) of ICTA and

Chapter 2 of Part 3 of

ITTOIA 2005”.

616   (1)
Amend Schedule 2 (approved share incentive plans) as follows.
5
      (2)
In paragraph 22(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1)
and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of
that Act)”.
      (3)
In paragraph 79(4) for the words from “section 68B(2)” to the end substitute
“Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK
10
resident companies etc.) as a result of section 394(2) or 407(2) of that Act
(distribution or dividend payment when dividend shares cease to be subject
to plan).”
      (4)
In paragraph 80(3)(b) (other duties of trustees in relation to tax liabilities) for
“Case V of Schedule D or Schedule F” substitute “Chapter 3 or 4 of Part 4 of
15
ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.)”.
      (5)
In paragraph 86(4)(c) at end insert “that is issued in a case where section
410(2) or (3) of ITTOIA 2005 applies”.
      (6)
In paragraph 87(2)(d) for sub-paragraph (ii) substitute—
“(ii)
sections 392 to 395 and 405 to 408 of ITTOIA 2005
20
(SIPs: special rules for charges under Chapters 3
and 4 of Part 4 of that Act (dividends etc. from UK
or non-UK resident companies etc.)),”.
617   (1)
Amend Schedule 3 (approved SAYE option schemes) as follows.
      (2)
In paragraph 1(3) for “savings scheme” substitute “savings arrangement”.
25
      (3)
In paragraph 2(1)(b) for “savings schemes” substitute “savings
arrangements”.
      (4)
In paragraph 14(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1)
and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of
that Act)”.
30
      (5)
In paragraph 23—
(a)
in the heading (including the Part heading), for “scheme” substitute
“arrangement”, and
(b)
for “savings schemes” in both places where it occurs, substitute
“savings arrangements”.
35
      (6)
In paragraph 24(1)—
(a)
in the heading, for “schemes” substitute “arrangements”,
(b)
for “CCS scheme” substitute “certified SAYE savings arrangement”,
and
(c)
for “(“the CCS scheme”)” substitute “(“the approved savings
40
arrangement”)”.
      (7)
Omit paragraph 24(2).