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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 3 — Trading income

537

 

(a)   

an individual carries on a trade of farming or market gardening in

the United Kingdom in partnership, and

(b)   

but for the repeal by this Act of section 96 of ICTA the individual

could have made a claim under that section in relation to the profits

of that trade for the tax years 2004-05 and 2005-06,

5

           

the individual may make an averaging claim under section 222 of this Act in

relation to those profits for those tax years (despite anything in Chapter 16

of Part 2 of this Act to the contrary).

Adjustment on change of basis

56    (1)  

Chapter 17 of Part 2 applies to a change of basis taking effect for a period of

10

account which ends on or after 6th April 2005.

      (2)  

For this purpose the period of account for which a change of basis takes

effect is the first period of account for which the new basis is adopted.

57    (1)  

Subject to sub-paragraph (3), section 232 applies before 6th April 2006 with

the following amendment.

15

      (2)  

In subsection (4)—

(a)   

before paragraph (a) insert—

“(aa)   

relevant earnings within section 623(2)(c) or 644(2)(c)

of ICTA, or”,

(b)   

omit paragraph (b) and the word “or” before it, and

20

(c)   

for “earned income or relevant UK earnings” substitute “relevant

earnings or earned income”.

      (3)  

The power of the Treasury to make an order under section 281 or 283 of FA

2004 has effect as if Schedule 35 to that Act contained an amendment

substituting section 232(4) of this Act for that subsection as amended by sub-

25

paragraph (2) above.

58         

If—

(a)   

an individual has made an election under paragraph 12 of Schedule

22 to FA 2002 (election by barrister or advocate to accelerate

adjustment charge),

30

(b)   

as a result of the election sub-paragraph (4) of that paragraph applies

in relation to the tax year 2004-05, and

(c)   

the election is in force immediately before 6th April 2005,

           

the election continues to apply in relation to the tax year 2005-06 and

subsequent tax years (despite paragraph 3 of this Schedule).

35

59         

Section 104(4) of ICTA (which, despite its repeal, applies in relation to any

change of accounting basis occurring before 6th April 1999) does not apply

if the person who would be liable to tax as a result of the change was born

before 6th April 1917.

Post-cessation receipts

40

60    (1)  

Subject to sub-paragraph (4), section 256 applies before 6th April 2006 with

the following amendments.

      (2)  

In subsection (1)(b)—

(a)   

after “from the trade was” insert “relevant earnings within section

623(2)(c) or 644(2)(c) of ICTA or”, and

45

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

538

 

(b)   

omit “or relevant UK earnings within section 189(2)(b) of FA 2004”.

      (3)  

In subsection (2) for “earned income or relevant UK earnings” substitute

“relevant earnings or earned income”.

      (4)  

The power of the Treasury to make an order under section 281 or 283 of FA

2004 has effect as if Schedule 35 to that Act contained an amendment

5

substituting section 256 of this Act for that section as amended by sub-

paragraphs (2) and (3) above.

61         

Chapter 18 of Part 2 does not apply in relation to a post-cessation receipt if—

(a)   

the person who would be liable to tax on the receipt was born before

6th April 1917, and

10

(b)   

the cessation of the trade occurred before 6th April 2000.

Part 4

Property income

Apportionment of profits or losses to tax years before tax year 2005-06

62    (1)  

This paragraph applies if—

15

(a)   

a period of account of a property business begins before 6th April

2005 and ends on or after that date, and

(b)   

in order to arrive at the profits or losses of a tax year before the tax

year 2005-06 it is necessary to apportion the profits or losses of the

period of account to any part of that period falling in a tax year before

20

the tax year 2005-06.

      (2)  

The profits or losses of the period of account—

(a)   

are calculated in accordance with Part 3 of this Act (and therefore, to

that extent, that Part has effect for tax years before the tax year 2005-

06), and

25

(b)   

may be apportioned in accordance with section 275 to any part of the

period of account falling in a tax year before the tax year 2005-06.

Lease premiums

63         

Section 277 does not apply in relation to a lease granted pursuant to a

contract entered into before 4th April 1963.

30

Lease premiums: sums payable instead of rent

64         

Section 279 does not apply in relation to a lease granted—

(a)   

before 6th April 1963, or

(b)   

pursuant to a contract entered into before 4th April 1963.

Lease premiums: sums payable for surrender of lease

35

65         

Section 280 does not apply in relation to a lease granted—

(a)   

before 6th April 1963, or

(b)   

pursuant to a contract entered into before 4th April 1963.

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

539

 

Lease premiums: assignments for profit of lease granted at undervalue

66         

Section 282 does not apply in relation to a lease granted —

(a)   

before 6th April 1963, or

(b)   

pursuant to a contract entered into before 4th April 1963.

Lease premiums: pre-commencement receipts treated as taxed receipts

5

67    (1)  

This paragraph relates to the operation of sections 287 to 298 where, in

respect of a lease—

(a)   

there is a receipt of a Schedule A business or an overseas property

business (within the meaning of section 65A(4) or 70A(4) of ICTA) as

a result of section 34 or 35 of ICTA (treatment of premiums etc. as

10

rent and assignments for profit of lease granted at an undervalue) for

a tax year before the tax year 2005-06 or an accounting period ending

before 6th April 2005, or

(b)   

there would be such a receipt, but for the operation of section 37(2)

or (3) of ICTA (reductions in certain receipts under section 34 or 35

15

of ICTA).

           

In this paragraph and paragraphs 68 and 69 such a receipt is referred to as a

“pre-commencement receipt”.

      (2)  

For the purposes of Chapter 4 of Part 3—

(a)   

the lease is treated as a taxed lease, and

20

(b)   

the pre-commencement receipt is treated as a taxed receipt.

      (3)  

For the purposes of that Chapter, the “receipt period” of a taxed receipt

which is a pre-commencement receipt is—

(a)   

in the case of a pre-commencement receipt as a result of section 34 of

ICTA, the period treated in calculating the amount of the receipt as

25

being the duration of the lease, and

(b)   

in the case of a pre-commencement receipt as a result of section 35 of

ICTA, the period treated in calculating the amount of the receipt as

being the duration of the lease remaining at the date of the

assignment.

30

      (4)  

For the purposes of that Chapter the “unreduced amount” of a taxed receipt

which is a pre-commencement receipt is the amount of the pre-

commencement receipt as a result of section 34 or 35 of ICTA, before the

operation of section 37(2) or (3) of ICTA.

      (5)  

Sub-paragraph (6) applies to a taxed receipt which is a pre-commencement

35

receipt arising as a result of section 34(2) of ICTA (obligation on tenant to

carry out work under lease).

      (6)  

If the obligation to carry out work included the carrying out of work which

gave or will give rise to expenditure for which an allowance has been, or

may be, made under the enactments relating to capital allowances, the

40

unreduced amount of the taxed receipt is calculated as if the obligation had

not included the carrying out of that work.

Lease premiums: taking account of reductions in pre-commencement receipts

68    (1)  

This paragraph applies if—

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

540

 

(a)   

in calculating the amount of a pre-commencement receipt, there is a

reduction under section 37(2) or (3) of ICTA by reference to the

amount chargeable on the superior interest for the purposes of that

section, and

(b)   

as a result of paragraph 67 the amount chargeable on the superior

5

interest is the taxed receipt for the purposes of Chapter 4 of Part 3.

      (2)  

References to a reduction under section 37(2) or (3) of ICTA in a pre-

commencement receipt by reference to the amount chargeable on the

superior interest are to the difference between—

(a)   

the amount of the pre-commencement receipt before the operation of

10

section 37(2) or (3) of ICTA, and

(b)   

the amount of the receipt after the operation of that subsection,

           

so far as attributable to the amount chargeable on the superior interest for

the purposes of section 37 of ICTA.

      (3)  

In sections 290(5)(a) (meaning of “unused amount”) and 295(1)(a) (limit on

15

reductions and deductions) references to reductions under section 288 by

reference to the taxed receipt include references to reductions under section

37(2) or (3) of ICTA in pre-commencement receipts by reference to the

amount chargeable on the superior interest.

      (4)  

Sections 292 to 294 apply as follows—

20

(a)   

the pre-commencement receipt is treated as if it were a lease

premium receipt for the purposes of sections 293 and 294,

(b)   

references in those sections to the reduction under section 288 by

reference to the taxed receipt are, in relation to the pre-

commencement receipt, to the reduction under section 37(2) or (3) of

25

ICTA by reference to the amount chargeable on the superior interest,

and

(c)   

for the purposes of those sections the receipt period of the pre-

commencement receipt is—

(i)   

in the case of a pre-commencement receipt as a result of

30

section 34 of ICTA, the period treated in calculating the

amount of the receipt as being the duration of the lease, and

(ii)   

in the case of a pre-commencement receipt as a result of

section 35 of ICTA, the period treated in calculating the

amount of the receipt as being the duration of the lease

35

remaining at the date of the assignment.

Lease premiums: taking account of deductions for rent as a result of section 37(4) or 87(2) of

ICTA

69    (1)  

Sub-paragraph (2) applies if—

(a)   

in calculating the profits of a trade, profession or vocation for a tax

40

year before the tax year 2005-06 or an accounting period ending

before 6th April 2005, a person is treated as paying rent under section

87(2) of ICTA by reference to the amount chargeable for the purposes

of that section, and

(b)   

as a result of paragraph 67 the amount chargeable is the taxed receipt

45

for the purposes of Chapter 4 of Part 3.

      (2)  

References in sections 290(5)(b) and 295(2)(b) to the deductions allowed for

expenses under section 61 by reference to the taxed receipt include

references to the deductions allowed in calculating the profits of the trade,

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

541

 

profession or vocation for the rent that the person is treated as paying under

section 87(2) of ICTA by reference to the amount chargeable.

      (3)  

Sub-paragraph (4) applies if—

(a)   

in calculating the profits of a Schedule A business or an overseas

property business (within the meaning of section 65A(4) or 70A(4) of

5

ICTA) for a tax year before the tax year 2005-06 or an accounting

period ending before 6th April 2005, a person is treated as paying

rent as a result of section 37(4) of ICTA by reference to the amount

chargeable on the superior interest for the purposes of that section,

and

10

(b)   

as a result of paragraph 67 the amount chargeable on the superior

interest is the taxed receipt for the purposes of Chapter 4 of Part 3.

      (4)  

References in sections 290(5)(c) and 295(1)(b) to the deductions allowed for

expenses under section 292 by reference to the taxed receipt include

references to the deductions allowed in calculating the profits of the

15

Schedule A business or overseas property business (within the meaning of

section 65A(4) or 70A(4) of ICTA) for the rent that the person is treated as

paying as a result of section 37(4) of ICTA by reference to the amount

chargeable on the superior interest.

Lease premiums: rules for determining effective duration of lease

20

70    (1)  

In relation to a lease granted after 12th June 1969 and before 25th August

1971, for sections 303 and 304 substitute—

       

303  Rules for determining effective duration of lease

(1)   

The following rules apply for determining the effective duration of a

lease for the purposes of this Chapter.

25

Rule 1: Where the terms of a lease include provision for the

determination of the lease by notice given by the landlord,

the lease is not to be treated as granted for a term longer than

one ending at the earliest date on which it could be

determined by notice so given.

30

Rule 2: A lease is not to be treated as having been granted for a

term longer than one ending on a date before the end of the

term for which the lease was granted, if the terms of the lease

or any other circumstances make it unlikely that the lease will

35

continue beyond that date.

Rule 3: Where the terms of the lease include provision for the

extension of the lease beyond a given date by notice given by

the tenant, account may be taken of any circumstances

40

making it likely that the lease will be so extended.

(2)   

Rule 2 applies by reference to the facts known or ascertainable at the

time of the grant of the lease.

(3)   

In applying the rules, it is assumed that all parties concerned,

whatever their relationship, act as if they were at arm’s length.

45

(4)   

In this section, in relation to Scotland, “term”, where referring to the

duration of a lease, means period.”

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

542

 

      (2)  

This paragraph does not apply if the determination is for the purposes of

section 281 (sums payable for variation or waiver of term of lease).

71    (1)  

In relation to a lease granted before 13th June 1969, for sections 303 to 305

substitute—

       

303  Rules for determining effective duration of lease

5

(1)   

The following rules apply for determining the effective duration of a

lease for the purposes of this Chapter.

Rule 1: Where the effective duration of a lease is being

determined after the date on which the lease has for any

reason come to an end, the duration is taken to have

10

extended from its commencement to that date.

Rule 2: Where the terms of the lease include provision for

the determination of the lease by notice given either by

the landlord or by the tenant, the lease is not to be

15

treated as granted for a term longer than one ending at

the earliest date on which it could be determined by

notice.

Rule 3: A lease is not to be treated as having been granted

20

for a term longer than one ending on a date before the

end of the term for which the lease was granted, if the

terms of the lease or any other circumstances make it

unlikely that the lease will continue beyond that date.

(2)   

Rules 2 and 3 are subject to rule 1.

25

(3)   

Rules 2 and 3 apply in accordance with circumstances prevailing at

the time of the determination.

(4)   

In this section, in relation to Scotland, “term”, where referring to the

duration of a lease, means period.”

      (2)  

This paragraph does not apply if the determination is for the purposes of

30

section 281 (sums payable for variation or waiver of term of lease).

Reverse premiums

72    (1)  

Section 311 does not apply to a reverse premium—

(a)   

which was received before 9th March 1999, or

(b)   

to which the recipient was entitled immediately before that date.

35

      (2)  

In determining whether a reverse premium was one to which the recipient

was entitled immediately before 9th March 1999, no account is to be taken of

any arrangements made on or after that date.

Deductions for expenditure on energy-saving items

73         

Sections 312 to 314 do not apply to expenditure incurred before 6th April

40

2004.

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 4 — Property income

543

 

Commercial letting of furnished holiday accommodation

74    (1)  

Subject to sub-paragraph (4), Chapter 6 of Part 3 applies before 6th April

2006 with the following amendments.

      (2)  

In section 322(2)—

(a)   

after paragraph (b) insert—

5

“(ba)   

section 623(2)(c) or 644(2)(c) of ICTA (income

regarded as relevant earnings for pension purposes:

see section 504A of that Act),”,

(b)   

at the end of paragraph (d) insert “and”, and

(c)   

omit paragraph (f) and the word “and” before it.

10

      (3)  

In section 328(2)—

(a)   

before paragraph (a) insert—

“(aa)   

income regarded as relevant earnings for pension

purposes under section 623(2)(c) or 644(2)(c) of ICTA,

or”, and

15

(b)   

omit paragraph (b) and the word “or” before it.

      (4)  

The power of the Treasury to make an order under section 281 or 283 of FA

2004 has effect as if Schedule 35 to that Act contained amendments

substituting sections 322(2) and 328(2) of this Act for those subsections as

amended by sub-paragraphs (2) and (3) above.

20

75    (1)  

Subject to sub-paragraph (3), section 504A of ICTA (as inserted by Schedule

1 to this Act) applies before 6th April 2006 with the following amendment.

      (2)  

In subsection (2)—

(a)   

after paragraph (a) insert—

“(ab)   

section 623(2)(c) or 644(2)(c) (income regarded as

25

relevant earnings for pension purposes), and”, and

(b)   

omit paragraph (c) and the word “and” before it.

      (3)  

The power of the Treasury to make an order under section 281 or 283 of FA

2004 has effect as if Schedule 35 to that Act contained an amendment

substituting section 504A of ICTA (as inserted by Schedule 1 to this Act) for

30

that section as amended by sub-paragraph (2) above.

Adjustment on change of basis

76    (1)  

Chapter 7 of Part 3 applies to a change of basis taking effect for a period of

account which ends on or after 6th April 2005.

      (2)  

For this purpose the period of account for which a change of basis takes

35

effect is the first period of account for which the new basis is adopted.

Meaning of “mineral royalties”

77         

The definition of “mineral royalties” in section 341(2) does not include any

rent receivable before 6th April 1970.

 

 

 
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