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 2 — Transitionals and savings etc.
Part 9 — Exempt income
565

(exemption for part of purchased life annuity payments) in accordance with
section 719 (extent of exemption under that section).
      (2)
And a notification of such a determination or appeal or of an alteration of
such a determination has effect accordingly.
Purchased life annuity payments: carry forward of excess capital elements
5
144   (1)
This paragraph applies if, in the case of an annuity to which section 656(2) of
ICTA applied immediately before 6th April 2005, the total of the amounts
determined in accordance with that section to be capital elements in respect
of the annuity payments that arose before that date (and accordingly not to
be annual payments for income tax purposes) exceeded the total of those
10
annuity payments.
      (2)
The amount of the excess is to be added to the fixed sum mentioned in
section 719(4) for the first payment that arises after 5th April 2005.
Purchased life annuity payments: penalty for false statements
145   (1)
Section 723(7) (liability to penalty for false statements and representations to
15
obtain exemption under Chapter 7 of Part 6) does not apply (and section
658(5) of ICTA continues to apply) to any statement or representation made
before 6th April 2005, despite the fact that it relates to the tax year 2005-06 or
any subsequent tax year.
      (2)
Section 723(7) (liability to penalty for false statements and representations to
20
obtain exemption under Chapter 7 of Part 6) applies (and section 658(5) of
ICTA does not apply) to any statement or representation made on or after
6th April 2005, despite the fact that it relates to a tax year before the tax year
2005-06.
Certain annual payments by individuals
25
146   (1)
Sections 727 (exemption for certain annual payments by individuals) and
730 (exemption for foreign maintenance payments) do not apply to—
(a)
any payment falling due before 16th March 1988, or
(b)
any payment falling due on or after that date but before 6th April
2000 to which this paragraph applies.
30
      (2)
Paragraph (b) of sub-paragraph (1) applies to a payment made in pursuance
of an existing obligation (within the meaning of section 36(3) of FA 1988)
unless it meets any of conditions A to E.
      (3)
Condition A is that the payment is treated as income of the payer under
Chapter 5 of Part 5 as a result of section 624 or 629.
35
      (4)
Condition B is that the payment fell due from a husband to a wife or a wife
to a husband at a time after 5th April 1990 when they were living together.
      (5)
Condition C is that an election is duly made under section 39 of FA 1988 in
respect of the payment.
      (6)
Condition D is that the payment fell due on or after 6th April 1994 and is
40
made—
(a)
in pursuance of an obligation within section 36(4)(a) to (c) of FA 1988
that is an obligation under—

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 9 — Exempt income
566

(i)
an order made by a court,
(ii)
a written or oral agreement, or
(iii)
a deed executed for giving effect to an agreement, and
(b)
for the benefit, maintenance or education of a person (whether or not
the person to whom the payment is made) who attained the age of 21
5
on or before the day on which the payment fell due but after 5th
April 1994.
      (7)
Condition E is that—
(a)
the payment is made in pursuance of an obligation within section
36(4)(a) of FA 1988 (existing obligations under certain court orders),
10
(b)
the payment is made for the benefit, maintenance or education of a
person (whether or not the person to whom the payment is made)
who attained the age of 21 before 6th April 1994, and
(c)
section 38 of FA 1988 (treatment of certain maintenance payments
under existing obligations) does not apply to the payment.
15
Annual payments for non-taxable consideration
147
Section 729 (exemption for payments for non-taxable consideration) applies
in the case of an annuity granted before 30th March 1977—
(a)
with the substitution in subsection (1) of “condition B, C or D” for
“condition B or C”, and
20
(b)
with the substitution of the following subsections for subsection
(5)—
“(5)
Condition D is that the payment is a payment under an
annuity charged on an interest in settled property and
granted by an individual to a company—
25
(a)
whose business then consisted wholly or mainly in
the acquisition of interests in settled property, or
(b)
which was then carrying on life assurance business in
the United Kingdom.
(6)
In the application of subsections (4) and (5) to Scotland, the
30
references in those subsections to settled property are to be
read as references to property held in trust.”
Periodical payments of personal injury damages etc.
148   (1)
Subject to sub-paragraphs (4) and (5), sections 731, 733 and 734 apply with
the modifications in sub-paragraphs (2) and (3).
35
      (2)
In section 731 (periodical payments of personal injury damages)—
(a)
for subsection (2) substitute—
“(2)
This subsection applies to periodical payments made in
pursuance of—
(a)
a court order making a final or interim award of
40
damages in respect of personal injury,
(b)
an agreement settling a claim or action for such
damages, or
(c)
an agreement for a payment on account of the
damages that may be awarded in such an action.”,
45

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 11 — Foreign income: special rules
567

(b)
in subsection (3)(b) for the words from “agreement” to the end of the
paragraph substitute “or agreement as is mentioned in subsection (2)
or a subsequent agreement”, and
(c)
omit subsection (6).
      (3)
In sections 733(a) and 734(1)(a)(i) for “agreement, undertaking” substitute
5
“or agreement”.
      (4)
The modifications in sub-paragraphs (2) and (3) do not apply if an order has
been made under section 110(1) of the Courts Act 2003 (c. 39)
(commencement) making provision for section 100(2) and (3) of that Act to
come into force on a day earlier than 6th April 2005.
10
      (5)
The power in section 110(1) of that Act includes power to make provision in
accordance with which the modifications in sub-paragraphs (2) and (3) do
not apply on or after a day appointed by the order that is later than 5th April
2005.
Part 10
15
Foster-care relief
149   (1)
This paragraph applies if—
(a)
a disposal event is treated as occurring in relation to an individual
under paragraph 17(2) of Schedule 36 to FA 2003 (foster-care relief:
capital allowances),
20
(b)
the individual is a relevant individual for the tax year 2004-05,
(c)
the individual has a chargeable period which corresponds to the
income period for the individual’s foster-care receipts in that tax
year (and therefore the chargeable period is a relevant chargeable
period), and
25
(d)
the next chargeable period of the individual is not a relevant
chargeable period.
      (2)
Subsection (4) of section 825 applies (despite anything in subsection (1) of
that section to the contrary) as if the reference to the first subsequent
chargeable period which is not a relevant chargeable period were to the
30
period mentioned in sub-paragraph (1)(d).
Part 11
Foreign income: special rules
Relevant foreign income charged on remittance basis: income arising before the tax year 2005-
06
35
150
A claim may be made under section 831 (claim for relevant foreign income
to be charged on the remittance basis) for relevant foreign income to be
charged in accordance with section 832 for the tax year 2005-06 or any later
tax year, despite that income having arisen in a tax year before the tax year
2005-06; and sections 832 to 834 apply accordingly.
40
Relevant foreign income charged on remittance basis: delayed remittances
151   (1)
The fact that income arose in a tax year before 2005-06 does not prevent—

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 11 — Foreign income: special rules
568

(a)
a claim being made in respect of it under section 835(1) (relief for
delayed remittances), or
(b)
section 835(5) applying as respects the tax year in which the income
arose.
      (2)
But sub-paragraphs (3) to (5) apply if—
5
(a)
such a claim is made in respect of any income (“the delayed
income”),
(b)
the delayed income arose in the tax year 1996-97 or an earlier tax
year,
(c)
the basis year for that year is a different year, and
10
(d)
that basis year is not the basis year for two tax years.
      (3)
Section 835(5) does not apply and the delayed income is to be treated as if it
were income received in the United Kingdom in that basis year.
      (4)
In this paragraph “basis year”, in relation to tax chargeable for any tax year
in respect of any income, means the year by reference to which the amount
15
of the income chargeable finally falls to be calculated.
      (5)
This paragraph does not affect which year is to be taken as the basis year for
calculating tax chargeable for any tax year.
Relief for backdated pensions charged on arising basis
152
The fact that the earlier year referred to in subsections (1)(b) and (2) of
20
section 840 (relief for backdated pensions charged on the arising basis) is a
tax year before 2005-06 does not prevent—
(a)
a claim being made under that section, or
(b)
such adjustments (by way of repayment of tax, assessment or
otherwise) as are necessary to give effect to that section being made
25
as respects such a tax year.
Unremittable income that arose before the tax year 2005-06
153   (1)
A claim may be made under section 842 (claim for relief on unremittable
income) for the tax year 2005-06 or any later tax year, despite the income
having arisen in a tax year before 2005-06.
30
      (2)
Without prejudice to paragraph 4 of this Schedule, section 843 (withdrawal
of relief) applies for the tax year 2005-06 or any later tax year, despite the
income having arisen originally in a tax year before the tax year 2005-06
(whether the claim in respect of it was made under section 584 of ICTA
(relief for unremittable overseas income) or section 842 of this Act).
35
      (3)
Sub-paragraph (4) applies if an appeal against an assessment for the tax year
2005-06 or a later tax year involves a question as to the operation of section
584 of ICTA or Chapter 4 of Part 8 of this Act as respects income that arose
in a tax year before 2005-06.
      (4)
Section 31D of TMA 1970 (appeals: election to bring appeal before Special
40
Commissioners) applies with the omission of—
(a)
paragraph (b) of subsection (2),
(b)
the word “or” preceding that paragraph, and
(c)
subsections (3) to (7) (by virtue of which such an election may be
disregarded if the General Commissioners so direct).
45

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 12 — Other provisions
569

Part 12
Other provisions
Unpaid remuneration: non-trades and non-property businesses
154   (1)
This paragraph applies for the purposes of section 865.
      (2)
In relation to a period of account ending before 27th November 2002, an
5
amount charged in the accounts in respect of employees’ remuneration
includes an amount which is held by an intermediary with a view to its
becoming employees’ remuneration.
      (3)
In relation to a period of account ending on or after 27th November 2002, an
amount charged in the accounts in respect of employees’ remuneration
10
includes an amount—
(a)
in respect of employee benefit contributions (within the meaning of
sections 38 to 44) made before that date, and
(b)
which is held by an intermediary,

with a view to its becoming employees’ remuneration.
15
Employee benefit contributions: non-trades and non-property businesses
155
Section 866 does not apply to deductions that would otherwise be allowed—
(a)
for a period ending before 27th November 2002, or
(b)
in respect of employee benefit contributions made before that date.
156   (1)
Subject to sub-paragraph (3), section 866 applies before 6th April 2006 with
20
the following amendment.
      (2)
In subsection (5)—
(a)
for paragraphs (b) and (c) and the word “or” at the end of paragraph
(c) substitute—
“(b)
contributions under a retirement benefits scheme
25
within the meaning of Chapter 1 of Part 14 of ICTA
(see section 611 of that Act),
(c)
contributions under a personal pension scheme
approved under Chapter 4 of that Part (see section
630 of that Act), or”, and
30
(b)
omit “For the purposes of paragraph (c)” to the end.
      (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 866(5) of this Act for that subsection as amended by sub-
paragraph (2) above.
35
Crime-related payments: non-trades and non-property businesses
157
Section 870(2)(b) does not apply to expenditure which was incurred before
1st April 2002.
Apportionment of miscellaneous profits or losses to tax years before tax year 2005-06
158   (1)
This paragraph applies if—
40

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 12 — Other provisions
570

(a)
a relevant period of account 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
relevant period of account to any part of that period falling in a tax
5
year before the tax year 2005-06.
      (2)
A period of account is a “relevant period of account” if—
(a)
section 871 applies to the period of account, and
(b)
the profits or losses of the part of the period of account falling in the
tax year 2005-06 are calculated in accordance with this Act.
10
      (3)
The profits or losses of the relevant period of account—
(a)
are calculated in accordance with this Act (and therefore, to that
extent, this Act has effect for tax years before the tax year 2005-06),
and
(b)
may be apportioned in accordance with section 871 to any part of the
15
period of account falling in a tax year before the tax year 2005-06.
General deduction rules
159
Neither—
(a)
the inclusion of rules in section 582 for calculating income chargeable
to tax under section 579, nor
20
(b)
the inclusion of rules in sections 612 and 617(3) to (6) for calculating
income chargeable to tax under Chapter 3 or 4 of Part 5,

prevents the continued operation of similar rules of law in relation to the
calculation of other income (including profits) chargeable to tax under other
provisions of this Act.
25
Section 820 of ICTA
160
Section 820 of ICTA (application of Income Tax Acts from year to year)
applies to this Act as if this Act were in force on the day before 6th April
2005.
Amendments of Part 4 of FA 2004 (pension schemes etc.)
30
161
The amendments made by paragraphs 643 to 650 and 654 of Schedule 1 come
into force at the same time as the enactments which they amend.