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
Part 5 — Miscellaneous income
Chapter 8 — Income not otherwise charged
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684
Income charged
(1)
Tax is charged under this Chapter on the full amount of the annual payments
arising in the tax year.
(2)
Subsection (1) is subject to Part 8 (foreign income: special rules).
(3)
The amount charged under this Chapter in the case of certain payments made
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by trustees in the exercise of a discretion is subject to section 687 of ICTA
(grossing up of discretionary payments from trusts).
685
Person liable
The person liable for any tax charged under this Chapter is the person
receiving or entitled to the annual payments.
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686
Payments received after deduction of tax
(1)
Income tax deducted under either of the following sections from an annual
payment within this Chapter is treated as income tax paid by the recipient—
section 348(1)(b) of ICTA (under which income tax may be deducted from
some payments by the payer), and
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section 349(1)(a) of that Act (under which income tax must be deducted
from some payments by the payer).
(2)
See also section 687(2) of that Act (sum treated as deducted from payments
made under a discretionary trust treated as income tax paid by the person to
whom the payment is made or the settlor).
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Chapter 8
Income not otherwise charged
687
Charge to tax on income not otherwise charged
(1)
Income tax is charged under this Chapter on income from any source that is not
charged to income tax under or as a result of any other provision of this Act or
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any other Act.
(2)
Subsection (1) does not apply to annual payments.
(3)
Subsection (1) does not apply to income that would be charged to income tax
under or as a result of another provision but for an exemption.
(4)
The definition of “income” in section 878(1) does not apply for the purposes of
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this section.
(5)
For exemptions from the charge under this Chapter, see in particular—
section 768 (commercial occupation of woodlands), and
section 779 (gains on commodity and financial futures).
688
Income charged
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(1)
Tax is charged under this Chapter on the full amount of the income arising in
the tax year.

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 1 — Introduction
301

(2)
Subsection (1) is subject to—
(a)
Chapter 1 of Part 7 (which provides relief on income from the use of
furnished accommodation in an individual’s only or main residence:
see, in particular, sections 794 and 798),
(b)
Chapter 2 of that Part (which provides relief on income from the
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provision by an individual of foster care: see, in particular, sections 814
and 817), and
(c)
Part 8 (foreign income: special rules).
689
Person liable
The person liable for any tax charged under this Chapter is the person
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receiving or entitled to the income.
Part 6
Exempt income
Chapter 1
Introduction
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690
Overview of Part 6
(1)
This Part provides for certain exemptions from charges to income tax under
this Act.
(2)
The exemptions are dealt with in—
(a)
Chapter 2 (national savings income),
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(b)
Chapter 3 (income from individual investment plans),
(c)
Chapter 4 (SAYE interest),
(d)
Chapter 5 (venture capital trust dividends),
(e)
Chapter 6 (income from FOTRA securities),
(f)
Chapter 7 (purchased life annuity payments),
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(g)
Chapter 8 (other annual payments), and
(h)
Chapter 9 (other income).
(3)
Chapter 10 explains that, in general, the effect of the exemptions is that the
exempt amounts are ignored for other income tax purposes.
(4)
Other exemptions, such as exemptions relating to particular categories of
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persons, may also be relevant to the charges to income tax under this Act.
(5)
And the exemptions dealt with in this Part may themselves be relevant to
charges to income tax outside this Act.

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 2 — National savings income
302

Chapter 2
National savings income
691
National Savings Bank ordinary account interest
(1)
No liability to income tax arises for an individual in respect of interest on
deposits in ordinary accounts with the National Savings Bank if the interest for
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the tax year does not exceed £70.
(2)
If the interest for the tax year exceeds £70, the individual is only liable to
income tax on the excess.
692
Income from savings certificates
(1)
No liability to income tax arises in respect of income from authorised savings
10
certificates.
(2)
A savings certificate is authorised so far as its acquisition was not prohibited
by regulations made by the Treasury limiting a person’s holding.
(3)
In this section “savings certificates” means—
(a)
savings certificates issued under—
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(i)
section 12 of the National Loans Act 1968 (c. 13) (power of
Treasury to borrow),
(ii)
section 7 of the National Debt Act 1958 (c. 6) (power of Treasury
to issue national savings certificates), or
(iii)
section 59 of FA 1920 (power to borrow on national savings
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certificates),
(b)
war savings certificates, as defined in section 9(3) of the National Debt
Act 1972 (c. 65), or
(c)
savings certificates issued under any enactment forming part of the law
of Northern Ireland and corresponding to section 12 of the National
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Loans Act 1968.
(4)
But subsection (3)(c) does not include Ulster Savings Certificates (for which
there are special rules in section 693).
693
Income from Ulster Savings Certificates
(1)
No liability to income tax arises in respect of income from authorised Ulster
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Savings Certificates if condition A, B or C is met.
(2)
Condition A is that —
(a)
the holder purchased them, and
(b)
at the time of the purchase the holder was resident and ordinarily
resident in Northern Ireland.
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(3)
Condition B is that the holder is so resident and ordinarily resident when they
are repaid.
(4)
Condition C is that—
(a)
they are repaid after the holder’s death, and
(b)
at the time of the purchase the holder was so resident and ordinarily
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resident.

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 3 — Income from individual investment plans
303

(5)
An Ulster Savings Certificate is authorised so far as its acquisition was not
prohibited by regulations made by the Department of Finance and Personnel
limiting a person’s holding.
(6)
The exemption under this section requires a claim.
(7)
In this Act “Ulster Savings Certificates” means savings certificates issued or
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treated as issued under section 15 of the Exchequer and Financial Provisions
Act (Northern Ireland) 1950 (c. 3 (N.I.)).
Chapter 3
Income from individual investment plans
694
Income from individual investment plans
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(1)
The Treasury may by regulations provide that income of an individual from
investments under a plan—
(a)
is exempt from income tax, or
(b)
is exempt from income tax to such extent as is specified in the
regulations.
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(2)
In this Chapter such regulations are referred to as “investment plan
regulations”.
(3)
Investment plan regulations may, in particular, specify—
(a)
the description of individuals who may invest, and
(b)
maximum investment limits.
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(4)
They may provide for investment by an individual under more than one plan
in the same tax year.
(5)
They must set out conditions subject to which plans are to operate.
(6)
The following provisions of this Chapter contain more particular provisions
about the scope of investment plan regulations.
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695
Investment plans
(1)
Investment plan regulations may specify the kind of investments which may
be made under a plan or which may be made by particular descriptions of
individuals under a plan.
(2)
They may—
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(a)
provide for a plan in the form of an account, and
(b)
authorise the ways in which the subscriptions to an account are to be
invested.
(3)
They may—
(a)
provide that plans are to be such as are approved by the Board of Inland
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Revenue, and
(b)
specify the circumstances in which approval may be granted and
withdrawn.
(4)
They may—

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 3 — Income from individual investment plans
304

(a)
provide for plans to be treated as being of different kinds, according to
criteria set out in the regulations,
(b)
provide for the Board to register a plan as being of a particular kind,
and
(c)
make different provision about different kinds of plan.
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696
Plan managers
(1)
Investment plan regulations may provide that investments are to be held by
persons on behalf of investors.
(2)
In this Chapter those persons, including the managers of any such account as
is specified in section 695(2), are referred to as “plan managers”, and references
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to “plan managers” in any other enactment are to be read accordingly.
(3)
Investment plan regulations may—
(a)
provide that plan managers are to be such as are approved by the Board
of Inland Revenue, and
(b)
specify the circumstances in which approval may be granted and
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withdrawn.
697
Special requirements for certain foreign managers
(1)
Investment plan regulations may provide that a foreign institution may only
be a plan manager if one of the requirements set out in section 698(2), (3) and
(4) about the discharge of such of the institution’s duties as are specified in the
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regulations is met.
(2)
In this section “foreign institution” means—
(a)
an EEA firm of the kind mentioned in paragraph 5(a), (b) or (c) of
Schedule 3 to FISMA 2000 which is an authorised person for the
purposes of that Act as a result of qualifying for authorisation under
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paragraph 12 of that Schedule,
(b)
a firm which is an authorised person for those purposes as a result of
qualifying for authorisation under paragraph 2 of Schedule 4 to that
Act, or
(c)
an insurance company which is non-UK resident.
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(3)
Different duties may be specified under subsection (1) for different institutions
or different descriptions of institution.
(4)
In this section—
“insurance company” means an undertaking carrying on the business of
effecting or carrying out contracts of insurance, and
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“contract of insurance” has the meaning given by Article 3(1) of the
Financial Services and Markets Act 2000 (Regulated Activities) Order
2001 (S.I. 2001/544).
698
Requirements for discharge of foreign institution’s duties
(1)
The requirements about the discharge of an institution’s duties which are
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referred to in section 697(1) (one of which may be imposed in the case of certain
foreign managers) are requirements A, B and C.
(2)
Requirement A is that—

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 3 — Income from individual investment plans
305

(a)
a person is currently appointed by the institution to be responsible for
securing the discharge of the duties,
(b)
that person either—
(i)
is an individual who is a UK resident, or
(ii)
is not an individual and has a business establishment in the
5
United Kingdom, and
(c)
the institution has notified the Board of Inland Revenue of that person’s
identity and appointment.
(3)
Requirement B is that there are other current arrangements with the Board for
a person other than the institution to secure the discharge of the duties.
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(4)
Requirement C is that there are other current arrangements with the Board
designed to secure the discharge of the duties.
(5)
Investment plan regulations may provide—
(a)
that requirement A or B is only met if the person concerned is of a
description specified in the regulations as respects that requirement,
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(b)
that appointments made for the purposes of requirement A or
arrangements made for the purposes of requirement B are treated as
terminated in circumstances specified in the regulations as respects that
requirement.
(6)
Investment plan regulations may provide that a person currently appointed as
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mentioned in subsection (2) or as to whom there is a current arrangement
within subsection (3)—
(a)
may act on the institution’s behalf for any of the purposes of the
provisions relating to the duties,
(b)
is to secure the institution’s compliance with, and discharge of, the
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duties, where appropriate by acting on its behalf,
(c)
is personally liable for the institution’s failure to comply with or
discharge any of the duties, as if they were imposed on the person and
the institution jointly and severally.
699
Non-entitlement to exemption
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(1)
Investment plan regulations may—
(a)
provide that in circumstances specified in the regulations an investor
ceases to be entitled to the exemption given by regulations made under
section 694(1) and is treated as not having been entitled to it,
(b)
adapt or modify the effect of any enactment relating to income tax for
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that purpose, and
(c)
provide that in those circumstances the investor or the plan manager
(depending on the terms of the regulations) is to account to the Board
of Inland Revenue for income tax from which exemption has already
been given on the basis that the investor was entitled to the exemption.
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(2)
They may provide that an investor or the plan manager (depending on the
terms of the regulations) is to account to the Board—
(a)
for income tax from which the exemption has been given in
circumstances where the investor was not entitled to it, or
(b)
for an amount determined in accordance with the regulations to be the
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amount to be taken as representing that tax.

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 3 — Income from individual investment plans
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(3)
They may modify the effect of or adapt any enactment relating to income tax
for the purposes of securing that investors or plan managers account for the tax
and other amounts mentioned in subsections (1) and (2).
(4)
They may also modify the provisions of or adapt Chapter 9 of Part 4 of this Act
(gains from contracts for life insurance etc.) or Chapter 2 of Part 13 of ICTA (life
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policies, life annuities and capital redemption policies) for cases where an
investor—
(a)
ceases to be entitled to the exemption given by regulations made under
section 694(1) and is treated as not having been entitled to it, or
(b)
has been given the exemption on the basis of an entitlement to it when
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there was no such entitlement.
(5)
They may provide for plan managers (as well as investors) to be liable to
account for amounts becoming due from investors as a result of regulations
made under subsection (4).
(6)
They may provide that, instead of having to account as mentioned in
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subsection (2) or (5), an investor or a plan manager is liable to a penalty of an
amount specified in the regulations if—
(a)
an exemption has been given to which there was no entitlement, and
(b)
the circumstances are such as are specified in the regulations.
(7)
They may provide that liabilities are imposed in cases which—
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(a)
are not cases in which liabilities may be imposed under subsections (1)
to (6) where relief has been given to which there was no entitlement, but
(b)
are cases where—
(i)
a contravention or failure to comply with investment plan
regulations that is specified in the regulations, or
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(ii)
the existence of such other circumstances as are so specified,

would have the effect of excluding or limiting an entitlement to
exemption, apart from the regulations under this subsection.
(8)
Regulations under subsection (7)—
(a)
may only provide for the imposition of liabilities equivalent to those
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which may be imposed under subsections (1) to (6), and
(b)
must provide for those liabilities to replace the liabilities to tax which
would otherwise arise.
700
Information
(1)
Investment plan regulations may impose a duty on any current or former
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investor or plan manager—
(a)
to comply within the period specified by the regulations with any
documents notice served by the Board of Inland Revenue, or
(b)
to comply within the period specified by the regulations with any
information request made by the Board.
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(2)
In this section “documents notice” means a notice requiring a person to make
available for the Board’s inspection documents relating to a plan or
investments held or formerly held under it.
(3)
The regulations must specify the kind of documents to which a documents
notice may relate.
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