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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 9 — Other income

327

 

Payments by persons liable to pool betting duty

748     

Payments by persons liable to pool betting duty

(1)   

No liability to income tax arises in respect of a payment which meets condition

A and either condition B or C.

(2)   

Condition A is that the payment is made, in consequence of a reduction in pool

5

betting duty, by a person liable to that duty.

(3)   

Condition B is that the payment is in order to meet (directly or indirectly)

capital expenditure incurred in improving the safety or comfort of spectators

at a ground to be used for the playing of association football.

(4)   

Condition C is that the payment is to trustees established mainly for the

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support of athletic sports or athletic games but with power to support the arts.

Chapter 9

Other income

Interest only income

749     

Interest paid under repayment supplements

15

No liability to income tax arises in respect of interest paid under—

(a)   

section 824 of ICTA (repayment supplements: individuals and others),

or

(b)   

section 283 of TCGA 1992 (repayment supplements).

750     

Interest from tax reserve certificates

20

No liability to income tax arises in respect of interest from tax reserve

certificates issued by the Treasury.

751     

Interest on damages for personal injury

(1)   

No liability to income tax arises in respect of interest on damages for personal

injury or death if—

25

(a)   

it is included in a sum awarded by a court,

(b)   

it does not relate to the period between the making and satisfaction of

the award, and

(c)   

in the case of an award by a court in a country outside the United

Kingdom, it is exempt from any charge to tax in that place.

30

(2)   

No liability to income tax arises in respect of interest if—

(a)   

it is included in a payment in satisfaction of a cause of action (including

a payment into court), and

(b)   

it would fall within subsection (1) if it were included in a sum awarded

by a court in respect of a cause of action.

35

(3)   

In subsection (1)—

“damages” in Scotland includes solatium, and

 
 

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 9 — Other income

328

 

“personal injury” includes disease and impairment of physical or mental

condition.

752     

Interest under employees’ share schemes

(1)   

This section applies if—

(a)   

a scheme is set up to comply with section 153(4)(b) of the Companies

5

Act 1985 (c. 6) or Article 163(4)(b) of the Companies (Northern Ireland)

Order 1986 (S.I. 1986/1032 (N.I. 6)) (financial assistance for the

purposes of an employees’ share scheme), and

(b)   

under the scheme the trustees receive interest from a participant in the

scheme.

10

(2)   

So far as the scheme requires the trustees to pay to the company an equivalent

amount as interest, no liability to income tax arises under Chapter 2 of Part 4

for the trustees in respect of the interest they receive.

753     

Interest on repayment of student loan

(1)   

No liability to income tax arises in respect of interest if—

15

(a)   

it is paid to a person to whom a student loan has been made, and

(b)   

it relates to an amount repaid to the person after being recovered from

the person in respect of the loan.

(2)   

In this section “student loan” means a loan made under—

section 22 of the Teaching and Higher Education Act 1998 (c. 30),

20

section 73(f) of the Education (Scotland) Act 1980 (c. 44), or

Article 3 of the Education (Student Support) (Northern Ireland) Order

1998 (S.I. 1998/1760 (N.I. 14)).

754     

Redemption of funding bonds

(1)   

The redemption of funding bonds is not treated as the payment of interest on

25

a debt for income tax purposes if their issue was treated under section 380 of

this Act or section 582(1) of ICTA as the payment of interest on the debt.

(2)   

In this section “funding bonds” includes any bonds, stocks, shares, securities or

certificates of indebtedness.

755     

Interest on foreign currency securities etc. owned by non-UK residents

30

(1)   

This section applies to interest on—

(a)   

such foreign currency securities issued by a local authority or a

statutory corporation as the Treasury direct, and

(b)   

such foreign currency loans made to a statutory corporation as the

Treasury direct.

35

(2)   

No liability to income tax arises in respect of interest to which this section

applies if—

(a)   

in the case of interest on a security, its beneficial owner is a non-UK

resident, and

(b)   

in the case of interest on a loan, the person for the time being entitled to

40

repayment or eventual repayment is a non-UK resident.

 
 

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 9 — Other income

329

 

(3)   

But interest is not exempt under subsection (2) because a person is a non-UK

resident if it is treated as another person’s income under—

Chapter 5 of Part 5 (settlements: amounts treated as income of settlor), or

Chapter 3 of Part 17 of ICTA (anti-avoidance provisions: transfer of assets

abroad).

5

(4)   

In this section—

“company” means a company, as defined in section 735(1)(a) of the

Companies Act 1985 (c. 6) or Article 3(1)(a) of the Companies (Northern

Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)),

“foreign currency”, in relation to loans and securities, has the meaning

10

given by section 756, and

“statutory corporation” means—

(a)   

a corporation incorporated by an Act (other than a company), or

(b)   

any other corporation on which functions connected with

carrying on an undertaking are conferred by an Act or by an

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order made under or confirmed by an Act.

756     

Which securities and loans are foreign currency ones for section 755

(1)   

For the purposes of section 755, a security or loan is a foreign currency one if

under its terms the currency to be used for repayment is not sterling.

(2)   

Subsection (1) is subject to the following qualifications.

20

(3)   

A security issued before 6th April 1982 is a foreign currency one if under its

terms the currency to be used for repayment is not that of a country specified

in Schedule 1 to the Exchange Control Act 1947 (c. 14) at the time of the issue

of the security.

(4)   

A loan made before that date is a foreign currency one if under its terms the

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currency to be used for repayment is not that of a country specified in that

Schedule at the time the loan was made.

(5)   

If in the case of a security there is an option as to the currency to be used for

repayment, the security is only to be treated as a foreign currency one if the

option is exercisable only by its holder.

30

(6)   

If in the case of a loan there is an option as to the currency to be used for

repayment, the loan is only to be treated as a foreign currency one if the option

is exercisable only by the person for the time being entitled to repayment or

eventual repayment.

Interest and royalty payments

35

757     

Interest and royalty payments: introduction

(1)   

Sections 758 to 767 make provision for an exemption from income tax in respect

of certain interest and royalty payments.

(2)   

They give effect to Council Directive 2003/49/EC of 3rd June 2003 on a

common system of taxation applicable to interest and royalty payments made

40

between associated companies of different member States (“the Directive”).

(3)   

Specifically—

(a)   

section 758 sets out the conditions to be met for the exemption to apply,

 
 

Income Tax (Trading and Other Income) Bill
Part 6 — Exempt income
Chapter 9 — Other income

330

 

(b)   

sections 759 to 761 explain certain terms used in those conditions,

(c)   

section 762 confers powers on the Board to make regulations about

exemption notices,

(d)   

sections 763 and 764 make provision for limiting the exemption in the

case of certain special relationships,

5

(e)   

section 765 contains anti-avoidance provisions,

(f)   

section 766 contains interpretation provisions, and

(g)   

section 767 confers power on the Treasury to amend references in

sections 757 to 766 to the Directive.

758     

Exemption for certain interest and royalty payments

10

(1)   

No liability to income tax arises in respect of a payment of interest or a

payment of a royalty if, at the time the payment is made, conditions A to D are

met.

(2)   

Condition A is that the person making the payment is—

(a)   

a UK company, but not such a company’s permanent establishment in

15

a territory other than the United Kingdom, or

(b)   

a UK permanent establishment of an EU company.

   

See section 759 as to when a permanent establishment is to be treated as the

person making the payment.

(3)   

Condition B is that the person beneficially entitled to the income in respect of

20

which the payment is made is an EU company, but not such a company’s UK

permanent establishment or non-EU permanent establishment.

   

See section 760 as to when a permanent establishment is to be treated as the

person beneficially entitled to the income in respect of which the payment is

made.

25

(4)   

Condition C is that the company in condition A and the company in condition

B are 25% associates (see section 761).

(5)   

Condition D is that, if the payment is a payment of interest, the Board of Inland

Revenue has issued an exemption notice in accordance with regulations under

section 762.

30

(6)   

This section is subject to—

sections 763 and 764 (special relationships), and

section 765 (anti-avoidance).

759     

The person making the payment

(1)   

This section supplements condition A in section 758.

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(2)   

It applies in a case where a company is resident in one territory and has a

permanent establishment in another territory.

(3)   

The permanent establishment (and not the company) is to be treated as the

person making the payment so far as (within the meaning of Article 1(3) of the

Directive) the payment represents a tax-deductible expense for the permanent

40

establishment in the territory in which it is situated.

 
 

 
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