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 10 — General provisions
Chapter 2 — General calculation rules etc.
374


within the meaning of Part 1 of the Social Security Contributions and Benefits
Act 1992 (c. 4) or of the Social Security Contributions and Benefits (Northern
Ireland) Act 1992 (c. 7).
(6)
Provision corresponding to that made by this section is made by—
(a)
section 53 (in relation to trades, professions and vocations),
5
(b)
section 272 (in relation to property businesses), and
(c)
section 360A of ITEPA 2003 (in relation to employment income).
Penalties, interest and VAT surcharges
869
Penalties, interest and VAT surcharges: non-trades etc.
(1)
This section applies for the purpose of calculating profits or other income
10
charged to income tax.
(2)
For this purpose “profits or other income” does not include the profits of—
(a)
a trade, profession, or vocation, or
(b)
a property business,

but see subsection (6).
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(3)
No deduction is allowed for any penalty or interest mentioned in the first
column of the following table.
(4)
This is the table—

Penalty or interest
Description of tax, levy or duty

Interest under any provision of Part 9 of
Income tax, capital gains tax

20

TMA 1970
and corporation tax

Interest required to be paid by

regulations made under section 71 of

FA 2004 (construction industry)

Penalty under any of sections 60 to 70 of
Value added tax

25

VATA 1994

Interest under section 74 of VATA 1994

Penalty under any of sections 8 to 11 of
Excise duties

FA 1994

Penalty under any of paragraphs 12 to
Insurance premium tax

30

19 of Schedule 7 to FA 1994

Interest under paragraph 21 of that

Schedule

Penalty under any provision of Part 5 of
Landfill tax

Schedule 5 to FA 1996

35

Interest under paragraph 26 or 27 of

that Schedule

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 2 — General calculation rules etc.
375

Penalty or interest
Description of tax, levy or duty

Penalty under any provision of
Climate change levy

Schedule 6 to FA 2000

Interest under any of paragraphs 70, 81

to 85 and 109 of that Schedule

5

Penalty under any provision of Part 2 of
Aggregates levy

FA 2001

Interest under any of paragraphs 5 to 9

of Schedule 5 to, paragraph 6 of

Schedule 8 to and paragraph 5 of

10

Schedule 10 to FA 2001

Penalty under section 25 or 26 of FA
Customs, export and import

2003
duties

Penalty under any provision of Part 4 of
Stamp duty land tax

FA 2003

15

Interest under any provision of that Part

(5)
No deduction is allowed for any surcharge under section 59 of VATA 1994.
(6)
Provision corresponding to that made by this section is made by—
(a)
section 54 (in relation to trades, professions and vocations), and
(b)
section 272 (in relation to property businesses).
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Crime-related payments
870
Crime-related payments: non-trades and non-property businesses
(1)
This section—
(a)
applies for the purpose of calculating profits or other income charged
to income tax, but
25
(b)
does not apply for the purpose of calculating the profits of a trade,
profession or vocation or of a property business (but see subsection (4)).
(2)
No deduction is allowed for expenses incurred—
(a)
in making a payment if the making of the payment constitutes a
criminal offence, or
30
(b)
in making a payment outside the United Kingdom if the making of a
corresponding payment in any part of the United Kingdom would
constitute a criminal offence in that part.
(3)
No deduction is allowed for expenses incurred in making a payment induced
by a demand which constitutes—
35
(a)
the offence of blackmail under section 21 of the Theft Act 1968 (c. 60)
(England and Wales),
(b)
the offence of extortion (Scotland), or
(c)
the offence of blackmail under section 20 of the Theft Act (Northern
Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland).
40

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 2 — General calculation rules etc.
376

(4)
Provision corresponding to that made by this section is made by—
(a)
section 55 (in relation to trades, professions and vocations), and
(b)
section 272 (in relation to property businesses).
Apportionment of profits
871
Apportionment etc. of miscellaneous profits to tax year
5
(1)
This section applies if—
(a)
income is chargeable to income tax under or by virtue of any provision
to which section 836B of ICTA applies, and
(b)
any period for which the accounts are drawn up (a “period of account”)
does not coincide with a tax year.
10
(2)
For this purpose the reference to any provision to which section 836B of ICTA
applies is to be read as if subsection (4)(a) of that section were omitted
(exclusion for relevant foreign income charged under this Act).
(3)
Any of the following steps may be taken if they are necessary in order to arrive
at the profits or losses of the tax year—
15
(a)
apportioning the profits or losses of a period of account to the parts of
that period falling in different tax years, and
(b)
adding the profits or losses of a period of account (or part of a period)
to profits or losses of other periods of account (or parts).
(4)
The steps must be taken by reference to the number of days in the periods
20
concerned.
(5)
But the person to whom the profits or losses arise may use a different way of
measuring the length of the periods concerned if—
(a)
it is reasonable to do so, and
(b)
the way of measuring the length of periods is used consistently for the
25
purpose of charging to income tax the income in question.
Calculation of losses
872
Losses calculated on same basis as miscellaneous income
(1)
The same rules apply for income tax purposes in calculating miscellaneous
losses as apply in calculating corresponding miscellaneous income.
30
(2)
This is subject to any express provision to the contrary.
(3)
In this section—
(a)
“miscellaneous income” means profits or other income charged to
income tax under or by virtue of a provision to which section 836B of
ICTA applies, and
35
(b)
“miscellaneous losses” means losses arising from a transaction which is
of such a nature that, if profits or other income had arisen from it, the
income would have been charged to income tax under or by virtue of
such a provision.
(4)
Provision corresponding to that made by this section is made by—
40
(a)
section 26 (in relation to trades, professions and vocations), and

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
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(b)
section 272 (in relation to property businesses).
Chapter 3
Supplementary and general provisions
Orders and regulations
873
Orders and regulations made by Treasury or Board
5
(1)
Any power of the Treasury or the Board of Inland Revenue to make any order
or regulations under this Act is exercisable by statutory instrument.
(2)
Any statutory instrument containing any order or regulations made by the
Treasury or the Board of Inland Revenue under this Act is subject to annulment
in pursuance of a resolution of the House of Commons.
10
(3)
Subsection (2) does not apply in relation to any order or regulations made
under—
(a)
section 86 (meaning of “urban regeneration company”),
(b)
section 724 (purchased life annuity payments),
(c)
section 774 (income from securities issued by designated international
15
organisations), or
(d)
section 883(5) (transitional or saving provision).
Interpretation
874
Activities in UK sector of continental shelf
(1)
Any profits—
20
(a)
from exploration or exploitation activities carried on in the UK sector of
the continental shelf, or
(b)
from exploration or exploitation rights,

are treated for income tax purposes as profits from activities or property in the
United Kingdom.
25
(2)
In this section—
“exploration or exploitation activities” means activities carried on in
connection with the exploration or exploitation of so much of the
seabed and subsoil and their natural resources as is situated in the
United Kingdom or the UK sector of the continental shelf,
30
“exploration or exploitation rights” means rights to assets to be produced
by exploration or exploitation activities or interests in or to the benefit
of such assets, and
“the UK sector of the continental shelf” means the areas designated by
Order in Council under section 1(7) of the Continental Shelf Act 1964
35
(c. 29).
875
Meaning of “caravan”
(1)
In this Act “caravan” means—

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
378

(a)
a structure designed or adapted for human habitation which is capable
of being moved by being towed or being transported on a motor vehicle
or trailer, or
(b)
a motor vehicle designed or adapted for human habitation,

but does not include railway rolling stock which is on rails forming part of a
5
railway system or any tent.
(2)
A structure composed of two sections—
(a)
separately constructed, and
(b)
designed to be assembled on a site by means of bolts, clamps or other
devices,
10

is not prevented from being a caravan just because it cannot, when assembled,
be lawfully moved on a highway (or, in Scotland or Northern Ireland, road) by
being towed or being transported on a motor vehicle or trailer.
876
Meaning of “farming” and related expressions
(1)
In this Act “farming” means the occupation of land wholly or mainly for the
15
purposes of husbandry, but does not include market gardening (see subsection
(5)).
(2)
Husbandry includes (for example)—
(a)
hop growing, and
(b)
the breeding and rearing of horses and the grazing of horses in
20
connection with those activities.
(3)
For the purposes of this Act the cultivation of short rotation coppice is
regarded as farming and not as forestry.
(4)
In this Act “woodlands” does not include land on which short rotation coppice
is cultivated.
25
(5)
In this Act “market gardening” means the occupation of land as a garden or
nursery for the purpose of growing produce for sale.
(6)
For the purposes of this section “short rotation coppice” means a perennial
crop of tree species planted at high density, the stems of which are harvested
above ground level at intervals of less than 10 years.
30
877
Meaning of grossing up
(1)
In this Act references to grossing up by reference to a rate of tax are to
calculating the amount (“the gross amount”) which after deduction of income
tax at that rate would equal the amount to be grossed up (“the net amount”).
(2)
The gross amount is the sum of the net amount and the tax deducted.
35
(3)
The gross amount may also be expressed as—

where—
GA is the gross amount,
NA is the net amount, and

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
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R is the percentage rate of tax by reference to which the net amount is to
be grossed up.
878
Other definitions
(1)
In this Act, unless otherwise indicated (whether expressly or by implication)—
“the Board of Inland Revenue” means the Commissioners of Inland
5
Revenue,
“charity” means a body of persons or trust established for charitable
purposes only,
“houseboat” means a boat or similar structure designed or adapted for use
as a place of human habitation,
10
“income” includes amounts treated as income (whether expressly or by
implication),
“the Inland Revenue” means any officer of the Board of Inland Revenue,
“non-UK resident” means not resident in the United Kingdom (and
references to a non-UK resident or a non-UK resident person are to a
15
person who is not resident there),
“normal self-assessment filing date”, in relation to a tax year, means the
31st January following the tax year,
“personal representatives”, in relation to a person who has died, means—
(a)
in the United Kingdom, persons responsible for administering
20
the estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having
functions under its law equivalent to those of administering the
estate of the deceased,
“tax year”, in relation to income tax, means a year for which any Act
25
provides for income tax to be charged,
“the tax year 2005-06” means the tax year beginning on 6th April 2005
(and any corresponding expression in which two years are similarly
mentioned is to be read in the same way), and
“UK resident” means resident in the United Kingdom (and references to a
30
UK resident or a UK resident person are to a person who is resident
there).
(2)
For the purposes of this Act, the remittance basis applies to a person for a tax
year for which the person makes a claim under section 831 (claims for relevant
foreign income to be charged on the remittance basis).
35
(3)
In this Act any reference to a claim or election is to a claim or election in writing
or in any form authorised (in relation to the case in question) by directions
under section 118 of FA 1998.
(4)
For further information about claims and elections, see TMA 1970 (in
particular, section 42(2), (10) and (11) and Schedule 1A).
40
(5)
Section 839 of ICTA (how to tell whether persons are connected) applies for the
purposes of this Act unless otherwise indicated (whether expressly or by
implication).
(6)
Section 840 of ICTA (meaning of control in relation to a body corporate) applies
for the purposes of this Act unless otherwise indicated (whether expressly or
45
by implication).