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 3 — Supplementary and general provisions
380

879
Interpretation: Scotland
(1)
In the application of this Act to Scotland—
“assignment” means an assignation,
“mortgage” means—
(a)
a standard security, or
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(b)
a heritable security, as defined in the Conveyancing (Scotland)
Act 1924 (c. 27), but including a security constituted by ex facie
absolute disposition or assignation, and
“surrender” includes renunciation.
(2)
In the application of this Act to Scotland, any reference to property or rights
10
being held on trust or on trusts is a reference to the property or rights being
held in trust.
(3)
In the application of section 755 (interest on foreign currency securities etc.
owned by non-UK residents) to Scotland, “Act” includes an Act of the Scottish
Parliament.
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(4)
In the application of sections 769 (housing grants) and 882 (consequential
amendments) and Part 1 of Schedule 2 (transitionals and savings: general
provisions) to Scotland, “enactment” includes an enactment comprised in, or in
an instrument made under, an Act of the Scottish Parliament.
(5)
The express provision made by subsection (4) does not affect the construction
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of “enactment” in the application of section 631 (retained and accumulated
income) to Scotland.
880
Interpretation: Northern Ireland
(1)
In the application of section 755 (interest on foreign currency securities etc.
owned by non-UK residents) to Northern Ireland, “Act” includes any Act,
25
Order in Council or Measure constituting Northern Ireland legislation.
(2)
In the application of section 769 (housing grants) and 882 (consequential
amendments) and Part 1 of Schedule 2 (transitionals and savings: general
provisions) to Northern Ireland, “enactment” includes an enactment
comprised in, or in an instrument made under, Northern Ireland legislation.
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(3)
The express provision made by subsection (2) does not affect the construction
of “enactment” in the application of section 631 (retained and accumulated
income) to Northern Ireland.
General and final
881
Disapplication of corporation tax: section 9 of ICTA
35
Section 9 of ICTA (computation of income for corporation tax purposes:
application of income tax principles) does not operate on the provisions of this
Act so as to convert them into provisions of the Corporation Tax Acts.
882
Consequential amendments
(1)
Schedule 1 (which contains consequential amendments) has effect.
40

Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
381

(2)
The Treasury may by order make such modifications of any enactment or
provision made under an enactment as the Treasury consider appropriate in
consequence of this Act.
(3)
In subsection (2) “modifications” includes amendments or repeals.
(4)
An order under subsection (2)—
5
(a)
must not change the effect of the law as it was immediately before 6th
April 2005, and
(b)
may include such transitional or saving provision as the Treasury
consider appropriate.
(5)
Subsection (4)(a) does not apply so far as an order contains provision made in
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consequence of a change already made by this Act in the effect of the law.
883
Commencement and transitional provisions etc.
(1)
This Act comes into force on 6th April 2005 and has effect—
(a)
for income tax purposes, for the tax year 2005-06 and subsequent tax
years, and
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(b)
for corporation tax purposes, for accounting periods ending after 5th
April 2005.
(2)
Subsection (1) is subject to subsections (3) to (5) (including Schedule 2).
(3)
Subsection (1) does not apply to the following provisions of this Act (which
therefore come into force on the passing of this Act)—
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(a)
section 873 (orders and regulations made by Treasury or Board),
(b)
sections 875 to 881 (certain interpretation and general provisions),
(c)
section 882(2) to (5) (power to make consequential amendments),
(d)
this section other than subsection (4) below,
(e)
section 885 and Schedule 4 (abbreviations and general index),
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(f)
section 886 (short title), and
(g)
paragraphs 78 and 148(5) of Schedule 2 (powers relating to open-ended
investment companies and periodical payments of personal injury
damages etc.) and subsection (4) below so far as it applies for the
purposes of those provisions.
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(4)
Schedule 2 (which contains transitional provisions and savings etc.) has effect.
(5)
The Treasury may by order make such transitional or saving provision as the
Treasury consider appropriate in connection with the coming into force of this
Act.
884
Repeals and revocations
35
Schedule 3 (which contains repeals and revocations of enactments including
certain spent enactments) has effect.
885
Abbreviations and general index in Schedule 4
(1)
Schedule 4 (which contains abbreviations and defined expressions that apply
for the purposes of this Act) has effect.
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Income Tax (Trading and Other Income) Bill
Part 10 — General provisions
Chapter 3 — Supplementary and general provisions
382

(2)
Part 1 of that Schedule gives the meaning of the abbreviated references to Acts
used in this Act.
(3)
Part 2 of that Schedule lists the places where expressions used in this Act are
defined or otherwise explained—
(a)
in this Act for the purposes of this Act or for purposes including this
5
Act,
(b)
in this Act for the purposes of a Part or Chapter of this Act, or
(c)
in ICTA or ITEPA 2003 for the purposes of this Act.
886
Short title
This Act may be cited as the Income Tax (Trading and Other Income) Act 2005.
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Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
383

Schedules
Schedule 1
Section 882

Consequential amendments
Part 1
Income and Corporation Taxes Act 1988
5
1
The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
2
In section 1(1) (the charge to income tax)—
(a)
omit paragraph (a), and
(b)
omit the word “and” at the end of paragraph (b) and after that
paragraph insert—
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“(ba)
all amounts which are charged to tax under any of the
following provisions of ITTOIA 2005—
(i)
Part 2 (trading income),
(ii)
Part 3 (property income),
(iii)
Part 4 (savings and investment income), and
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(iv)
Part 5 (miscellaneous income), and”.
3     (1)
Amend section 1A (application of lower rate to income from savings and
distributions) as follows.
      (2)
In subsection (1AA)—
(a)
in paragraph (a) for “Schedule F” substitute “Chapter 3, 5 or 6 of Part
20
4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.,
stock dividends from UK resident companies and loans to
participators)”, and
(b)
for paragraph (b) substitute—
“(b)
dividends chargeable under Chapter 4 of Part 4 of
25
that Act (dividends from non-UK resident
companies) or relevant foreign distributions
chargeable under Chapter 8 of Part 5 of that Act
(income not otherwise charged).”
      (3)
In subsection (1A)—
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(a)
in paragraph (a)—
(i)
for “Schedule F”, in the first place where it occurs, substitute
“Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005”, and
(ii)
for “Schedule F”, in the second place where it occurs,
substitute “dividend”, and
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(b)
for paragraph (b) and the word “and” at the end of the paragraph

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
384

substitute—
“(b)
in the case of dividends chargeable under Chapter 4
of Part 4 of that Act or relevant foreign distributions
chargeable under Chapter 8 of Part 5 of that Act, the
dividend ordinary rate; and”.
5
      (4)
In subsection (2)—
(a)
in paragraph (a) for the words from “chargeable under” to “section
119” substitute “(other than relevant foreign income) chargeable
under—
(i)
Chapter 2 of Part 4 of ITTOIA 2005 (charge on
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interest);
(ii)
Chapter 7 of that Part of that Act (charge on
purchased life annuity payments) other than
income from annuities specified in section
718(2) of that Act; or
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(iii)
Chapter 8 of that Part of that Act (charge on
profits from deeply discounted securities);”,
(b)
in paragraph (aa) omit “under Case VI of Schedule D”,
(c)
in paragraph (b) for “Schedule F” substitute “Chapter 3, 5 or 6 of Part
4 of ITTOIA 2005”,
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(d)
in paragraph (c) for “equivalent foreign income” substitute “income
falling within subsection (3) below”, and
(e)
in paragraph (d) for “547(1)(a) (chargeable event gains on life policies
etc)” substitute “465 of ITTOIA 2005 (gains from contracts for life
insurance etc.)”.
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      (5)
For subsection (3) substitute—
“(3)
The income which falls within this subsection is any relevant foreign
income which—
(a)
would fall within subsection (2)(a) but for the exclusion of
relevant foreign income;
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(b)
is a dividend chargeable under Chapter 4 of Part 4 of ITTOIA
2005; or
(c)
is a relevant foreign distribution chargeable under Chapter 8
of Part 5 of that Act.”
      (6)
In subsection (4)—
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(a)
in paragraph (a), for the words from “income” to “Kingdom”
substitute “relevant foreign income which is charged in accordance
with section 832 of ITTOIA 2005 (relevant foreign income charged on
the remittance basis)”, and
(b)
omit paragraph (b) and the word “or” at the end of paragraph (a).
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      (7)
In subsection (5)—
(a)
for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and
(b)
in paragraph (b)(i) for “Schedule F” substitute “Chapter 3, 5 or 6 of
Part 4 of ITTOIA 2005”, and
(c)
in paragraph (b) for sub-paragraph (ii) substitute—
45
“(ii)
dividends chargeable under Chapter 4 of Part
4 of that Act (if any) or relevant foreign
distributions chargeable under Chapter 8 of
Part 5 of that Act (if any),”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
385

      (8)
In subsection (6) for “section 550” substitute “sections 535 to 537 of ITTOIA
2005”.
      (9)
Omit subsection (7).
     (10)
After subsection (7) insert—
“(8)
In this section “relevant foreign distribution” means any distribution
5
of a company not resident in the United Kingdom which—
(a)
is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005,
but
(b)
would be chargeable under Chapter 3 of that Part of that Act
if the company were resident in the United Kingdom.
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(9)
And, for the meaning of “relevant foreign income”, see section
832(1).”
4     (1)
Amend section 1B (rates of tax applicable to Schedule F income) as follows.
      (2)
In subsection (1)—
(a)
for paragraphs (a) and (b) substitute—
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“(a)
income chargeable under Chapter 3 of Part 4 of
ITTOIA 2005 (dividends etc. from UK resident
companies etc.) (if any), and
(b)
dividends chargeable under Chapter 4 of Part 4 of
that Act (dividends from non-UK resident
20
companies) (if any) or relevant foreign distributions
chargeable under Chapter 8 of Part 5 of that Act
(income not otherwise charged) (if any),” and
(b)
for “Schedule F”, in the second place where it occurs, substitute
“dividend”.
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      (3)
In subsection (2) for “Schedule F”, in both places where it occurs, substitute
“dividend”.
      (4)
After subsection (2) insert—
“(3)
In this section “relevant foreign distribution” has the same meaning
as in section 1A (see subsection (8) of that section).”
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      (5)
In the side-note for the section for “Schedule F” substitute “distribution”.
5
In section 4 (construction of references in Income Tax Acts to deduction of
tax), omit subsection (1B).
6
After section 6(4) (the charge to corporation tax and exclusion of income tax
and capital gains tax) insert—
35
“(4A)
In sections 74(1), 79(1), 79A(1), 79B(1), 83A(1), 84(1), 86(1), 86A(2)(a),
87(1), (2) and (4), 88, 89, 90(1) and (3), 94(1), 100(2)(b), 101, 102, 401(1),
491(10), 577(7)(b), 579(2), 588(3), 589A(8) and 817(2), and in
paragraph 5(11) of Schedule 30, “profession” includes vocation.”
7     (1)
Amend section 9 (computation of income: application of income tax
40
principles) as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
386

      (2)
After subsection (2) insert—
“(2A)
But no income shall be computed, and no assessment shall be made,
for purposes of corporation tax under ITTOIA 2005.
(2B)
Instead, income shall continue to be computed, and the assessment
shall continue to be made, for purposes of corporation tax under
5
Schedules A and D and the Cases of Schedule D.
(2C)
For (but only for) the purpose of continuing to apply for purposes of
corporation tax, those Schedules and Cases are treated as if they were
still part of income tax law (and therefore applied in accordance with
subsection (1) above for purposes of corporation tax).”
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      (3)
In subsection (3)(a)—
(a)
for “, D and F,” substitute “and D”,
(b)
for “those Schedules” substitute “Schedule D”, and
(c)
omit “, as they apply for purposes of income tax”.
      (4)
In subsection (4) after “Acts” insert “(other than ITTOIA 2005)”.
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      (5)
In subsection (6) omit “60 to 69,”.
8     (1)
Amend section 15 (Schedule A) as follows.
      (2)
In subsection (1A)—
(a)
in paragraph (b) for “within the charge to income tax under Schedule
A” substitute “the profits of a UK property business within the
20
charge to income tax under Chapter 3 of Part 3 of ITTOIA 2005”, and
(b)
for “as separate Schedule A businesses” substitute “for the purposes
of those charges as separate businesses”.
      (3)
Before subsection (4) insert—
“(3A)
Subsection (1) applies for corporation tax purposes (and does not
25
apply for income tax purposes except so far as necessary to ensure its
application for corporation tax purposes by virtue of section 9).”
      (4)
In subsection (4) at the end insert “and under Chapter 3 of Part 3 of ITTOIA
2005 (profits of a property business)”.
9     (1)
Amend section 18 (Schedule D) as follows.
30
      (2)
After subsection (4) insert—
“(4A)
Subsections (1) to (4) apply for corporation tax purposes (and do not
apply for income tax purposes except so far as necessary to ensure
their application for corporation tax purposes by virtue of section
9).”
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      (3)
In subsection (5) at the end insert “and under ITTOIA 2005 (see, in particular,
the charge under Chapter 2 of Part 2 of that Act (trade profits))”.
      (4)
Omit subsection (6).
10
Omit section 20 (Schedule F).
11
Omit section 21 (persons chargeable and basis of assessment under Schedule
40
A).