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 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
387

12    (1)
Amend section 21A (computation of amount chargeable under Schedule A)
as follows.
      (2)
In subsection (2) omit “sections 112 and 113 of that Act (expenditure in
connection with provision of security asset or service);”.
      (3)
In subsection (4)—
5
(a)
omit “section 82 (interest paid to non-residents),”, and
(b)
omit “section 96 (farming and market gardening: relief for
fluctuating profits),”.
13
In section 21B (application of other rules applicable to Case I of Schedule
D)—
10
(a)
omit “, 108, 109A”,
(b)
after “(post-cessation receipts and expenses, etc)” insert “, with any
reference to a trade within the charge to income tax being read as a
reference to a UK property business”, and
(c)
omit “section 113 (effect for income tax purposes of change in the
15
persons engaged on trade);”.
14
In section 21C (the Schedule A charge and mutual business)—
(a)
in subsection (1) after “the charge to” insert “corporation”, and
(b)
in subsection (4) from the beginning to “the person who would”
substitute “The company to which the profit arises is the company
20
which would”.
15    (1)
Amend section 30 (expenditure on making sea walls) as follows.
      (2)
In subsection (1) for “he shall be” substitute “that person shall be”.
      (3)
In subsection (2) for “he would be” substitute “that person would be”.
      (4)
After that subsection insert—
25
“(2A)
If—
(a)
the transferor is a company within the charge to corporation
tax and the transferee is a person within the charge to income
tax, or
(b)
the transferor is a person within the charge to income tax and
30
the transferee is a company within the charge to corporation
tax,

subsection (2) above shall apply only for the purpose of determining
the amount of the payment which the company is treated as making
in any year of assessment.
35

For any entitlement of the person within the charge to income tax to
a deduction for any of the expenditure, see sections 316 and 318 of
ITTOIA 2005 (corresponding income tax provision).”
16
Omit sections 31A and 31B (deductions for expenditure by landlords on
energy-saving items).
40
17    (1)
Amend section 34 (treatment of premiums etc. as rent) as follows.
      (2)
In subsection (1) for “the purposes of the Tax Acts” substitute “corporation
tax purposes”.
      (3)
In subsection (6)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
388

(a)
for “that other person” substitute “if that other person is a company,
the company”,
(b)
for “tax” substitute “corporation tax”,
(c)
for “he” substitute “the company”, and
(d)
for “his” substitute “its”.
5
      (4)
In subsection (7A) for “chargeable” substitute “accounting”.
      (5)
In subsection (8)—
(a)
for “person” substitute “company”,
(b)
for “tax”, wherever it occurs, substitute “corporation tax”, and
(c)
for “his” substitute “the company’s”.
10
18    (1)
Amend section 35 (charge on assignment of lease granted at an undervalue)
as follows.
      (2)
In subsection (2) for “him in consequence of his” substitute “the assignor in
consequence of the assignor’s”.
      (3)
In subsection (2A)(b) for “chargeable” substitute “accounting”.
15
      (4)
In subsection (3) for “tax” substitute “corporation tax”.
19    (1)
Amend section 36 (charge on sale of land with right to reconveyance) as
follows.
      (2)
In subsection (1)—
(a)
for “him”, in both places where it occurs, substitute “the vendor”,
20
and
(b)
for “his” substitute “the vendor’s”.
      (3)
In subsection (2)(b)—
(a)
for “tax” substitute “corporation tax”, and
(b)
for “him” substitute “the vendor”.
25
      (4)
In subsection (3) for “him” substitute “the vendor”.
      (5)
In subsection (4A)(b) for “chargeable” substitute “accounting”.
20    (1)
Amend section 37 (premiums paid etc: deductions from premiums and rent
received) as follows.
      (2)
In subsection (1)—
30
(a)
omit “or” at the end of paragraph (a),
(b)
after paragraph (b) insert—
“(c)
any amount falls to be treated as a receipt of a UK
property business by virtue of any of sections 277 to
282 of ITTOIA 2005 (receipts in respect of lease
35
premiums, sums payable instead of rent, for
surrender of lease and for variation or waiver of term
of lease and assignments), or
(d)
any amount would fall to be so treated but for the
operation of the rule in section 288 of that Act (the
40
additional calculation rule),”, and
(c)
after “this section” insert “and section 37A”.
      (3)
In subsection (2)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
389

(a)
for “person” substitute “company”, and
(b)
for “he” substitute “the company”.
      (4)
In subsection (3)—
(a)
for “person” substitute “company”, and
(b)
for “he” substitute “the company”.
5
      (5)
In subsection (4)—
(a)
for “the person” substitute “a company which is”, and
(b)
for “he” substitute “the company”.
      (6)
In subsection (7)(b) after sub-paragraph (ii) insert—
“(iii)
where it arose under Chapter 4 of Part 3 of ITTOIA
10
2005 (profits of property businesses: lease premiums
etc.), shall be its receipt period (within the meaning of
that Chapter (see section 288(6)).”
      (7)
In subsection (8) after “section 34(2)” insert “or under section 277 of ITTOIA
2005 by virtue of section 278 of that Act (amount treated as lease premium
15
where work required)”.
      (8)
In subsection (9)—
(a)
for “tax” substitute “income tax or corporation tax”, and
(b)
at the end insert “or if it has been deducted under the rule in section
288 of ITTOIA 2005 (the additional calculation rule) in calculating the
20
amount of a receipt of a property business (within the meaning of
that Act) under Chapter 4 of Part 3 of that Act.”
      (9)
At end insert—
“(10)
In the application of this section to Scotland the reference to a lease
being granted out of the head lease is to the grant of a sublease of
25
land subject to the head lease.”
21
After section 37 insert—
“37A
Section 37(4) and reductions in receipts under ITTOIA 2005
(1)
This section applies if—
(a)
in calculating the amount that falls to be treated as a receipt
30
of a UK property business under Chapter 4 of Part 3 of
ITTOIA 2005 (“the ITTOIA receipt”), there is a reduction
under section 288 of that Act by reference to a taxed receipt,
and
(b)
the taxed receipt is the amount chargeable on the superior
35
interest for the purposes of section 37.
(2)
Section 37(4) shall apply for the period in respect of which the
ITTOIA receipt arose only if the appropriate fraction of the amount
chargeable on the superior interest exceeds the amount of the
ITTOIA receipt given by the formula in section 277, 279, 280, 281 or
40
282 of ITTOIA 2005, as the case may be.
(3)
Section 37(4) shall then apply as if the amount chargeable on the
superior interest were reduced in the proportion which that excess
bears to that appropriate fraction.
(4)
Subsection (5) applies if—
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
390

(a)
the ITTOIA receipt is in respect of a lease granted out of the
taxed lease,
(b)
the taxed lease is the head lease for the purposes of section 37,
and
(c)
the lease granted as mentioned in paragraph (a) does not
5
extend to the whole of the premises subject to the head lease.
(5)
Section 37(4) and subsections (2) and (3) above shall be applied
separately to the part of the premises subject to the lease and to the
remainder of the premises, but as if for any reference to the amount
chargeable on the superior interest there were a reference to that
10
amount proportionately adjusted.
(6)
For the purposes of this section the appropriate fraction of the
amount chargeable on the superior interest is the fraction—

where—
A is the period in respect of which the ITTOIA receipt arose, and
15
B is the period in respect of which the amount chargeable on the
superior interest arose for the purposes of section 37.
(7)
For the purposes of this section the period in respect of which an
ITTOIA receipt arose is its receipt period (within the meaning of
Chapter 4 of Part 3 of ITTOIA 2005 (see section 288(6))).
20
(8)
In this section the following expressions have the same meaning as
in Chapter 4 of Part 3 of ITTOIA 2005—
“reduction under section 288 by reference to a taxed receipt”
(see section 290(6) of that Act),
“taxed lease” (see section 287(4) of that Act), and
25
“taxed receipt” (see section 287(4) of that Act).
(9)
In the application of this section to Scotland, references to a lease
granted out of a taxed lease are to be construed as references to a
sublease of land subject to the taxed lease.”
22    (1)
Amend section 38 (rules for ascertaining duration of leases) as follows.
30
      (2)
In subsection (2) for “tax” substitute “corporation tax”.
      (3)
In subsection (4) for “tax advantage in the application of this Part” substitute
“corporation tax advantage in the application of this Part or an income tax
advantage in the application of Chapter 4 of Part 3 of ITTOIA 2005”.
23
In section 40 (tax treatment of receipts and outgoings on sale of land)—
35
(a)
in subsection (1)—
(i)
after “for the purposes of” insert “corporation”, and
(ii)
for “him” substitute “the purchaser”,
(b)
in subsection (2) after “for the purposes of” insert “corporation”, and
(c)
in subsection (3)—
40
(i)
after “for the purposes of” insert “corporation”, and
(ii)
for “him” substitute “the vendor”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
391

24    (1)
Amend section 42 (appeals against determinations under sections 34 to 36)
as follows.
      (2)
In subsection (1)—
(a)
after “determination of” insert “—

(a)”,
5
(b)
for “to tax” substitute “to corporation tax”, and
(c)
after “35 or 36” insert “, or
(b)
any amount that under Chapter 4 of Part 3 of ITTOIA
2005 (profits of property businesses: lease premiums
etc.) is brought into account as a receipt in calculating
10
the profits of a property business (within the meaning
of that Act),”.
      (3)
At the end of the side-note insert “or Chapter 4 of Part 3 of ITTOIA 2005”.
25    (1)
Amend section 42A (non-residents and their representatives) as follows.
      (2)
In subsection (1) for “under Schedule A on the income of any person”
15
substitute “—
(a)
under Schedule A, or
(b)
as the profits of a UK property business, under Chapter 3 of
Part 3 of ITTOIA 2005,

on the income of any person”.
20
      (3)
In subsection (2)(a) after “Schedule A business” insert “, or a UK property
business,”.
26
In section 43B(2) (transfer of rent)—
(a)
after “paragraph 1(1) of Schedule A” insert “or in the course of a UK
property business”, and
25
(b)
after “Schedule A business” insert “or the UK property business”.
27    (1)
Amend section 43C (transfer of rent: exceptions, etc.) as follows.
      (2)
In subsection (3)—
(a)
omit “or” at the end of paragraph (a), and
(b)
after paragraph (b) insert—
30
“(c)
section 284 of ITTOIA 2005 applies, or
(d)
that section would apply if the price at which an
estate or interest is sold were to exceed the price at
which it is to be reconveyed.”
      (3)
After subsection (4) insert—
35
“(4A)
If—
(a)
section 285 of ITTOIA 2005 would apply in relation to a
finance agreement, and
(b)
section 43B applies in relation to the agreement,

section 285 of ITTOIA 2005 shall not apply.”
40
      (4)
In subsection (6)—
(a)
after “brought into account” insert “—

(a)”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
392

(b)
at the end insert “or
(b)
in computing under Chapter 2 of Part 2 of ITTOIA
2005 the profits of a trade carried on wholly or partly
in the United Kingdom.”
28
In section 43D(2) (interposed lease)—
5
(a)
after “paragraph 1(1) of Schedule A” insert “or in the course of a UK
property business”, and
(b)
after “Schedule A business” insert “or the UK property business”.
29    (1)
Amend section 43E (interposed lease: exceptions, etc.) as follows.
      (2)
In subsection (4)—
10
(a)
after “brought into account” insert “—

(a)”, and
(b)
at the end insert “or
(b)
in computing under Chapter 2 of Part 2 of ITTOIA
2005 the profits of a trade carried on wholly or partly
15
in the United Kingdom.”
      (3)
In subsection (5) after “Section 34” insert “and sections 277 to 281 of ITTOIA
2005”.
30    (1)
Amend section 43G (interpretation) as follows.
      (2)
In subsection (2) in the definition of “rent” after “Schedule A” insert “or, as
20
the profits of a UK property business, under Chapter 3 of Part 3 of ITTOIA
2005”.
      (3)
In subsection (2) in the definition of “premium”—
(a)
after ““premium”” insert “—
(a)
for the purposes of corporation tax”, and
25
(b)
after “section 34, and” insert—
“(b)
for the purposes of income tax has the meaning given
by section 307(1) of ITTOIA 2005 (and, in relation to
Scotland, section 307(3) of that Act), and includes—
(i)
a sum payable by the tenant under the terms
30
subject to which a lease is granted instead of
the whole or a part of the rent for a period,
(ii)
a sum payable by the tenant under those
terms as consideration for the surrender (in
Scotland, the renunciation) of the lease, and
35
(iii)
a sum payable by the tenant (otherwise than
by way of rent) as consideration for the
variation or waiver of a term of a lease, and”.
31    (1)
Amend section 46 (savings certificates and tax reserve certificates) as
follows.
40
      (2)
In subsection (1) after “liable to” insert “corporation”.
      (3)
In subsection (2) for “Tax” substitute “Corporation tax”.
      (4)
In subsection (4)(b) for “him and he” substitute “the holder and the holder”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
393

      (5)
After subsection (6) insert—
“(7)
In this section “Ulster Savings Certificates” means savings
certificates issued or treated as issued under section 15 of the
Exchequer and Financial Provisions Act (Northern Ireland) 1950.”
32    (1)
Amend section 53 (farming and other commercial occupation of land (except
5
woodlands)) as follows.
      (2)
In subsection (1) after “charged to” insert “corporation”.
      (3)
In subsection (2)—
(a)
for “person or partnership or body of persons” substitute “company
or partnership”, and
10
(b)
after “trade” insert “for corporation tax purposes”.
      (4)
In subsection (3) after “charged to” insert “corporation”.
33
In section 55(1) (mines, quarries and other concerns) after “charged to” insert
“corporation”.
34    (1)
Amend section 56 (transactions in deposits with and without certificates or
15
in debts) as follows.
      (2)
In subsection (2)—
(a)
for “person”, in the first place where it occurs, substitute “company”,
and
(b)
for “tax” substitute “corporation tax”.
20
      (3)
In subsection (3)
(a)
for “does” substitute “and section 551 of ITTOIA 2005 (charge to
income tax on profits from disposal of deposit rights) do”, and
(b)
in paragraph (a) for “person” substitute “company”.
35    (1)
Amend section 59 (persons chargeable: Schedule D) as follows.
25
      (2)
Omit subsections (1) and (2).
      (3)
In subsection (3)—
(a)
for “that section” substitute “section 12 of ITTOIA 2005”, and
(b)
omit “under Schedule D”.
      (4)
In subsection (4) for “Subsections (1) to (3)” substitute “Subsection (3)”.
30
36
Omit sections 60 to 63A (basis of assessment for income tax: Cases I and II of
Schedule D).
37
Omit section 64 (Case III assessments).
38
Omit section 65 (Cases IV and V assessments: general).
39
Omit section 65A (Case V income from land outside UK: income tax).
35
40
Omit section 68 (special rules where property etc. situated in Republic of
Ireland).
41
Omit sections 68A to 68C (share incentive plans).
42
Omit section 69 (Case VI assessments).