Income Tax (Trading and Other Income) Bill

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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
401

(b)
for “trade, profession or vocation”, wherever it occurs, substitute
“trade or profession”.
74    (1)
Amend section 95 (taxation of dealers in respect of distributions etc.) as
follows.
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
5
      (3)
In subsection (1A) omit paragraph (a).
      (4)
In subsection (2) for “tax” substitute “corporation tax”.
75
Omit section 95A (creative artists: relief for fluctuating profits).
76
Omit section 96 (farming and market gardening: relief for fluctuating
profits).
10
77
In section 98(1) (tied premises: receipts and expenses treated as those of a
trade)—
(a)
after “This section applies” insert “for corporation tax purposes”,
(b)
for “a person (“the trader”)” substitute “a company (“the trader”)”,
and
15
(c)
for “another person” substitute “a person other than the trader”.
78    (1)
Amend section 99 (dealers in land) as follows.
      (2)
In subsection (1) for “tax purposes” substitute “corporation tax purposes”.
      (3)
In subsection (2) for “tax” substitute “corporation tax”.
      (4)
In subsection (3)—
20
(a)
for “tax”, in each place where it occurs, substitute “corporation tax”,
(b)
for “chargeable periods” substitute “accounting periods”, and
(c)
for “chargeable period” substitute “accounting period”.
79    (1)
Amend section 100 (valuation of trading stock at discontinuance of trade) as
follows.
25
      (2)
In subsection (1) for “any tax purpose”, in the first place where it occurs,
substitute “any corporation tax purpose”.
      (3)
In subsection (1A)—
(a)
for “the person who” substitute “the company which”, and
(b)
for “those persons” substitute “that person and that company”.
30
      (4)
In subsection (1C)(c) for “chargeable period” substitute “accounting period”.
      (5)
In subsection (1D) after “in computing for any” insert “corporation”.
      (6)
In subsection (1E)—
(a)
for the words from the beginning to “subsections (1A) to (1C) above
to be” substitute “Where the value of the trading stock is determined
35
in accordance with subsections (1A) to (1C) above, or sections 176 to
178 of ITTOIA 2005 or section 127 of that Act (by virtue of section
175(3)) (corresponding provisions for income tax purposes),” and
(b)
after “for the purpose of making” insert “for corporation tax
purposes”.
40
      (7)
In subsection (2)(b) omit “or vocation” in both places where it occurs.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
402

80    (1)
Amend section 101 (valuation of work in progress at discontinuance of
profession or vocation) as follows.
      (2)
In subsection (1)—
(a)
for “any tax purpose”, in the first place where it occurs, substitute
“any corporation tax purpose”, and
5
(b)
omit “or vocation”, wherever it occurs.
      (3)
In subsection (2) omit “or vocation” and for “person by whom” substitute
“company by which”.
      (4)
In subsection (2A)—
(a)
omit paragraph (a), and
10
(b)
in paragraph (b), omit “in the case of an election for the purposes of
corporation tax,” and “or vocation”.
      (5)
In subsection (3) omit “or vocation”, wherever it occurs.
81    (1)
Amend section 102 (provisions supplementary to sections 100 and 101) as
follows.
15
      (2)
In subsection (1)—
(a)
omit “or vocations”, and
(b)
for “trade, profession or vocation” substitute “trade or profession”.
      (3)
In subsection (2)—
(a)
omit “113 or”,
20
(b)
for “trade, profession or vocation” substitute “trade or profession”,
(c)
after “computing” insert “corporation”, and
(d)
omit the words from “but those sections” to the end.
82    (1)
Amend section 103 (receipts after discontinuance: earnings basis charge and
related charge affecting conventional basis) as follows.
25
      (2)
In subsection (1)—
(a)
after “vocation” insert “carried on wholly or partly in the United
Kingdom”,
(b)
omit “under Case I or II of Schedule D”, and
(c)
for “tax shall be charged under Case VI of that Schedule” substitute
30
“corporation tax shall be charged under Case VI of Schedule D”.
      (3)
In subsection (3)—
(a)
in paragraph (a)—
(i)
for “person”, in the first place where it occurs, substitute
“company”,
35
(ii)
for “who” substitute “which”, and
(iii)
for “his” substitute “its”,
(b)
omit paragraphs (b) and (bb), and
(c)
omit the words from “Paragraph (b) above shall” to the end.
      (4)
In subsection (5) at the end insert “above or under section 35 of ITTOIA
40
2005”.
83    (1)
Amend section 104 (conventional basis: general charge on receipts after
discontinuance or change of basis) as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
403

      (2)
In subsection (1)—
(a)
after “vocation” insert “carried on wholly or partly in the United
Kingdom”,
(b)
omit “under Case I or II of Schedule D”, and
(c)
for “tax shall be charged under Case VI of that Schedule” substitute
5
“corporation tax shall be charged under Case VI of Schedule D”.
      (3)
In subsection (3)—
(a)
for “tax”, in the second place where it occurs, substitute “corporation
tax”, and
(b)
omit “and (b)”.
10
84    (1)
Amend section 105 (allowable deductions) as follows.
      (2)
In subsection (1)—
(a)
for “tax”, in the first three places where it occurs, substitute
“corporation tax”,
(b)
for “person”, in the first place where it occurs, substitute “company”,
15
and
(c)
for “him” substitute “it”.
      (3)
In subsection (3) for “chargeable period”, in each place where it occurs,
substitute “accounting period”.
85    (1)
Amend section 106 (application of charges where rights to payments
20
transferred) as follows.
      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (2)—
(a)
for “the persons carrying on the trade,” substitute “the company
carrying on the trade,”
25
(b)
for “tax” substitute “corporation tax”,
(c)
for “those persons” substitute “that company”, and
(d)
for “all purposes” substitute “corporation tax purposes”.
86
Omit section 107 (treatment of receipts as earned income).
87
Omit section 108 (election for carry-back).
30
88
Omit section 109 (charge under section 104: relief for individuals born before
6th April 1917).
89    (1)
Amend section 109A (relief for post-cessation expenditure) as follows.
      (2)
Omit subsection (3).
      (3)
In subsection (4) omit the unnumbered paragraph beginning with “If any
35
sum”.
      (4)
In subsection (4A) omit the unnumbered paragraph beginning with “If any
sum”.
      (5)
In subsection (6) for “section 105” substitute “section 254 of ITTOIA 2005
(allowable deductions against post-cessation receipts charged to income
40
tax)”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
404

      (6)
After subsection (6) insert—
“(6A)
This section applies in relation to a UK property business as it applies
in relation to a trade, profession or vocation.”
90
In section 110 (interpretation etc) for subsection (2) substitute—
“(1A)
In the case of a trade carried on by a person other than a company or
5
a profession or vocation within the charge to income tax carried on
by any person, any reference to the permanent discontinuance of a
trade, profession or vocation includes a reference to—
(a)
a person permanently ceasing to carry on a trade, profession
or vocation, or
10
(b)
in relation to a trade or profession carried on by a person in
partnership with other persons, the occurrence of an event
treated under section 246(4) of ITTOIA 2005 (basic meaning
of “post-cessation receipt”) as a person permanently ceasing
to carry on a trade or profession.
15
(1B)
In the case of a trade carried on by a company, any reference to the
permanent discontinuance of a trade includes a reference to the
occurrence of an event treated under section 337(1) below as a
discontinuance or treated under section 18 of ITTOIA 2005
(companies beginning or ceasing to carry on trade) as the company
20
permanently ceasing to carry on the trade.
(1C)
In the case of a UK property business carried on by a person other
than a company, any reference to the permanent discontinuance of a
UK property business includes a reference to—
(a)
a person permanently ceasing to carry on a UK property
25
business, or
(b)
in relation to a UK property business carried on by a person
in partnership with other persons, the occurrence of an event
treated under section 353(3) of ITTOIA 2005 (basic meaning
of “post-cessation receipt”) as a person permanently ceasing
30
to carry on a UK property business.
(1D)
In the case of a UK property business carried on by a company, any
reference to the permanent discontinuance of a UK property
business includes a reference to the occurrence of an event treated
under section 362 of ITTOIA 2005 (companies beginning or ceasing
35
to be within the charge to income tax) as the company permanently
ceasing to carry on the business.”
91
Omit section 110A (change of residence) and the italic cross-heading before
it.
92    (1)
Amend section 111 (treatment of partnerships) as follows.
40
      (2)
In subsection (1) for “the purposes of the Tax Acts” substitute “corporation
tax purposes”.
      (3)
Omit subsections (2) to (13).
93
Omit section 112 (partnerships controlled abroad).
94
Omit section 113 (effect for income tax of change in ownership of trade,
45
profession or vocation).

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
405

95    (1)
Amend section 115 (provisions supplementary to section 114) as follows.
      (2)
For subsection (5) substitute—
“(5)
Subsections (5A) and (5B) apply if—
(a)
a company resident in the United Kingdom (“the resident
partner”) is a member of a partnership which resides outside
5
the United Kingdom or which carries on any trade,
profession or business the control and management of which
is situated outside the United Kingdom, and
(b)
by virtue of any arrangements falling within section 788 (“the
arrangements”) any of the income or capital gains of the
10
partnership is relieved from corporation tax in the United
Kingdom.
(5A)
The arrangements do not affect any liability to corporation tax in
respect of the resident partner’s share of any income or capital gains
of the partnership (and section 114 has effect accordingly).
15
(5B)
If the resident partner’s share of the income of the partnership
consists of or includes a share in a qualifying distribution made by a
company resident in the United Kingdom, the resident partner (and
not the partnership) is, despite the arrangements, entitled to the
share of the tax credit in respect of the distribution which
20
corresponds to the partner’s share of the distribution (and section
114 has effect accordingly).”
96
In section 116(4) (arrangements for transferring relief) before “tax” insert
“corporation”.
97
In section 118ZA (treatment of limited liability partnerships)—
25
(a)
in subsection (1) for “the purposes of the Tax Acts” substitute
“corporation tax purposes”, and
(b)
in subsection (2) for “the Tax Acts” substitute “the Corporation Tax
Acts”.
98    (1)
Amend section 118ZE (restriction on relief for non-active partners) as
30
follows.
      (2)
In subsection (5) for the words from “sections 60 to 63” to the end substitute
“Chapter 15 of Part 2 of ITTOIA 2005 as applied by section 853 of that Act”.
      (3)
In subsection (6)—
(a)
for “section 61(1)” substitute “section 199(1) of ITTOIA 2005”, and
35
(b)
after “to 118ZK” insert “below”.
99
In section 118ZH(3) (“a significant amount of time”: recovery of relief) for
“under Case VI of Schedule D” substitute “to income tax”.
100
In section 118ZK(2)(b) and (5) (transitional provision for years after the first
restricted year) after “1992” insert “or any of sections 138 to 140 of ITTOIA
40
2005”.
101
In section 118ZL(6) (partnerships exploiting films)—
(a)
in paragraph (b)—
(i)
for “section 111(2)” substitute “section 849 of ITTOIA 2005
(calculation of firm’s profits or losses)”, and
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
406

(ii)
for “section 41 or 42 of the Finance (No. 2) Act 1992”
substitute “any of sections 137 to 140 of ITTOIA 2005”, and
(b)
in paragraph (c)—
(i)
for “section 41 or 42 of that Act” substitute “sections 137 to
140 of that Act”, and
5
(ii)
for “either of” substitute “any of”.
102
In section 118ZM(4) (partnerships exploiting films: supplementary) for “the
acquisition of the master negative” to the end substitute “the acquisition of
the original master version of the film; and this subsection is to be construed
as if contained in Chapter 9 of Part 2 of ITTOIA 2005.”
10
103
In section 119(1) (rent etc. payable in connection with mines, quarries and
similar concerns) after “charged to” insert “corporation”.
104
In section 120 (rent etc. payable in respect of electric line wayleaves)—
(a)
in subsection (1) after “charged to” insert “corporation”,
(b)
in subsection (1A) for “chargeable period” substitute “accounting
15
period”, and
(c)
in subsection (1A) after “charged to”, in both places where it occurs,
insert “corporation”.
105
In section 121 (management expenses of owner or mineral rights) omit
subsection (1).
20
106   (1)
Amend section 122 (relief in respect of mineral royalties) as follows.
      (2)
In subsection (1)—
(a)
for the words from “a person resident” to “year of assessment or”
substitute “a company resident in the United Kingdom which in
any”,
25
(b)
omit “for the purposes of income tax, or as the case may be”,
(c)
for “him” substitute “it”, and
(d)
omit “year or” in both places where it occurs.
      (3)
In subsection (2)—
(a)
omit the words from “brought into account” to “may be,”, and
30
(b)
for “subsection (2)” substitute “subsection (3)”.
      (4)
Omit subsection (4).
107   (1)
Amend section 125 (annual payments for non-taxable consideration) as
follows.
      (2)
In subsection (2) for paragraph (a) and the word “and” at the end of the
35
paragraph substitute—
“(a)
is not interest but is—
(i)
an annuity or other annual payment charged with
income tax under Part 5 of ITTOIA 2005 otherwise
than as relevant foreign income; or
40
(ii)
an annuity or other annual payment charged with
corporation tax under Case III of Schedule D; and”.
      (3)
In subsection (3)(a) for “section 660A(8) or (9)(a)” substitute “section 627(1)
or (2)(a) of ITTOIA 2005”.
108
Omit section 127 (enterprise allowance).
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
407

109
Omit section 127A (futures and options: transactions with guaranteed
returns).
110
In section 128 (commodity and financial futures etc: losses and gains) omit
subsection (1).
111   (1)
Amend section 214 (chargeable payments connected with exempt
5
distributions) as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a) omit “chargeable to tax under Case VI of Schedule
D”, and
(b)
after that paragraph insert—
10
“(ab)
that income shall be chargeable to tax;”.
      (3)
After subsection (1) insert—
“(1A)
Income tax chargeable by virtue of subsection (1) shall be charged on
the full amount or value of the payment made in the year of
assessment; and the person liable for any tax so charged is the person
15
receiving or entitled to the payment.
(1B)
Corporation tax chargeable by virtue of subsection (1) shall be
charged under Case VI of Schedule D.”
112
In section 230 (stock dividends: distributions) for the words from “as
mentioned” to “that section)” substitute “in a case where section 410(2), (3)
20
or (4) of ITTOIA 2005 applies”.
113   (1)
Amend section 231 (tax credits for certain recipients of qualifying
distributions) as follows.
      (2)
In subsection (1)—
(a)
for “sections” to “1993” substitute “sections 231AA and 231AB of this
25
Act”,
(b)
for the words from “where” to “charged” substitute “for corporation
tax purposes where”, and
(c)
omit “or a person resident in the United Kingdom, not being a
company”.
30
      (3)
Omit subsections (3) and (3AA).
      (4)
In subsection (4) for “he” in both places where it occurs substitute “that
person”.
114   (1)
Amend section 231AA (no tax credit for borrower under stock lending
arrangement or interim holder under repurchase agreement) as follows.
35
      (2)
In subsection (1) after “section 231” insert “above or section 397(1) of ITTOIA
2005”.
      (3)
In subsection (1A)—
(a)
for “a relevant person”, “section 233(1)” and “Schedule F” substitute
“a person resident in the United Kingdom”, “section 399(2) of
40
ITTOIA 2005” and “dividend” respectively, and
(b)
omit the second sentence.
115   (1)
Amend section 231AB (no tax credit for original owner under repurchase
agreement in respect of certain manufactured dividends) as follows.