Income Tax (Trading and Other Income) Bill

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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
415

      (2)
In subsection (1) omit “under Schedule D”.
      (3)
In subsection (4) omit “under Schedule D” and, in both places where it
occurs, “under Case I of Schedule D”.
      (4)
In subsection (7) for “under the provisions of the Income Tax Acts applicable
to Cases I and II of Schedule D” substitute “of a trade, profession or vocation
5
under Part 2 of ITTOIA 2005”.
165
In section 389 (supplementary provisions relating to carry-back of terminal
losses) for subsection (4) substitute—
“(4)
For the purposes of this section and section 388 references to the
permanent discontinuance of a trade, profession or vocation
10
include—
(a)
a person permanently ceasing to carry on a trade, profession
or vocation, and
(b)
a partner permanently ceasing to carry on a notional trade in
accordance with section 852(4) of ITTOIA 2005.”
15
166
In section 390(a) (treatment of interest as a loss for purposes of carry-forward
and carry-back) for “the profits of which are chargeable to tax under Case I
or II of Schedule D” substitute “carried on wholly or partly in the United
Kingdom”.
167
For section 391 (losses from trade etc carried on abroad) substitute—
20
“391
Losses from trade etc. carried on abroad
In the case of a loss sustained in a trade, profession or vocation
carried on wholly outside the United Kingdom, relief under any of
sections 380 to 386, 388 and 389 is given only on—
(a)
the profits of a trade, profession or vocation carried on
25
wholly outside the United Kingdom, or
(b)
income falling within section 23, 355, 575, 613, 615, 631 or 635
of ITEPA 2003,
but no relief is to be given on income which is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
30
charged on the remittance basis).”
168
For section 392 (Case VI losses) substitute—
“392
Losses from miscellaneous transactions
(1)
A person may make a loss relief claim if —
(a)
in any year of assessment he sustains a loss in any transaction
35
(whether he was engaged in it solely or in partnership), and
(b)
the transaction is of such a nature that, if any profits or other
income had arisen from it, he would have been liable to be
assessed to income tax in respect of the income under or by
virtue of any provision to which section 836B applies.
40
(2)
A loss relief claim is a claim requiring—
(a)
that the amount of the loss sustained by him is, as far as may
be, to be deducted from or set off against the total of the
amount of any profits or other income or gains arising from
any transaction in respect of which he is assessed for that year
45
under or by virtue of any such provision, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
416

(b)
that any portion of the loss for which relief is not so given is,
as far as may be, to be carried forward and deducted from or
set off against the total of the amount of any profits or other
income or gains arising from any transaction in respect of
which he is assessed for a subsequent year of assessment
5
under or by virtue of any such provision.
(3)
If a partner in a partnership sustains a loss, the expression “the
amount of any profits or other income or gains arising from any
transaction in respect of which he is assessed” is to be read in
accordance with subsection (4).
10
(4)
In respect of any year that expression means such portion of the
amount on which the partnership is assessed under or by virtue of
any provision to which section 836B applies in respect of any
transaction as falls to be taken into account in computing the
partner’s total income for that year.
15
(5)
Any relief under this section by way of the carrying forward of the
loss is to be given as far as possible—
(a)
from the first subsequent assessment in respect of any profits
or other income or gains arising from any transaction in
respect of which he is assessed under or by virtue of any
20
provision to which section 836B applies for any year, and
(b)
so far as it cannot be so given, from the next such assessment,
and so on.
(6)
So far as a loss relief claim concerns the amount of the loss for any
year of assessment it must be made on or before the fifth anniversary
25
of the 31st January next following the year of assessment in question.
(7)
But the question whether and, if so, how much relief on that amount
should be given under this section against tax for any year of
assessment may be the subject of a separate claim made on or before
the fifth anniversary of the 31st January next following that year of
30
assessment.
(8)
Any portion of a loss sustained by any person in any transaction
(whether he was engaged in it solely or in partnership)—
(a)
which was of such a nature that, if any profits had arisen from
it, he would have been liable to be assessed to income tax in
35
respect of the profits under Case VI of Schedule D for any
year of assessment before the year 2005-06, and
(b)
which did not fall within section 34, 35 or 36,

is (so far as relief for that portion has not previously been given) to
be treated as a loss to be carried forward and deducted in accordance
40
with subsection (2)(b) above.”
169   (1)
Amend section 397 (restriction of relief in case of farming and market
gardening) as follows.
      (2)
In subsection (5) (restriction of relief in case of farming and market
gardening) for the definitions of “farming” and “market gardening”
45
substitute—
““farming” and “market gardening” shall be construed—
(a)
for income tax purposes, in accordance with the
definitions in section 876 of ITTOIA 2005, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
417

(b)
for corporation tax purposes, in accordance with the
definitions in section 832 but as if those definitions
were not restricted to activities in the United
Kingdom.”
      (3)
In subsection (7) after “the rules applicable to” insert “the calculation of the
5
profits of a trade in Part 2 of ITTOIA 2005 or to”.
      (4)
In subsection (8) for the words from “, a trade shall be treated” to the end
substitute “—
(a)
a trade shall be treated as discontinued, and a new trade set
up, in any event which under any of the provisions of the Tax
10
Acts is to be treated as equivalent to the permanent
discontinuance or setting up of a trade; and
(b)
without prejudice to paragraph (a), a trade shall be treated as
discontinued, and a new trade set up, at any time when there
is a change in the persons carrying on the trade which
15
involves all of the persons carrying it on before the change
permanently ceasing to carry it on.”
      (5)
In subsection (10) for the words from the beginning to “any discontinuance,
and as if” substitute “Where at any time there has been a change in the
persons carrying on a trade, this section shall, notwithstanding subsection
20
(8) above, apply as if”.
170
In section 398 (loss relief for transactions in deposits with and without
certificates or in debts)—
(a)
after “56(2)”, in the first place where it occurs, insert “above or
Chapter 11 of Part 4 of ITTOIA 2005 (transactions in deposits)”,
25
(b)
after “56(2)”, in the second place where it occurs, insert “above or that
Chapter”, and
(c)
for “tax under Schedule D” substitute “corporation tax under
Schedule D or income tax under that Act”.
171   (1)
Amend section 399 (dealings in commodity futures etc: withdrawal of loss
30
relief) as follows.
      (2)
Omit subsections (1) and (1A).
      (3)
In subsection (3) for “under Case VI of Schedule D” substitute “(in the case
of corporation tax, under Case VI of Schedule D)”.
      (4)
In subsection (5) omit the words from “and the reference” to the end.
35
172
In section 401(1) (relief for pre-trading expenditure)—
(a)
for “person” substitute “company”,
(b)
for “trade, profession or vocation”, wherever it occurs, substitute
“trade or profession”,
(c)
for “he” substitute “the company”,
40
(d)
for “his” substitute “the company’s”, and
(e)
for “him” substitute “the company”.
173
In section 417(3)(b) (meaning of “associate” etc.) for “Chapter 1A of Part XV
(see section 660G(1) and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005
(see section 620 of that Act)”.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
418

174   (1)
Amend section 421 (taxation of borrower where loan under section 419
released etc.) as follows.
      (2)
In subsection (1)—
(a)
for “advance and” substitute “advance made to the trustees of a trust
and after the trust has ended”,
5
(b)
in paragraph (a) for “the total income of the person to whom the loan
or advance was made”, “him” and “Schedule F” substitute “the
income of the person from whom the debt was due (“the debtor”) for
corporation tax purposes”, “the debtor” and “dividend” respectively,
(c)
in paragraph (b) for “he shall not be liable to pay income tax at the
10
Schedule F” substitute “the debtor shall not be liable to pay
corporation tax at the dividend”, and
(d)
omit paragraphs (c) and (d).
      (3)
Omit subsections (2) and (3).
175
In section 431(2) (interpretative provisions relating to insurance companies)
15
in the definition of “annuity business” for the words “section 580C”
substitute “section 725 of ITTOIA 2005 (immediate needs annuities)”.
176
In section 431D(3)(b) (meaning of “overseas life assurance business”) after
“Chapter II of Part XIII” insert “or Chapter 9 of Part 4 of ITTOIA 2005”.
177
In section 434 (franked investment income etc.) omit subsection (1A).
20
178   (1)
Amend section 437 (general annuity business) as follows.
      (2)
In subsection (1C)(b)(ii) after “capital elements” insert “and amounts exempt
under section 717 of ITTOIA 2005”.
      (3)
Omit “and” at the end of subsection (1C)(b).
      (4)
After subsection (1C)(c) insert “and
25
(d)
the amounts exempt under section 717 of ITTOIA 2005 shall
be determined in accordance with Chapter 7 of Part 6 of that
Act, but for this purpose—
(i)
it is immaterial whether or not an annuitant claims
any relief to which the annuitant is entitled under that
30
section; and
(ii)
where, by virtue of section 718 of that Act, section 717
does not apply to an annuity, the annuity shall be
treated as being exempt to the same extent that it
would have been apart from that section.”
35
179   (1)
Section 468J (dividend distributions of authorised unit trusts) is amended as
follows.
      (2)
In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.
      (3)
At the end of subsection (4) insert “(including a dividend treated as paid to
a unit holder who is not liable to corporation tax)”.
40
180   (1)
Section 468L (interest distributions of authorised unit trusts) is amended as
follows.
      (2)
In subsection (1A) after “this Chapter” insert “and Chapter 2 of Part 4 of
ITTOIA 2005 (interest)”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
419

      (3)
In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.
      (4)
At the end of subsection (3) insert “(including a payment of interest treated
as made to a unit holder who is not liable to corporation tax)”.
181   (1)
Amend section 469 (other unit trusts) as follows.
      (2)
In subsection (2A) for “section 231(1)” substitute “section 397(1) of ITTOIA
5
2005”.
      (3)
For subsection (2B) substitute—
“(2B)
Section 348(4)(a) above and sections 399(2) and (6) and 400(2) and (3)
of ITTOIA 2005 shall not apply where the recipient of the
distribution in question is the trustees of the scheme.”
10
      (4)
In subsection (3)—
(a)
after “the Tax Acts” insert “other than ITTOIA 2005”, and
(b)
at the end insert “(and see Chapter 10 of Part 4 of that Act for their
treatment under that Act)”.
      (5)
In subsection (9) for “paragraph 7 of Schedule 5AA” substitute “section 568
15
of ITTOIA 2005”.
182
In section 472A (trading profits etc. from securities: taxation of amounts
taken to reserves)—
(a)
in subsection (1) for “person” substitute “company”, and
(b)
in subsection (2) for “person’s” substitute “company’s”.
20
183
In section 473(1) and (4) (conversion etc. of securities held as circulating
capital) for “person” substitute “company”.
184   (1)
Amend section 477A (building societies: regulations for deduction of tax) as
follows.
      (2)
In subsection (4)—
25
(a)
for “terminal bonus” substitute “interest”, and
(b)
for “contractual savings scheme” substitute “SAYE savings
arrangement”.
      (3)
Omit subsections (5) and (6).
      (4)
In subsection (9) omit the words from “but” to the end of the subsection.
30
      (5)
In subsection (10) after “this section—” insert—
““certified SAYE savings arrangement” has the meaning given
by section 703 of ITTOIA 2005”.
185
Omit section 480C (relevant deposits: computation of tax on interest).
186   (1)
Amend section 481 (“deposit-taker”, “deposit” and “relevant deposit”) as
35
follows.
      (2)
In subsection (1A) for “sections 480A and 480C” substitute “section 480A”.
      (3)
In subsection (5A)—
(a)
at the end of paragraph (a) insert “above or an uncertificated right
falling within section 552(1)(c) of ITTOIA 2005”, and
40
(b)
in paragraph (c)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
420

(i)
for “, as defined in section 56(5), has” substitute “or
uncertificated eligible debt security units have”, and
(ii)
omit “or 480C”.
      (4)
In subsection (6) omit the word “, 480C”.
187   (1)
Amend section 482 (supplementary provisions) as follows.
5
      (2)
In subsection (6)—
(a)
after “481(5)” insert “and (5A)”,
(b)
after the definition of “appropriate person” insert—
““certificate of deposit” for corporation tax purposes has
the meaning given in section 56(5) above and for
10
income tax purposes has the meaning given in section
552(2) of ITTOIA 2005,”
(c)
in the definition of “qualifying certificate of deposit” for “, as defined
in section 56(5), which is” substitute “or uncertificated eligible debt
security units, being a certificate or units”, and
15
(d)
after the definition of “qualifying time deposit” insert—
““uncertificated eligible debt security units” has the
meaning given in section 552(2) of ITTOIA 2005”.
      (3)
In subsection (8) for “section 56(5)” substitute “subsection (6) above”.
188   (1)
Section 486 (industrial and provident societies and co-operative
20
associations) is amended as follows.
      (2)
In subsection (1)—
(a)
after “distribution” insert “for the purposes of corporation tax”, and
(b)
for “the purposes of corporation tax” substitute “those purposes”.
      (3)
In subsection (4) at the end insert “for the purposes of corporation tax”.
25
      (4)
Omit subsection (5).
189   (1)
Amend section 491 (distribution of assets of body corporate carrying on
mutual business) as follows.
      (2)
In subsection (1) for “any person” substitute “any company”.
      (3)
In subsection (2) for “the person” substitute “the company”.
30
      (4)
In subsection (3)—
(a)
for “the purposes of tax”, wherever it occurs, substitute “the
purposes of corporation tax”,
(b)
for “the recipient”, wherever it occurs, substitute “the recipient
company”,
35
(c)
after “be charged” insert “to corporation tax”, and
(d)
for “chargeable period” substitute “accounting period”.
      (5)
In subsection (4) omit “113 or”.
      (6)
Omit subsection (5).
      (7)
In subsection (10) omit “or vocation”.
40
190   (1)
Amend section 492 (treatment of oil extraction activities etc for tax purposes)
as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
421

      (2)
In subsection (1) for “for all purposes of income tax, and for the purposes of
the charge of corporation tax on income,” substitute “for the purposes of the
charge of corporation tax on income”.
      (3)
In subsection (4)—
(a)
in paragraph (a) after “are treated by virtue of” insert “section 16(1)
5
of ITTOIA 2005 or”,
(b)
in paragraph (a) for “the purposes specified in that subsection”
substitute “income tax purposes or (as the case may be) for the
purposes of the charge of corporation tax on income”,
(c)
in paragraph (b) after “but which, apart from” insert “section 16(1) of
10
ITTOIA 2005 or”, and
(d)
after “notwithstanding anything in that” insert “section or”.
191
In section 493(2)(a)(i) (valuation of oil disposed of or appropriated in certain
circumstances) for “falling within section 492(1)(a) or (b)” substitute “falling
within the definition of “oil-related activities” in section 16(2) of ITTOIA
15
2005 or within section 492(1)(a) or (b) above”.
192
In section 495(2) (regional development grants) for “section 492(1)”
substitute “section 16(1) of ITTOIA 2005 or section 492(1) above”.
193
In section 496(1)(c) (tariff receipts and tax-exempt tariffing receipts) for
“section 492(1)” substitute “section 16(1) of ITTOIA 2005 or section 492(1)
20
above”.
194
In section 502(1) (interpretation of Chapter 5), in the definition of “ring fence
trade”—
(a)
in paragraph (a) for “any of paragraphs (a) to (c) of subsection (1) of
section 492” substitute “the definition of “oil-related activities” in
25
section 16(2) of ITTOIA 2005 or within section 492(1) above”, and
(b)
in paragraph (b) for “that subsection” substitute “section 16(1) of
ITTOIA 2005 or section 492(1) above”.
195   (1)
Amend section 503 (letting of furnished holiday accommodation treated as
a trade for certain purposes) as follows.
30
      (2)
In subsection (1)—
(a)
for “specified in subsection (2)” substitute “of Chapter 2 of Part 10
(loss relief for corporation tax)”,
(b)
omit “in the United Kingdom”,
(c)
after “chargeable to” insert “corporation”, and
35
(d)
for “particular person or partnership or body of persons” substitute
“particular company or partnership”.
      (3)
Omit subsections (2) and (3).
      (4)
In subsection (5)—
(a)
for “Part X” substitute “Chapter 2 of Part 10”, and
40
(b)
after “other provision of the” insert “Corporation”.
      (5)
In the side-note after “certain” insert “corporation tax”.
196   (1)
Amend section 504 (meaning of the “commercial letting of furnished
accommodation”) as follows.
      (2)
Omit subsection (4).
45