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
457

(3)
An amount arising to a person who is not resident in the United
Kingdom is chargeable to tax only if it is from a source in the United
Kingdom.
(4)
References in this section to amounts which are from a source in the
United Kingdom include, in the case of any amount which does not
5
have a source, references to amounts which have a comparable
connection to the United Kingdom.
(5)
This section is subject to any express or implied provision to the
contrary in any provision of the Income Tax Acts.
(6)
This section does not apply for the purposes of corporation tax.”
10
334   (1)
Amend section 828 (orders and regulations made by the Treasury or the
Board) as follows.
      (2)
In subsection (4) omit “324,”.
      (3)
In subsection (5)—
(a)
after “section 717 of ITEPA 2003” insert “or section 873 of ITTOIA
15
2005”,
(b)
after “under ITEPA 2003” insert “or ITTOIA 2005”, and
(c)
for “that Act” substitute “either of those Acts”.
335
In section 830(3) (territorial sea and designated areas) omit “income tax or”.
336
In section 831(3) (interpretation of ICTA) after the entry relating to “ITEPA
20
2003” insert—
““ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005;”.
337
In section 832(1) (interpretation of the Tax Acts)—
(a)
for the definition of “overseas property business” substitute—
25
““overseas property business”—
(a)
for the purposes of income tax, has the
meaning given by Chapter 2 of Part 3 of
ITTOIA 2005;
(b)
for the purposes of corporation tax, has the
30
meaning given by section 70A(4);”,
(b)
in the appropriate place insert—
““relevant foreign income” has the meaning given by
subsections (1) to (3) of section 830 of ITTOIA 2005 but
also includes, for any purpose mentioned in any
35
provision listed in subsection (4) of that section,
income treated as relevant foreign income for that
purpose by that provision;”.
(c)
in the definition of “Schedule A business” for “income tax” substitute
“corporation tax”,
40
(d)
in the definitions of “the Schedule F ordinary rate”, “the Schedule F
trust rate” and “the Schedule F upper rate” for “Schedule F”
substitute “dividend”,
(e)
for the definition of “tax credit” substitute—
““tax credit” means—
45
(a)
a tax credit under section 231 for the purposes
of corporation tax; and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
458

(b)
a tax credit under section 397(1) of ITTOIA
2005 for the purposes of income tax;”,
(f)
in the appropriate place insert—
““UK property business” has the meaning given by
Chapter 2 of Part 3 of ITTOIA 2005;”, and
5
(g)
omit the definition of “Ulster Savings Certificates”.
338   (1)
Amend section 833 (interpretation of Income Tax Acts) as follows.
      (2)
In subsection (3)—
(a)
for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and
(b)
in paragraph (b)—
10
(i)
for “547(1)(a)” substitute “465 of ITTOIA 2005”, and
(ii)
for “547(5)” substitute “530 of that Act”.
      (3)
In subsection (4)—
(a)
for “and” in the first place where it occurs substitute “to”, and
(b)
in paragraph (c) for the words from “under” to “D” substitute “under
15
Part 2 of ITTOIA 2005 (trading income)”.
      (4)
In subsection (5) for “income which is earned income by virtue of section
529” substitute “—
(a)
income to which subsection (5A) applies, and
(b)
income to which subsection (5B) applies.”
20
      (5)
After that subsection insert—
“(5A)
This subsection applies to income arising to the individual if—
(a)
it is charged to tax under section 583 of ITTOIA 2005 (income
from disposals of know-how), and
(b)
the individual, alone or jointly, devised the know-how in
25
question.
(5B)
This subsection applies to income arising to the individual if—
(a)
it is patent income, and
(b)
the individual, alone or jointly, devised the invention for
which the patent in question was granted.
30

This is subject to subsection (5C).
(5C)
If—
(a)
any part of the rights in respect of the patent, or of any rights
out of which they were granted, has at any time belonged to
any other person, and
35
(b)
any part of the income is properly attributable to the rights
which have belonged to that other person,

subsection (5B) does not apply to that part of the income (and so it is
not earned income).
(5D)
In subsection (5B) “patent income” means—
40
(a)
royalties or other sums paid in respect of the use of a patent
charged to tax under section 579 of ITTOIA 2005,
(b)
amounts on which tax is payable under section 587 or 593 of
ITTOIA 2005, and
(c)
amounts on which tax is payable under—
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
459

(i)
section 472(5) of the Capital Allowances Act (patent
allowances: balancing charges), or
(ii)
paragraph 100 of Schedule 3 to that Act (balancing
charges in respect of pre-1st April 1986 expenditure
on the purchase of patent rights).
5
(5E)
References in subsection (5C) to the rights in respect of the patent are
to any right to do or authorise the doing of anything which would,
but for the right, be an infringement of the patent.”
339
In section 835(6)(a) (“total income” in the Income Tax Acts) for “Schedule F”
substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK
10
resident companies etc.)”.
340
After section 836A insert—
“836B
  Table of provisions to which this section applies
(1)
In the Tax Acts references to any provision to which this section
applies are references to any provision listed in the following table so
15
far as it relates to income tax (but subject to any applicable limitation
in subsections (3) to (5)).
(2)
This is the table—
PART 1

Provisions of this Act
Description

20

Section 214(1)(ab)
Chargeable payments

connected with exempt

distributions

Section 571(1)
Cancellation of certificates:

schemes for rationalising

25

industry

Section 591C(1)
Cessation of approval

(retirement benefits scheme)

Section 598(1)
Repayment of employee’s

contribution

30

Section 599(1) or (1B)
Commutation of entire

pension in special

circumstances

Section 599A(2)
Payment out of surplus funds

Section 601(2) (as read with
Payments to employers

35

section 602(1)(a)) or 601(5)
(retirement benefits scheme)

Section 648B(1)
Return of contributions after

pension date (approved

personal pension scheme)

Section 650A(1)
Withdrawal of approval from

40

arrangements (approved

personal pension scheme)

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
460

Provisions of this Act
Description

Section 714(2)
Transfer of securities within

accrued income scheme with

or without accrued interest

Section 716(3)
Transfer of securities with

5

unrealised interest where

settlement day follows last

interest period

Section 723(4)
Proceeds of transfer of foreign

securities within the accrued

10

income scheme ceasing to be

unremittable

Section 730(4)
Transfers of income arising

from securities

Section 740(2)(a) or (b)
Transfer of assets abroad

15

(liability of non-transferors)

Section 743(1)
Transfer of assets abroad

(liability of transferors)

Section 761(1)(b)(i)
Offshore income gains

Section 774(1)
Transactions between dealing

20

company and associated

company

Section 775(2A)
Sale by individual of income

derived from his personal

activities

25

Section 776(3A)(a)
Transactions in land

Section 780(3A)(a)
Sale and lease-back (taxation

of consideration received)

Section 781(1)
Assets leased to traders and

others

30

Section 786(5)(a)
Transactions associated with

loans or credit

Section 804(5B)(a)
Double taxation relief

PART 2

Provision of ITTOIA 2005
Description

35

Chapter 18 of Part 2
Post-cessation receipts: trades,

professions and vocations

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
461

Provision of ITTOIA 2005
Description

Chapter 8 of Part 3
Rent receivable in connection

with a UK section 12(4)

concern

Chapter 9 of Part 3
Rent receivable for UK

5

electric-line wayleaves

Chapter 10 of Part 3
Post-cessation receipts: UK

property businesses

Chapter 2 of Part 4
Interest

Chapter 9 of Part 4
Gains from contracts for life

10

insurance etc.

Chapter 11 of Part 4
Transactions in deposits

Chapter 12 of Part 4
Disposals of futures and

options involving guaranteed

returns

15

Section 579
Royalties and other income

from intellectual property

Section 583
Income from disposals of

know-how

Section 587
Income from sales of patent

20

rights

Chapter 3 of Part 5
Films and sound recordings:

non-trade businesses

Chapter 4 of Part 5
Certain telecommunication

rights: non-trading income

25

Chapter 5 of Part 5
Settlements: amounts treated

as income of settlor

Section 682(3)
Adjustments after the

administration period

Chapter 8 of Part 5
Income not otherwise charged

30

Section 844(4)
Withdrawal of relief for

unremittable foreign income

after source ceases

PART 3

Other provisions
Description

35

Paragraph 8(2)(b)(i) of
Occupational pension schemes

Schedule 3 to the Finance Act
(refunds of contributions and

1971
commutation payments)

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
462

Other provisions
Description

Section 68(2) of the Finance Act
Employee share ownership

1989
trust (chargeable event)

Section 71(4) of the Finance Act
Employee share ownership

1989
trust (borrowing)

5

Paragraph 11(3) of Schedule 20
Self-assessment transitional

to the Finance Act 1994

Section 258(4) of the Capital
Special leasing

Allowances Act

Section 479(4) of the Capital
Persons having qualifying

10

Allowances Act
non-trade expenditure

Section 394(2) of ITEPA 2003
Charge on administrator of

non-approved pension scheme

Section 476(5) of ITEPA 2003
Charge on occurrence of

chargeable event

15

Section 583 of ITEPA 2003
certain pension income

(approved retirement benefits

schemes: unauthorised

payments)

Section 623 of ITEPA 2003
certain pension income (return

20

of surplus employee AVCs)

Section 119(4) of the Finance
Individuals benefited by film

Act 2004
relief

Section 127(2) of the Finance
Losses derived from exploiting

Act 2004
licence: individuals in

25

partnership

(3)
For the purposes of this section the reference to section 743 of this Act
does not include that section so far as relating to income falling
within subsection (1A) of that section.
(4)
For the purposes of this section—
30
(a)
any reference to any provision of ITTOIA 2005 does not
include that provision so far as relating to relevant foreign
income,
(b)
the reference to Chapter 2 of Part 4 of ITTOIA 2005 is a
reference to that Chapter only so far as relating to interest
35
falling within section 582(2)(b)(ii) of this Act (funding bonds
issued in respect of interest on certain debts),
(c)
the reference to Chapter 9 of Part 4 of ITTOIA 2005 is a
reference to that Chapter only so far as relating to gains—
(i)
which are from a policy or contract specified in
40
section 531(3) of that Act, and
(ii)
which do not fall within section 532 or 534 of that Act,

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
463

(d)
the reference to section 579 of ITTOIA 2005 does not include
that section so far as relating to any annual payment,
(e)
the reference to Chapter 4 of Part 5 of ITTOIA 2005 does not
include that Chapter so far as relating to any annual
payment, and
5
(f)
the reference to Chapter 5 of Part 5 of ITTOIA 2005 does not
include that Chapter so far as relating to income which falls
within section 619(3) of that Act.
(5)
For the purposes of this section the reference to section 583 of ITEPA
2003 is a reference to that section only where the paying scheme (see
10
subsection (3) of that section) is a pilots’ benefit fund (see section 587
of that Act).”
341
In section 839(3) (connected persons) 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)”.
15
342
Omit Schedule 4A (creative artists: relief for fluctuating profits).
343   (1)
Amend Schedule 5 (treatment of farm animals etc for the purposes of Case I
of Schedule D) as follows.
      (2)
In paragraph 1—
(a)
after “profits” insert “chargeable to corporation tax”, and
20
(b)
for “his” substitute “its”.
      (3)
In paragraph 2—
(a)
in sub-paragraph (1) for “he” substitute “the farmer”,
(b)
omit sub-paragraphs (3)(a), (4)(a) and (5), and
(c)
in sub-paragraph (6), omit the definitions of “commencement year”
25
and “qualifying year of assessment”.
      (4)
In paragraph 3—
(a)
in sub-paragraph (1) after “profits” insert “chargeable to corporation
tax”,
(b)
in sub-paragraph (3)(b) for “him” substitute “the farmer”,
30
(c)
in sub-paragraph (9)(a) for “his” substitute “the seller’s”, and
(d)
in sub-paragraph (10)(b) for “him” substitute “the farmer”.
      (5)
In paragraph 4—
(a)
for “him” substitute “the farmer”, and
(b)
for “he” substitute “the farmer”.
35
      (6)
In paragraph 5(1) after “profits” insert “chargeable to corporation tax”.
      (7)
In paragraph 6—
(a)
in sub-paragraph (1)—
(i)
for “his” substitute “its”, and
(ii)
for “him” substitute “the farmer”,
40
(b)
omit sub-paragraphs (2)(a), and (3)(a), and
(c)
in sub-paragraph (4), omit the definition of “qualifying year of
assessment”.
      (8)
In paragraph 8—
(a)
for “him”, in each place it occurs, substitute “the farmer”,
45