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
Schedule 1 — Consequential amendments
Part 2 — Other enactments
485

Finance (No. 2) Act 1992 (c. 48)
452
The Finance (No. 2) Act 1992 is amended as follows.
453   (1)
Amend section 40A (revenue nature of expenditure on master versions of
films) as follows.
      (2)
In subsection (1)—
5
(a)
for “the purposes of the Tax Acts” substitute “corporation tax
purposes”, and
(b)
after “section 40D below” insert “or section 143 of ITTOIA 2005
(corresponding income tax provision)”.
      (3)
In subsection (2) for “the purposes of the Tax Acts” substitute “corporation
10
tax purposes”.
      (4)
In the definition of “expenditure of a revenue nature” in subsection (4)(a)
after “chargeable to” insert “corporation”.
454   (1)
Amend section 40B (allocation of expenditure to periods) as follows.
      (2)
In subsection (1) for “person” substitute “company within the charge to
15
corporation tax”.
      (3)
In subsection (2) after “section 40D below” insert “or section 143 of ITTOIA
2005”.
      (4)
In subsection (3)(b) for “up for a period—” to the end substitute “up for a
period, the accounting period of the company.”
20
      (5)
In subsection (6) for “made—” to the end substitute “made not later than two
years after the end of the relevant period to which the claim relates.”
      (6)
In subsection (7)(b) at the end insert “or section 135 of ITTOIA 2005 (income
tax provision corresponding to this section)”.
455
In section 40C(1) (cases where section 40B does not apply) after “section 42
25
below” insert “or under any of sections 138 to 140 of ITTOIA 2005
(corresponding income tax provisions)”.
456   (1)
Amend section 40D (election for sections 40A and 40B not to apply) as
follows.
      (2)
In subsection (1)(a) after “this section” insert “or under section 143 of ITTOIA
30
2005”.
      (3)
In subsection (2)(a)(i) for “a person who carries” substitute “a company
within the charge to corporation tax carrying”.
      (4)
In subsection (4) for “given—” to the end substitute “given not later than two
years after the end of the relevant period in which the master version of the
35
film is completed.”
      (5)
In subsection (7) at the end insert “or any of that expenditure is deducted
under any of sections 137 to 140 of ITTOIA 2005 (corresponding income tax
provisions)”.
457   (1)
Amend section 41 (relief for preliminary expenditure) as follows.
40
      (2)
In subsection (1)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
486

(a)
for “tax purposes”, in the first place where it occurs, substitute “the
purposes of corporation tax”,
(b)
for “a person” substitute “a company within the charge to
corporation tax”,
(c)
for “that person” substitute “the company”,
5
(d)
for “him” substitute “it”, and
(e)
after “section 40D above” insert “or section 143 of ITTOIA 2005”.
      (3)
In subsection (6) for “made—” to the end substitute “made not later than two
years after the end of the relevant period in which the expenditure to which
it relates becomes payable.”
10
      (4)
In subsection (7)—
(a)
after “this section” insert “or section 137 of ITTOIA 2005
(corresponding income tax provision)”, and
(b)
for “tax purposes” substitute “the purposes of corporation tax”.
458   (1)
Amend section 42 (relief for production or acquisition expenditure) as
15
follows.
      (2)
In subsection (1)—
(a)
for “tax purposes” substitute “the purposes of corporation tax”,
(b)
for “a person” substitute “a company”,
(c)
for “that person” substitute “the company”,
20
(d)
after “section 40B above” insert “or section 135 of ITTOIA 2005”, and
(e)
after “section 40D above” insert “or section 143 of ITTOIA 2005”.
      (3)
In subsection (4)—
(a)
in paragraph (b) after “section 41 above” insert “or section 137 of
ITTOIA 2005”,
25
(b)
in paragraph (c) after “this section” insert “or any provision of
Chapter 9 of Part 2 of ITTOIA 2005”.
      (4)
In subsection (6) for “shall be made—” to the end substitute “—
(a)
shall be made not later than two years after the end of the
relevant period to which the claim relates, and
30
(b)
shall be irrevocable.”
      (5)
In subsection (7) after “section 40B above” insert “or section 135 of ITTOIA
2005”.
459
In section 43(1) after the definition of “expenditure of a revenue nature”
insert—
35
““ITTOIA 2005” means the Income Tax (Trading and Other
Income) Act 2005,”.
460
Omit section 59 (furnished accommodation).
461
Omit Schedule 10 (furnished accommodation).
Finance Act 1993 (c. 34)
40
462
The Finance Act 1993 is amended as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
487

463
In section 112(7) (employers’ pension contributions) in the definition of
“basis period” after “Schedule D” insert “or under Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
464   (1)
Amend section 171 (Lloyd’s underwriters etc: taxation of income tax profits)
as follows.
5
      (2)
In subsection (2) for paragraphs (a) and (b) substitute—
“(a)
the aggregate of those profits shall be chargeable to tax under
Chapter 2 of Part 2 of the Income Tax (Trading and Other
Income) Act 2005 as the profits of a trade carried on in the
United Kingdom; and
10
(b)
accordingly, no part of those profits shall be treated as
relevant foreign income, or be charged to tax under any other
Part of that Act or any Part of the Income Tax (Earnings and
Pensions) Act 2003;”.
      (3)
In subsection (2B) for “section 231(1) of the Taxes Act 1988” substitute
15
“section 397(1) of the Income Tax (Trading and Other Income) Act 2005”.
465
In paragraph 13(4) of Schedule 19 (Lloyd’s underwriters etc: repayment of
tax deducted etc. from investment income) after “others)” insert “and section
749 of the Income Tax (Trading and Other Income) Act 2005 (exemption of
interest paid under repayment supplements) so far as it relates to interest
20
paid under section 824 of the Taxes Act 1988”.
466   (1)
Amend Schedule 20A (Lloyd’s underwriters: conversion to limited liability
underwriting) as follows.
      (2)
In paragraph 2(2) for “Schedule D” substitute “Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
25
      (3)
In paragraph 7(2) for “Schedule D” substitute “Part 2 of the Income Tax
(Trading and Other Income) Act 2005”.
Pension Schemes Act 1993 (c. 48)
467
The Pension Schemes Act 1993 is amended as follows.
468
In section 158(4) (disclosure of information between government
30
departments etc.)—
(a)
after “carrying on or have carried on” insert “wholly or partly in the
United Kingdom”, and
(b)
after “chargeable to tax under” insert “Part 2 of the Income Tax
(Trading and Other Income) Act 2005 or”.
35
Pension Schemes (Northern Ireland) Act 1993 (c. 49)
469
The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
470
In section 154(4) (disclosure of information between government
departments etc.)—
(a)
after “carrying on or have carried on” insert “wholly or partly in the
40
United Kingdom”, and
(b)
after “chargeable to tax under” insert “Part 2 of the Income Tax
(Trading and Other Income) Act 2005 or”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
488

Finance Act 1994 (c. 9)
471
The Finance Act 1994 is amended as follows.
472   (1)
Amend Schedule 20 (changes for facilitating self-assessment: transitional
provisions and savings) as follows.
      (2)
Omit paragraphs 1 to 10.
5
      (3)
In paragraph 11—
(a)
in sub-paragraph (1) omit “Subject to paragraph 12(2) below,”,
(b)
in sub-paragraph (3) for “under Case VI of Schedule D” substitute “to
income tax”, and
(c)
in sub-paragraph (3) at the end insert “, and the person shall be liable
10
for any tax so chargeable”.
      (4)
Omit paragraphs 12 and 13.
473
In paragraph 26 of Schedule 24 (vesting in successor company of the British
Railways Board of liability for loans to that Board not to affect directions by
the Treasury under section 581 of ICTA) for “section 581 of the Taxes Act
15
1988” substitute “section 755 of the Income Tax (Trading and Other Income)
Act 2005”.
Coal Industry Act 1994 (c. 21)
474
In paragraph 17(1) of Schedule 4 to the Coal Industry Act 1994 (vesting in
successor company of liability for loans not to affect directions by the
20
Treasury under section 581 of ICTA) for “section 581 of the 1988 Act”
substitute “section 755 of the Income Tax (Trading and Other Income) Act
2005”.
Finance Act 1995 (c. 4)
475
The Finance Act 1995 is amended as follows.
25
476
Omit section 56 (foreign life policies etc).
477
In section 73(1)(a) (venture capital trusts: regulations) after “1992” insert “or
Chapter 5 of Part 6 of the Income Tax (Trading and Other Income) Act 2005”.
478
In section 123 (prevention of exploitation of transitional provisions) for “2(2)
and (4), 4(2) and 6(2)(a) and (4) of Schedule 20 to the Finance Act 1994”
30
substitute “52 and 53 of Schedule 2 to the Income Tax (Trading and Other
Income) Act 2005”.
479   (1)
Amend section 126 (UK representatives of non-residents) as follows.
      (2)
In subsections (6) and (7) for “the deemed trade or profession from which the
non-resident’s share in the partnership’s profits or losses is treated for the
35
purposes of section 111 or 114 of the Taxes Act 1988 as deriving” substitute
“the notional or deemed trade or profession”.
      (3)
After subsection (7) insert—
“(7A)
In subsections (6) and (7) “the notional or deemed trade or
profession” means—
40

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
489

(a)
the notional trade from which the non-resident’s share in the
partnership’s profits or losses is treated for the purposes of
section 852 of the Income Tax (Trading and Other Income)
Act 2005 as deriving, or
(b)
the deemed trade or profession from which that share is
5
treated for the purposes of section 114 of the Taxes Act as
deriving.”
480
In section 128(3) (limit on income chargeable on non-residents: income tax)
for paragraphs (a) and (b) substitute—
“(a)
it—
10
(i)
is chargeable to income tax under Chapter 2, 7, 8, 10
or 11 of Part 4 of the Income Tax (Trading and Other
Income) Act 2005 (interest, purchased life annuity
payments, profits from deeply discounted securities,
distributions from unauthorised unit trusts and
15
transactions in deposits), section 579 of that Act so far
as it relates to annual payments (royalties etc. from
intellectual property), Chapter 4 of Part 5 of that Act
so far as it relates to annual payments (certain
telecommunication rights: non-trading income) or
20
Chapter 7 of Part 5 of that Act (annual payments not
otherwise charged); and
(ii)
is not relevant foreign income;
(aa)
it is chargeable to tax under Chapter 3 of Part 4 of that Act
(dividends etc. from UK resident companies etc.);”.
25
481   (1)
Amend section 154 (short rotation coppice) as follows.
      (2)
In subsection (1) at the beginning insert “Subject to subsection (1A),”.
      (3)
After subsection (1) insert—
“(1A)
Subsection (1) does not apply for the purposes of the Income Tax
(Trading and Other Income) Act 2005 (in relation to which section
30
876(3) and (4) makes corresponding provision).”
482
In section 157(7) (certificates of tax deposit) for “Case III of Schedule D”
substitute “Chapter 2 of Part 4 of the Income Tax (Trading and Other
Income) Act 2005 (interest)”.
483
In paragraph 3(4) of Schedule 18 (deceased persons’ estates) after
35
“Schedule)” insert “and sections 652, 660 and 665 of the Income Tax (Trading
and Other Income) Act 2005”.
484   (1)
Amend Schedule 22 (prevention of exploitation of transitional provisions to
facilitate self-assessment) as follows.
      (2)
Omit paragraph 2.
40
      (3)
In paragraph 3—
(a)
in sub-paragraph (1)(a) for “paragraph 2(4) of Schedule 20 to the
Finance Act 1994” substitute “paragraph 52 of Schedule 2 to the
Income Tax (Trading and Other Income) Act 2005 (“ITTOIA 2005”)”,
(b)
in sub-paragraph (2) for “the said paragraph 2(4)” substitute
45
“paragraph 52 of that Schedule”,

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
490

(c)
in sub-paragraph (4), in the definition of “the transitional overlap
period”, after “1996-97” insert “(determined in accordance with
paragraph 1 of Schedule 20 to the Finance Act 1994 despite the repeal
by ITTOIA 2005 of that paragraph)” and after “that year” insert “(as
so determined)”, and
5
(d)
in sub-paragraph (4), in the definition of “the transitional overlap
profit”, for “the said paragraph 2(4)” substitute “paragraph 52(2) of
Schedule 2 to ITTOIA 2005”.
      (4)
Omit paragraph 4.
      (5)
In paragraph 5—
10
(a)
in sub-paragraph (1) for “paragraph 2(4) of Schedule 20 to the
Finance Act 1994” substitute “paragraph 52 of Schedule 2 to ITTOIA
2005”,
(b)
in sub-paragraph (3) for “the said paragraph 2(4)” substitute
“paragraph 52 of Schedule 2 to ITTOIA 2005”, and
15
(c)
in sub-paragraph (5), in the definition of “the transitional overlap
profit”, for “the said paragraph 2(4)” substitute “paragraph 52(2) of
Schedule 2 to ITTOIA 2005”.
      (6)
Omit paragraph 6.
      (7)
In paragraph 7—
20
(a)
in sub-paragraph (1) for “paragraph 6(4) of Schedule 20 to the
Finance Act 1994” substitute “paragraph 53 of Schedule 2 to ITTOIA
2005”,
(b)
in sub-paragraph (2) for “the said paragraph 6(4)” substitute
“paragraph 53 of that Schedule”,
25
(c)
in sub-paragraph (4), in the definition of “the transitional overlap
period”, after “1996-97” insert “(determined in accordance with
paragraph 1 of Schedule 20 to the Finance Act 1994 despite the repeal
by ITTOIA 2005 of that paragraph)” and after “that year” insert “(as
so determined)”, and
30
(d)
in sub-paragraph (4), in the definition of “the transitional overlap
profit”, for “the said paragraph 6(4)” substitute “paragraph 53(3) of
Schedule 2 to ITTOIA 2005”.
      (8)
Omit paragraphs 8 to 10.
      (9)
In paragraph 14(1) for “paragraphs 1, 3, 6 and 7” substitute “paragraphs 1, 3
35
and 7”.
     (10)
In paragraph 15(1) for “paragraphs 1, 3, 6 and 7” substitute “paragraphs 1, 3
and 7”.
     (11)
Omit paragraphs 18 to 20.
     (12)
In the heading for “SCHEDULE 20 TO FINANCE ACT 1994” substitute
40
“SCHEDULE 2 TO ITTOIA 2005 (SO FAR AS RELATING TO OVERLAP
PROFIT)”.
Finance Act 1996 (c. 8)
485
The Finance Act 1996 is amended as follows.
486
In section 92(1) (convertible securities etc: creditor relationships) for
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
491

paragraph (d) substitute—
“(d)
the asset is not a deeply discounted security for the purposes
of Chapter 8 of Part 4 of the Income Tax (Trading and Other
Income) Act 2005 (see section 430) or an excluded indexed
security within the meaning of section 433 of that Act;”.
5
487
Omit section 102 (discounted securities: income tax provisions).
488   (1)
Amend section 154 (FOTRA securities) as follows.
      (2)
In subsection (2)—
(a)
for “(3) to” substitute “(3) and”, and
(b)
at the end insert—
10

“This does not apply to any charge to income tax (but see
sections 714 and 715 of the Income Tax (Trading and Other
Income) Act 2005 for exemptions from income tax charges).”
      (3)
Omit subsection (4).
      (4)
In subsection (6) omit “income tax or”.
15
489   (1)
Amend Schedule 9 (loan provisions: special computational provisions) as
follows.
      (2)
In the italic cross-heading before paragraph 17 for “Discounted” substitute
“Deeply discounted”.
      (3)
In paragraph 17(1)(a) for “relevant” substitute “deeply”.
20
      (4)
For paragraph 17(4) substitute—
    “(4)
In this paragraph “deeply discounted security” has the same
meaning as in Chapter 8 of Part 4 of the Income Tax (Trading and
Other Income) Act 2005 (see section 430); and the provisions of
that Chapter shall apply for the purposes of this paragraph for
25
determining the difference between the issue price of a security
and the amount payable on redemption as they apply for the
purposes of section 430 of that Act.”
      (5)
In paragraph 17(8) and (8A) for “relevant” substitute “deeply”.
      (6)
In the italic cross-heading before paragraph 18 for “Discounted” substitute
30
“Deeply discounted”.
      (7)
In paragraph 18(1)(a), (2C) and (2D) for “relevant” substitute “deeply”.
      (8)
For paragraph 18(3) substitute—
    “(3)
In this paragraph “deeply discounted security” has the same
meaning as in Chapter 8 of Part 4 of the Income Tax (Trading and
35
Other Income) Act 2005 (see section 430); and the provisions of
that Chapter shall apply for the purposes of this paragraph for
determining the difference between the issue price of a security
and the amount payable on redemption as they apply for the
purposes of section 430 of that Act.”
40
      (9)
In paragraph 19(13) for “relevant” substitute “deeply”.
490
Omit Schedule 13 (discounted securities: income tax provisions).