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
492

491   (1)
Amend Schedule 15 (loan relationships: savings and transitional provisions)
as follows.
      (2)
In paragraph 26(2) for the definition of “relevant discounted security”
substitute—
““deeply discounted security” has the same meaning as in
5
Chapter 8 of Part 4 of the Income Tax (Trading and Other
Income) Act 2005 (see section 430)”.
      (3)
In paragraph 28(b) for “Schedule 13 to this Act” and “relevant” substitute
respectively “Chapter 8 of Part 4 of the Income Tax (Trading and Other
Income) Act 2005 (profits from deeply discounted securities)” and “deeply”.
10
      (4)
In paragraph 30(1)(c) for “relevant” substitute “deeply”.
Finance Act 1997 (c. 16)
492
The Finance Act 1997 is amended as follows.
493
In section 79 (payments under certain life insurance policies)—
(a)
in subsection (1)(a) for “the purposes of the Tax Acts” substitute
15
“corporation tax purposes”, and
(b)
in subsection (3) after “Tax Acts” insert “other than the Income Tax
(Trading and Other Income) Act 2005”.
494   (1)
Amend Schedule 12 (leasing arrangements: finance leases and loans) as
follows.
20
      (2)
In paragraph 11—
(a)
in sub-paragraph (9) after “1992” insert “or section 135, 138, 139 or
140 of ITTOIA 2005”,
(b)
in sub-paragraph (10)(b) after “1992” insert “or section 134(2) of
ITTOIA 2005”,
25
(c)
in sub-paragraph (11)(a) after “Taxes Act 1988” insert “or section 170
of ITTOIA 2005”, and
(d)
in sub-paragraph (11)(b) for “of that Act” substitute “of the Taxes Act
1988 or section 165 or 168 of ITTOIA 2005”.
      (3)
In paragraph 30—
30
(a)
in sub-paragraph (1) before the definition of “lease” insert—
““ITTOIA 2005” means the Income Tax (Trading and
Other Income) Act 2005;”, and
(b)
in sub-paragraph (2)(b) for “Case I or II of Schedule D” substitute
“Part 2 of ITTOIA 2005”.
35
Finance Act (No.2) 1997 (c. 58)
495
The Finance (No.2) Act 1997 is amended as follows.
496
In section 30 (tax credits)—
(a)
in subsection (9) after “above” insert “and rewritten in section 397(3)
of the Income Tax (Trading and Other Income) Act 2005”, and
40
(b)
in subsection (10)(a) for “section 231 of the Taxes Act 1988” substitute
“section 397 of the Income Tax (Trading and Other Income) Act
2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
493

497
In section 37(7) (interest to be paid gross) for “sections 722A(5) and 730C(9),
and in paragraph 3A(2)(a) of Schedule 23A, (which all” substitute “section
722A(5), and in paragraph 3A(2)(a) of Schedule 23A, (which”.
498
In section 48(1) (relief for expenditure on production or acquisition of films)
after “, section 41 above or this section” insert “or by virtue of any provision
5
of Chapter 9 of Part 2 of ITTOIA 2005”.
Finance Act 1998 (c. 39)
499
The Finance Act 1998 is amended as follows.
500
In section 42 (computation of profits of trade, profession or vocation)—
(a)
omit subsection (4), and
10
(b)
in subsection (5) for “Tax Acts” substitute “Corporation Tax Acts”.
501
Omit section 43 (barristers and advocates in early years of practice).
502   (1)
Amend section 46 (minor and consequential provisions about
computations) as follows.
      (2)
In subsection (1) for “Tax Acts” substitute “Corporation Tax Acts”.
15
      (3)
In subsection (2) for “any purpose of the Tax Acts” substitute “corporation
tax purposes”.
503
In section 76(3) (power to make regulations for non-UK residents who have
made investments under individual investment plans to be treated as UK
resident for the purpose of tax credits) for “section 333 of the Taxes Act 1988”
20
substitute “Chapter 3 of Part 6 of the Income Tax (Trading and Other
Income) Act 2005”.
504
In section 123(7)—
(a)
for “both” substitute “more”,
(b)
in paragraph (a) for the words from “(regulations” onwards
25
substitute “(investment plan regulations)”, and
(c)
at the end of paragraph (b) add “and
(c)
Chapter 3 of Part 6 of the Income Tax (Trading and
Other Income) Act 2005 (income from individual
investment plans),”.
30
Finance Act 1999 (c. 16)
505
The Finance Act 1999 is amended as follows.
506
In section 63(1) (treatment of transfer fees under existing contracts) at the
end insert “or, as the case may be, under Chapter 2 of Part 2 of the Income
Tax (Trading and Other Income) Act 2005”.
35
507   (1)
Amend section 65 (relevant discounted securities) as follows.
      (2)
Omit subsections (1) to (6).
      (3)
In subsection (8) for “subsections (1) to (7) above have” substitute
“subsection (7) above has”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
494

      (4)
In subsections (9) and (10) for “subsections (1) to (7)”, “have effect” and “do
not affect” substitute “subsection (7)”, “has effect” and “does not affect”
respectively.
      (5)
In subsections (11) and (12) for “subsections (1) to (7) above have” substitute
“subsection (7) above has”.
5
508
In section 85(7)(b) (advance pricing agreements etc.) after “Taxes Act 1988”
insert “or section 16(1) of the Income Tax (Trading and Other Income) Act
2005”.
509   (1)
Amend Schedule 6 (tax treatment of receipts by way of reverse premium) as
follows.
10
      (2)
In paragraph 1(1) (application of Schedule)—
(a)
for “a person receives” substitute “a company receives”,
(b)
for “him or a person connected with him” substitute “the company
or a person connected with the company”, and
(c)
for “the person receiving the payment or other benefit, or as the case
15
may be the person connected with him” substitute “the company
receiving the payment or other benefit, or as the case may be the
person connected with the company”.
      (3)
In paragraph 2 (tax treatment of receipts by way of reverse premium)—
(a)
for “the purposes of the Tax Acts” substitute “corporation tax
20
purposes”,
(b)
for “the person receiving the reverse premium”, in both places where
it occurs, substitute “the company receiving the reverse premium”,
(c)
for “that person” substitute “that company”,
(d)
for “tax” substitute “corporation tax”, and
25
(e)
for “him” substitute “the company”.
      (4)
In paragraph 3(3) (arrangements not at arm’s length)—
(a)
for “the person receiving” substitute “the company receiving”,
(b)
for “by him but which he” substitute “by the company but which it”,
and
30
(c)
for “he carries” substitute “the company carries”.
      (5)
Omit paragraph 6 (exclusion of transaction relating to individual’s only or
main residence) and the italic cross-heading before it.
Commonwealth Development Corporation Act 1999 (c. 20)
510   (1)
Amend paragraph 6 of Schedule 3 to the Commonwealth Development
35
Corporation Act 1999 (distributions by the Commonwealth Development
Corporation) as follows.
      (2)
In sub-paragraph (2)(b) after “section 231 of that Act” insert “or section 397
of the Income Tax (Trading and Other Income) Act 2005 (tax credits for
qualifying distributions: UK residents and eligible non-UK residents)”.
40
      (3)
In sub-paragraph (3) for “corporation tax and income tax” substitute
“income tax as dividends of a non-UK resident company chargeable under
Chapter 4 of Part 4 of the Income Tax (Trading and Other Income) Act 2005
(and accordingly as relevant foreign income for the purposes of that Act),
and for the purposes of corporation tax”.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
495

      (4)
Omit sub-paragraph (4).
Finance Act 2000 (c. 17)
511
The Finance Act 2000 is amended as follows.
512   (1)
Amend section 44 (gifts to charity from certain trusts) as follows.
      (2)
Omit subsections (1) to (3).
5
      (3)
In subsection (4)—
(a)
for “UK trust” substitute “trust the trustees of which are resident in
the United Kingdom (a “UK trust”)”, and
(b)
for “subsection (1) above” substitute “section 628(1) or 630(1) of
ITTOIA 2005”.
10
      (4)
For subsection (5) substitute—
“(5)
In this section—
“qualifying income” has the same meaning as in section 628 of
ITTOIA 2005; and
“resident”, in relation to the trustees of a trust, shall be
15
construed in accordance with section 110 of the Finance Act
1989.”
513
Omit section 45 (loans to charities).
514   (1)
Amend section 46 (exemption for small trades etc.) as follows.
      (2)
In subsection (1) for the words from the beginning to “shall be granted,”
20
substitute—
“(1)
Subject to subsections (2) and (2A) below, exemption—
(a)
from income tax—
(i)
under Part 2 of ITTOIA 2005 in respect of a trade
carried on wholly or partly in the United Kingdom, or
25
(ii)
under or by virtue of any provision to which section
836B of the Taxes Act 1988 applies, or
(b)
from corporation tax under Case I or VI of Schedule D,

shall be granted”.
      (3)
For subsection (2) substitute—
30
“(2)
Exemption shall not be granted under subsection (1) above in respect
of income which is chargeable to—
(a)
income tax under or by virtue of any provision to which
section 836B of the Taxes Act 1988 applies, or
(b)
corporation tax under Case VI of Schedule D,
35

by virtue of any of the provisions mentioned in subsection (2A).
(2A)
The provisions are—
(a)
sections 214, 547(1)(b), 703, 776, 788, 790 or 804 of the Taxes
Act 1988;
(b)
paragraph 52(4) of Schedule 18 to the Finance Act 1998;
40
(c)
Chapter 9 of Part 4, and Chapter 5 of Part 5, of ITTOIA 2005;
and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
496

(d)
any other enactment specified in an order made by the
Treasury.”
      (4)
In subsection (6), in the definition of “income”—
(a)
after “means” insert “—
(a)
any profits or other income or gains —
5
(i)
which are chargeable to income tax under Part
2 of ITTOIA 2005 in respect of a trade carried
on wholly or partly in the United Kingdom, or
(ii)
which are chargeable to income tax under or
by virtue of any provision to which section
10
836B of the Taxes Act 1988 applies,

and which (in either case) are not, apart from this
section, exempted from income tax chargeable under
or by virtue of that Part or provision, or
(b)
”,
15
(b)
after “chargeable to” insert “corporation”.
515
Omit section 84 (exemption of payments under New Deal 50plus).
516
Omit section 85 (exemption of payments under Employment Zones
programmes).
517
Omit section 87 (treatment of certain telecommunication rights).
20
518
In section 143(2) (power to provide incentives to use electronic
communications) for “purposes of the Tax Acts” substitute “corporation tax
purposes”.
519
In section 155 (interpretation) at the end insert “and “ITTOIA 2005” means
the Income Tax (Trading and Other Income) Act 2005”.
25
520
In Schedule 12 (provision of services through an intermediary), in
paragraphs 17(1) and 18(1), for “tax purposes” substitute “corporation tax
purposes”.
521
In Schedule 15 (the corporate venturing scheme), in paragraph 99(3), for
“Chapter 1A of Part XV of the Taxes Act 1988 (see section 660G(1) and (2))”
30
substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.
522
In Schedule 22 (tonnage tax), in paragraph 144(3), for “Chapter 1A of Part XV
of the Taxes Act 1988 (see section 660G(1) and (2) of that Act)” substitute
“Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.
523
Omit Schedule 23 (treatment of certain telecommunication rights).
35
Capital Allowances Act 2001 (c.2)
524
The Capital Allowances Act 2001 is amended as follows.
525
In section 4 (capital expenditure) for subsection (5) substitute—
“(5)
Subsection (4) does not apply to any expenditure or sum in the case
of which a deduction of income tax falls or may fall to be so made as
40
a result of section 595(2) of ITTOIA 2005 or section 524(3)(b) of ICTA
(receipts from sale of patent rights by person not resident in the UK:
income and corporation tax).”

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
497

526   (1)
Amend section 15 (qualifying activities) as follows.
      (2)
In subsection (1)—
(a)
in paragraph (b) for “Schedule A” substitute “property”,
(b)
in paragraph (f) after “listed in” insert “section 12(4) of ITTOIA 2005
or”.
5
      (3)
In subsection (3)(a) for “Schedule A” substitute “property”.
527   (1)
Amend section 16 (ordinary Schedule A businesses) as follows.
      (2)
For ““ordinary Schedule A” substitute ““ordinary property”.
      (3)
For “means a Schedule A business” substitute “means a UK property
business, or a Schedule A business,”.
10
      (4)
In the side-note for “Schedule A” substitute “property”.
528   (1)
Amend section 17 (furnished holiday lettings businesses) as follows.
      (2)
In subsection (1) for “a Schedule A business in so far” to the end substitute
“a UK property business, or a Schedule A business, which consists in, or so
far as it consists in, the commercial letting of furnished holiday
15
accommodation”.
      (3)
For subsection (3) substitute—
“(3)
For the purposes of income tax the “commercial letting of furnished
holiday accommodation” has the same meaning as it has for the
purposes of Chapter 6 of Part 3 of ITTOIA 2005.
20

For the purposes of corporation tax the “commercial letting of
furnished holiday accommodation” has the meaning given by
section 504 of ICTA.”
529
In section 20(1) (employments and offices) for “section 314 of ICTA”
substitute “section 15 of ITTOIA 2005”.
25
530
In section 23(2) (expenditure unaffected by sections 21 and 22) before “40D”
insert “143 of ITTOIA 2005 or section”.
531
In section 28(2) (thermal insulation of industrial buildings) for “Schedule A”
substitute “property”.
532
In section 33(8)(b) (personal security) for “Schedule A” substitute
30
“property”.
533
In section 35(1)(a) (expenditure on plant or machinery for use in dwelling-
house not qualifying expenditure in certain cases) for “Schedule A”
substitute “property”.
534
In section 38(a) (production of animals etc)—
35
(a)
after “to which” insert “section 30 or Chapter 8 of Part 2 of ITTOIA
2005 or”, and
(b)
after “purposes of” insert “Part 2 of ITTOIA 2005 or”,
535   (1)
Amend section 63 (cases in which disposal value is nil) as follows.
      (2)
In subsection (2)(c) after “within the meaning of” insert “section 110 of
40
ITTOIA 2005 or”.
      (3)
In subsection (3)(b) for “Schedule A” substitute “property”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
498

      (4)
In subsection (4) after “to be read with” insert “section 109 of ITTOIA 2005
and”.
536   (1)
Amend section 106 (the designated period) as follows.
      (2)
In subsection (3)(b) for the words from “the qualifying activity” to the end
substitute “—
5
(i)
there was a change in the persons carrying on the
qualifying activity which did not involve all of the
persons carrying on that activity before the change
permanently ceasing to carry it on, or
(ii)
the qualifying activity carried on by the person
10
making the disposal was treated as continuing under
section 114(1) of ICTA (effect of partnership changes
involving companies).”
      (3)
Omit subsection (4).
537   (1)
Amend section 108 (effect of disposal to connected person on overseas
15
leasing pool) as follows.
      (2)
In subsection (1) for paragraph (b) and the word “and” at the end of that
paragraph substitute—
“(b)
the disposal is one on the occasion of which—
(i)
there was a change in the persons carrying on the
20
qualifying activity which involved all of the persons
carrying on that activity before the change
permanently ceasing to carry it on, or
(ii)
the qualifying activity carried on by the person
making the disposal was not treated as continuing
25
under section 114(1) or 343(2) of ICTA (effect of
partnership changes involving companies or of
company reconstructions), and”.
      (3)
Omit subsection (4).
538   (1)
Amend section 112 (excess allowances: connected persons) as follows.
30
      (2)
In subsection (1) for paragraph (b) and the word “and” at the end of that
paragraph substitute—
“(b)
the transaction (or each of the transactions) is one—
(i)
which involved all of the persons carrying on the
qualifying activity before the transaction
35
permanently ceasing to carry it on, or
(ii)
in respect of which the qualifying activity carried on
by the person making the disposal was not treated as
continuing under section 114(1) or 343(2) of ICTA
(effect of partnership changes involving companies or
40
of company reconstructions), and”.
      (3)
Omit subsection (5).
539   (1)
Amend section 115 (prohibited allowances: connected persons) as follows.
      (2)
In subsection (1) for paragraph (c) and the word “and” at the end of that
paragraph substitute—
45
“(c)
the transaction (or each of the transactions) is one—