Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
Internet Publications
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
499

(i)
which involved all of the persons carrying on the
qualifying activity before the transaction
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
5
continuing under section 114(1) or 343(2) of ICTA
(effect of partnership changes involving companies or
of company reconstructions), and”.
      (3)
Omit subsection (3).
540   (1)
Amend section 122 (short-term leasing by buyer, lessee etc) as follows.
10
      (2)
In subsection (2) for paragraph (c) substitute—
“(c)
a person who acquired the plant or machinery from X as a
result of a disposal on the occasion of which, or two or more
disposals on the occasion of each of which—
(i)
there was a change in the persons carrying on the
15
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
making the disposal was treated as continuing under
20
section 114(1) of ICTA (effect of partnership changes
involving companies);”.
      (3)
Omit subsection (3).
541   (1)
Amend section 125 (other qualifying purposes) as follows.
      (2)
In subsection (3) for paragraph (c) substitute—
25
“(c)
a person who acquired the plant or machinery from X as a
result of a disposal on the occasion of which, or two or more
disposals on the occasion of each of which—
(i)
there was a change in the persons carrying on the
qualifying activity which did not involve all of the
30
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 treated as continuing under
section 114(1) of ICTA (effect of partnership changes
35
involving companies).”
      (3)
Omit subsection (5).
542
In section 154(3) (further registration requirement) for paragraph (b)
substitute—
“(b)
the only changes in the persons carrying it on between the
40
time that B does so and the time that A or a person connected
with A does so are changes—
(i)
which do not involve all of the persons carrying it on
before the changes permanently ceasing to carry it on,
or
45
(ii)
in respect of which the qualifying activity is treated as
continuing under section 343(2) of ICTA.”

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
500

543
In section 155(1) (changes in the persons carrying on qualifying activity) for
paragraph (b) substitute—
“(b)
the only changes in the persons carrying on the qualifying
activity since the shipowner carried it on are changes—
(i)
which do not involve all of the persons carrying it on
5
before the changes permanently ceasing to carry it on,
or
(ii)
in respect of which the qualifying activity is treated as
continuing under section 343(2) of ICTA.”
544
In section 156 (connected persons) for subsection (2) substitute—
10
“(2)
The condition is that the only changes in the persons carrying on the
qualifying activity since A carried it on are changes—
(a)
which do not involve all of the persons carrying it on before
the changes permanently ceasing to carry it on, or
(b)
in respect of which the qualifying activity is treated as
15
continuing under section 343(2) of ICTA.”
545
In section 162(2) (ring fence trade a separate qualifying activity)—
(a)
in paragraph (a), after “fall within” insert “the definition of “oil-
related activities” in section 16(2) of ITTOIA 2005 or within”, and
(b)
in paragraph (b), after “as a result of” insert “section 16(1) of ITTOIA
20
2005 or”.
546
In section 248 (ordinary Schedule A businesses)—
(a)
for “Schedule A” substitute “property”, and
(b)
in the side-note for “Schedule A” substitute “property”.
547
In section 252 (mines, transport undertakings etc)—
25
(a)
after “is a concern listed in” insert “section 12(4) of ITTOIA 2005 or”,
and
(b)
after “the profits of the concern under” insert “Chapter 2 of Part 2 of
ITTOIA 2005 or, as the case may be, under”.
548
In section 258(4) (special leasing: income tax) for “taxed under Case VI of
30
Schedule D” substitute “assessed to income tax”.
549   (1)
Amend section 263 (qualifying activities carried on in partnership) as
follows.
      (2)
In subsection (1) for paragraph (c) substitute—
“(c)
the following condition is met.”
35
      (3)
After that subsection insert—
“(1A)
The condition is that—
(a)
the change does not involve all of the partners permanently
ceasing to carry on the qualifying activity, or
(b)
the change does not result in the qualifying activity being
40
treated under section 18 or 362 of ITTOIA 2005 as
permanently ceasing to be carried on by a company or treated
as discontinued under section 337(1) of ICTA (companies
beginning or ceasing to carry on trade etc.).”
550   (1)
Amend section 265 (successions: general) as follows.
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
501

      (2)
In subsection (1) for paragraph (b) substitute—
“(b)
the following condition is met.”
      (3)
After that subsection insert—
“(1A)
The condition is that—
(a)
all of the persons carrying on the qualifying activity before
5
the succession permanently cease to carry it on, or
(b)
the qualifying activity is treated under section 18 or 362 of
ITTOIA 2005 as permanently ceasing to be carried on by a
company or treated as discontinued under section 337(1) of
ICTA (companies beginning or ceasing to carry on trade
10
etc.).”
551
In 268(1) (successions by beneficiaries) for paragraph (b) and the word “and”
at the end of that paragraph substitute—
“(b)
all of the persons carrying on the qualifying activity before
the succession permanently cease to carry it on, and”.
15
552
In section 282 (buildings outside the United Kingdom) for “applicable to
Case I of Schedule D” substitute “that apply in calculating trade profits for
income tax purposes or that apply to Case I of Schedule D for corporation
tax purposes”.
553
In section 326(1) (interpretation of section 325) in the definition of
20
“premium”—
(a)
after “corresponds to” insert “—

(a)”, and
(b)
at end insert “, or
(b)
an amount brought into account as a receipt in
25
calculating the profits of a UK property business
under sections 277 to 281 of ITTOIA 2005 that is
calculated by reference to the sum;”.
554
In section 331(1)(b) (capital value provisions: interpretation)—
(a)
after “corresponds to” insert “—
30

(i)”, and
(b)
at end insert “, or
(ii)
an amount brought into account as a receipt in
calculating the profits of a UK property
business under sections 277 to 281 of ITTOIA
35
2005 that is calculated by reference to the
sum.”
555   (1)
Amend section 353 (lessors and licensors) as follows.
      (2)
In subsection (2) for “a Schedule A business” substitute “a UK property
business, or a Schedule A business,”.
40
      (3)
After subsection (3) insert—
“(3A)
If the person is within the charge to income tax in respect of the
allowance or charge and his interest in the building is not an asset of
any property business carried on by him at any time in the relevant
period, the allowance or charge is to be given effect by treating him
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
502

as if he had been carrying on a UK property business in that period
and as if—
(a)
the allowance were an expense of that business, and
(b)
the charge were a receipt of that business.”
      (4)
In subsection (4)—
5
(a)
for “the person’s” substitute “the person is a company within the
charge to corporation tax in respect of the allowance or charge and
its”,
(b)
for “him”, in the first place where it occurs, substitute “it”,
(c)
for “him”, in the second place where it occurs, substitute “the
10
company”, and
(d)
for “he” substitute “it”.
556   (1)
Amend section 354 (buildings temporarily out of use) as follows.
      (2)
In subsection (3)—
(a)
after “as may be made under” insert “section 254 of ITTOIA 2005 or”,
15
and
(b)
after “chargeable to tax under” insert “Chapter 18 of Part 2 of ITTOIA
2005 or, as the case may be, under”.
      (3)
In subsection (5) for “section 113(1)” to the end substitute “section 18 of
ITTOIA 2005 or section 337(1) of ICTA (effect of company ceasing to trade
20
etc).”
557
In section 390(1) (interpretation of section 389) in the definition of
“premium”—
(a)
after “corresponds to” insert “—

(a)”, and
25
(b)
at end insert “, or
(b)
an amount brought into account as a receipt in
calculating the profits of a UK property business
under sections 277 to 281 of ITTOIA 2005 that is
calculated by reference to the sum;”.
30
558   (1)
Amend section 392 (Schedule A businesses) as follows.
      (2)
In subsection (2) for “a Schedule A business” substitute “a UK property
business, or a Schedule A business,”.
      (3)
After that subsection insert—
“(2A)
If the person is within the charge to income tax in respect of the
35
allowance or charge and he was not carrying on a UK property
business at any time in that period, the allowance or charge is to be
given effect by treating him as if he had been carrying on such a
business in that period and as if—
(a)
the allowance were an expense of that business, and
40
(b)
the charge were a receipt of that business.”
      (4)
In subsection (3)—
(a)
after “the person” insert “is a company within the charge to
corporation tax in respect of the allowance or charge and it”,
(b)
for “him” substitute “the company”, and
45
(c)
for “he” substitute “it”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
503

      (5)
In the sidenote for “Schedule A” substitute “UK property and Schedule A”.
559
In section 393B(4) (meaning of “qualifying expenditure”) after “the profits of
a” insert “UK property business or”
560   (1)
Amend section 393T (giving effect to allowances and charges) as follows.
      (2)
In subsection (2) for “a Schedule A business” substitute “a UK property
5
business, or a Schedule A business,”.
      (3)
After that subsection insert—
“(2A)
If the person is within the charge to income tax in respect of the
allowance or charge and his interest in the flat is not an asset of a UK
property business carried on by him at any time in that period, the
10
allowance or charge is to be given effect by treating him as if he had
been carrying on a UK property business in that period and as if—
(a)
the allowance were an expense of that business, and
(b)
the charge were a receipt of that business.”
      (4)
In subsection (3)—
15
(a)
for “the person’s” substitute “the person is a company within the
charge to corporation tax in respect of the allowance or charge and
its”,
(b)
for “him”, in both places where it occurs, substitute “the company”,
and
20
(c)
for “he” substitute “it”.
561   (1)
Amend section 406 (reduction where premium relief previously allowed) as
follows.
      (2)
In subsection (1) for “section 87 of ICTA” substitute “sections 60 to 67 of
ITTOIA 2005 or under sections 87 and 87A of ICTA”.
25
      (3)
In subsection (2) for “section 87 of ICTA” substitute “sections 60 to 67 of
ITTOIA 2005 or under sections 87 and 87A of ICTA”.
562
In section 454(1)(c) (qualifying expenditure) after “an election under” insert
“section 194 of ITTOIA 2005 or under”.
563
In section 455(4) (excluded expenditure) after “goodwill under” insert
30
“section 194(3) of ITTOIA 2005 or under”.
564
In section 462(3) (disposal values) after “goodwill under” insert “section
194(2) of ITTOIA 2005 or under”.
565
In section 479(4) (persons having qualifying non-trade expenditure: income
tax) for “taxed under Case VI of Schedule D” substitute “assessed to income
35
tax”.
566
In section 481(5)(b) (anti-avoidance: limit on qualifying expenditure) after
“in accordance with section” insert “587 of ITTOIA 2005 or section”.
567
In section 483(c) (meaning of “income from patents”) after “payable under”
insert “section 587, 593 or 594 of ITTOIA 2005 or under”.
40
568
In section 488(3)(a) (balancing allowances) for “section 113(1)” to “to trade
etc.)” substitute “section 18 of ITTOIA 2005 or section 337(1) of ICTA (effect
of company ceasing to trade etc.)”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
504

569   (1)
Amend section 529 (giving effect to allowances and charges) as follows.
      (2)
In subsection (1) for “a Schedule A business” substitute “a UK property
business, or a Schedule A business,”.
      (3)
After that subsection insert—
“(1A)
If the person entitled or liable to an allowance or charge for a
5
chargeable period is within the charge to income tax in respect of the
allowance or charge and he was not carrying on a UK property
business at any time in that period, the allowance or charge is to be
given effect by treating him as if he had been carrying on such a
business in that period and as if—
10
(a)
the allowance were an expense of that business, and
(b)
the charge were a receipt of that business.”
      (4)
In subsection (2)—
(a)
for the words from the beginning to “chargeable period” substitute
“If the person entitled or liable to an allowance or charge for a
15
chargeable period is a company within the charge to corporation tax
in respect of the allowance or charge and it”,
(b)
for “him” substitute “the company”, and
(c)
for “he” substitute “it”.
570
In section 536(5)(a) (contributions not made by public bodies and not eligible
20
for tax relief)—
(a)
in sub-paragraph (i) for “Schedule A” substitute “property”, and
(b)
in sub-paragraph (v) after “listed in” insert “section 12(4) of ITTOIA
2005 or”.
571
In section 558(1)(c) (effect of partnership changes) for the words from “result
25
in” to the end substitute “—
(i)
involve all of the persons carrying on the relevant
activity before the change permanently ceasing to
carry it on, or
(ii)
result in the relevant activity being treated under
30
section 18 or 362 of ITTOIA 2005 as permanently
ceasing to be carried on by a company or treated as
discontinued under section 337(1) of ICTA
(companies beginning or ceasing to carry on trade
etc.).”
35
572   (1)
Amend section 559 (effect of successions) as follows.
      (2)
In subsection (1) for paragraph (b) substitute—
“(b)
the following condition is met.”
      (3)
After that subsection insert—
“(1A)
The condition is that—
40
(a)
all of the persons carrying on the relevant activity before the
succession permanently cease to carry it on, or
(b)
the relevant activity is treated under section 18 or 362 of
ITTOIA 2005 as permanently ceasing to be carried on by a
company or treated as discontinued under section 337(1) of
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
505

ICTA (companies beginning or ceasing to carry on trade
etc.).”
573
In section 577(1) (definitions) in the definition of “property business” after
“means” insert “a UK property business,”.
574   (1)
Amend Schedule 1 (abbreviations and defined expressions) as follows.
5
      (2)
In Part 1 in the appropriate place insert—

“ITTOIA 2005
The Income Tax (Trading and Other

Income) Act 2005”.

      (3)
In Part 2—
(a)
in the entry for “ordinary Schedule A business” for “Schedule A”
10
substitute “property”,
(b)
in the entry for “overseas property business” for “65A(4), 70A(4) and
832(1) of ICTA” substitute “70A(4) and 832(1) of ICTA and Chapter 2
of Part 3 of ITTOIA 2005”, and
(c)
in the appropriate place insert—
15

“UK property business
section 832(1) of ICTA and

Chapter 2 of Part 3 of

ITTOIA 2005”.

Finance Act 2002 (c. 23)
575
The Finance Act 2002 is amended as follows.
20
576
In section 64(1) (adjustment on change of basis) after “to be made for” insert
“corporation”.
577   (1)
Amend Schedule 16 (community investment tax relief) as follows.
      (2)
In paragraph 27(2) omit “under Case VI of Schedule D”.
      (3)
In paragraph 50(3), for “Chapter 1A of Part 15 of the Taxes Act 1988 (see
25
section 660G(1) and (2))” substitute “Chapter 5 of Part 5 of the Income Tax
(Trading and Other Income) Act 2005 (see section 620 of that Act)”.
578   (1)
Amend Schedule 22 (computation of profits: adjustment of change of basis)
as follows.
      (2)
In paragraph 2, in item 4 of the first step for “tax purposes” substitute
30
“corporation tax purposes”.
      (3)
In paragraph 3(2) for “, profession” to the end substitute “is not regarded as
the same if section 337(1) of the Taxes Act 1988 applies (companies
beginning or ceasing to carry on trade).”
      (4)
For paragraph 4 substitute—
35
“4
If the amount of the adjustment is positive, it is chargeable to
corporation tax and is treated as receipt of the trade, profession or
vocation arising on the last day of the first period of account for
which the new basis is adopted.”