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 2 — Other enactments
506

      (5)
In paragraph 9—
(a)
in sub-paragraph (1) for “person who is chargeable to tax” substitute
“company which is chargeable to corporation tax”,
(b)
in sub-paragraph (2)(c) for “the time allowed” substitute “twelve
months of the end of the first accounting period to which the new
5
basis applies”,
(c)
omit sub-paragraph (3),
(d)
in sub-paragraph (4) for “tax” substitute “corporation tax”, and
(e)
in sub-paragraph (5) for “tax”, in each place where it occurs,
substitute “corporation tax”.
10
      (6)
Omit paragraphs 11 and 12.
      (7)
In paragraph 13—
(a)
in sub-paragraph (1) for “computed” to the end substitute
“computed as if the partnership were a company resident in the
United Kingdom”, and
15
(b)
omit sub-paragraphs (3), (4) and (6).
      (8)
Omit paragraph 14.
      (9)
For paragraph 15 substitute—
“15
In this Schedule “adjustment charge” means a charge under Part 2
of this Schedule.”
20
     (10)
In paragraph 17—
(a)
in sub-paragraph (2) omit paragraph (a), and
(b)
in sub-paragraph (3) omit “9ZA or” and “personal, trustee or”.
579   (1)
Amend paragraph 64 of Schedule 25 (transitional provisions concerning
loan relationships in the case of authorised unit trusts and open-ended
25
investment companies) as follows.
      (2)
At the beginning of sub-paragraph (7) insert “Subject to sub-paragraph (9),”.
      (3)
After sub-paragraph (8) insert—
    “(9)
So far as sub-paragraphs (3) to (6) are capable of applying at any
time after 5th April 2005—
30
(a)
they have effect as if any reference in them to a relevant
discounted security were a reference to a security that is a
deeply discounted security for the purposes of Chapter 8
of Part 4 of the Income Tax (Trading and Other Income)
Act 2005 (profits from deeply discounted securities) (see
35
430 of that Act), and
(b)
in those sub-paragraphs—
“redeem” means make a disposal, within the meaning
of that Chapter (except by a transfer within the
meaning of that Chapter), or convert as mentioned
40
in section 437(1)(c) of that Act, and
“transfer” has the same meaning as in that Chapter.”
580
In Schedule 29 (gains and losses of a company from intangible fixed assets),
in paragraph 101(3), for “Chapter 1A of Part 15 of the Taxes Act 1988
(settlements: liability of settlor) (see section 660G(1) and (2) of that Act)”
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
507

substitute “Chapter 5 of Part 5 of the Income Tax (Trading and Other
Income) Act 2005 (see section 620 of that Act)”.
Proceeds of Crime Act 2002 (c. 29)
581
The Proceeds of Crime Act 2002 is amended as follows.
582
In section 319(2) (source of income) for “Case 6 of Schedule D” substitute
5
“Chapter 8 of Part 5 of the Income Tax (Trading and Other Income) Act
2005”.
583   (1)
Amend Schedule 10 (tax) as follows.
      (2)
In paragraph 2(7) (introductory) at the end insert “, and “ITTOIA 2005”
means the Income Tax (Trading and Other Income) Act 2005”.
10
      (3)
In paragraph 5 (relevant discounted securities)—
(a)
for “relevant” substitute “deeply”, and
(b)
for the words from “Schedule 13” to “c.8)” and “that Schedule”
substitute respectively “Chapter 8 of Part 4 of ITTOIA 2005” and
“that Chapter”.
15
      (4)
In paragraph 6 (rights to receive amounts stated in certificates of deposit
etc.)—
(a)
after “deposit etc.)” insert “, or a right falling within the definition of
“deposit rights” in section 552(1) of ITTOIA 2005”, and
(b)
for the words “of that Act”, in the second place where they occur,
20
substitute “of the Taxes Act 1988 or Chapter 11 of Part 4 of ITTOIA
2005”.
      (5)
In paragraph 8 (futures and options)—
(a)
for “paragraph 4 of Schedule 5AA to the Taxes Act 1988” substitute
“section 562 of ITTOIA 2005”, and
25
(b)
for “that Schedule” substitute “Chapter 12 of Part 4 of that Act”.
      (6)
In paragraph 11 (trading stock)—
(a)
in sub-paragraph (3) after “1988” insert “or section 173 of ITTOIA
2005” and after “discontinuance” insert “or cessation”, and
(b)
in sub-paragraph (4) for “that section” substitute “section 100 of the
30
Taxes Act 1988 or (as the case may be) section 174 of ITTOIA 2005”.
Income Tax (Earnings and Pensions) Act 2003 (c. 1)
584
The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
585
In section 6(5) (exception to charge to tax on employment income for income
of divers and diving supervisors) for the words from “Case I” to “ICTA”
35
substitute “Part 2 of ITTOIA 2005 (trading income) by virtue of section 15 of
that Act”.
586
In section 61(1) (application of provisions to workers under arrangements
made by intermediaries: interpretation) in the definition of “business” after
“includes a” insert “UK property business or”.
40
587
In section 178 (exception for loans where interest qualifies for tax relief)—
(a)
in paragraph (c)—
(i)
for “under Case I or II of Schedule D” substitute “to tax”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
508

(ii)
after “carried on” insert “wholly or partly in the United
Kingdom”, and
(b)
in paragraph (d) for “under Schedule A in respect of a Schedule A
business” substitute “to tax in respect of a UK property business, or
a Schedule A business,”.
5
588
In section 180(5) (threshold for benefit of loan to be treated as earnings)—
(a)
in paragraph (c)—
(i)
for “under Case I or II of Schedule D” substitute “to tax”, and
(ii)
after “carried on” insert “wholly or partly in the United
Kingdom”, and
10
(b)
in paragraph (d) for “under Schedule A in respect of a Schedule A
business” substitute “to tax in respect of a UK property business, or
a Schedule A business,”.
589
In section 189(3)(a) (exception where double charge) for “section 677 of ICTA
(sums paid to settlor otherwise than as income)” substitute “section 633 of
15
ITTOIA 2005 (capital sums paid to settlor by trustees of settlement)”.
590
In section 215 for “section 331(1) of ICTA” substitute “section 776(1) of
ITTOIA 2005”.
591
In section 302(4) (exemption of consular employees’ employment income),
in the definition of “reciprocal arrangement”, for “and section 322 of ICTA”
20
substitute “, sections 646A and 681A of this Act and section 771 of ITTOIA
2005 (relevant foreign income of consular officers and employees)”.
592
After section 325 insert—
“325A
  Health and employment insurance payments
(1)
No liability to income tax in respect of employment income arises on
25
any payment if or to the extent that—
(a)
were the payment an annual payment falling within Chapter
7 of Part 5 of ITTOIA 2005, it would be exempt from income
tax under section 735 of that Act (health and employment
insurance payments), and
30
(b)
it meets conditions A and B.
(2)
Condition A is that the payments are made—
(a)
to a person (“the employee”) who made payments or
contributions in respect of premiums under an insurance
policy which another person took out wholly or partly for the
35
employee’s benefit, or
(b)
to the employee’s husband or wife.
(3)
Condition B is that the payments are attributable on a just and
reasonable basis to the payments or contributions in respect of
premiums.”
40
593
In section 357(2) (business entertainment and gifts: exception where
employer’s expenses disallowed) after “disallowed under” insert “section 45
or 867 of ITTOIA 2005 or under”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
509

594
In Chapter 2 of Part 5, after section 360 insert—
“360A
  Social security contributions
(1)
No deduction from earnings is allowed under this Chapter for any
contribution paid by any person under Part 1 of SSCBA 1992 or Part
1 of SSCB(NI)A 1992.
5
(2)
But this prohibition does not apply to an employer’s contribution
(see subsection (3)) which is allowable as a deduction—
(a)
under section 336 (the general rule),
(b)
under any of sections 337 to 342 (travel expenses), or
(c)
under section 351(1) (expenses of ministers of religion).
10
(3)
For this purpose “an employer’s contribution” means—
(a)
a secondary Class 1 contribution,
(b)
a Class 1A contribution, or
(c)
a Class 1B contribution,

within the meaning of Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A
15
1992.”
595
In section 394(2) (charge on benefit to which Chapter 2 of Part 6 applies) for
“to tax under Case VI of Schedule D” substitute “to income tax”.
596
In section 397(1) (certain lump sums: calculation of amount taxed by virtue
of section 394) for “Case VI of Schedule D” substitute “subsection (2) of that
20
section”.
597
In section 399(1)(b) (employment-related loans: interest treated as paid) omit
“under Case VI of Schedule D”.
598
In section 476 (charge on occurrence of chargeable event) for subsection (5)
substitute—
25
“(5)
If the employee has been divested of the employment-related
securities option by operation of law—
(a)
income tax is charged on the amount determined under
section 478, and
(b)
the person liable for any tax so charged is the relevant person
30
in relation to the chargeable event (see section 477(7)).”
599
In section 477(7) (chargeable events) for “(charge under Case VI of Schedule
D)” substitute “(charge to income tax)”.
600   (1)
Amend section 493 (no charge on acquisition of dividend shares) as follows.
      (2)
Omit subsections (1), (2) and (4).
35
      (3)
After subsection (3) insert—
“(3A)
For the exemption of such amounts from income tax, see section 770
of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend
shares or retained for reinvestment).”
601
For section 496 (no charge on cash dividend retained for reinvestment)
40

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
510

substitute—
“496
No charge on cash dividend retained for reinvestment
For the exemption from income tax of amounts retained under
paragraph 68(2) of Schedule 2 (amount of cash dividend not
reinvested), see section 770 of ITTOIA 2005 (amounts applied by SIP
5
trustees acquiring dividend shares or retained for reinvestment).”
602
In section 497(3) (limitations on charges on shares ceasing to be subject to
plan) for the words from “as” to the end substitute “under Chapter 3 or 4 of
Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident
companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution
10
or dividend payment when dividend shares cease to be subject to plan).”
603
In section 502(4)(a) (meaning of “capital receipt” in section 501) at the end
insert “or section 770 of ITTOIA 2005 (exemption for amounts applied by SIP
trustees acquiring dividend shares or retained for reinvestment)”.
604   (1)
Amend section 515 (tax advantages and charges under other Acts) as
15
follows.
      (2)
In subsection (1) omit paragraph (a).
      (3)
In subsection (2) omit “and” at the end of paragraph (a).
      (4)
In subsection (2) at the end of paragraph (b) insert “, and
(c)
sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs:
20
special rules for charges under Chapters 3 and 4 of Part 4 of
that Act (dividends etc. from UK or non-UK resident
companies etc.)) and section 770 of that Act (exemption for
amounts applied by SIP trustees acquiring dividend shares
or retained for reinvestment).”
25
605
In section 516(4) (approved SAYE option schemes), in the definition of
“SAYE option scheme”, for “approved savings schemes” substitute
“approved savings arrangements”.
606   (1)
Amend section 575 (taxable pension income: foreign pensions) as follows.
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
30
amount of the pension income arising in the tax year, but subject to
subsections (2) and (3).”
      (3)
For subsection (2) substitute—
“(2)
The full amount of the pension income arising in the tax year is to be
calculated on the basis that the pension is 90% of its actual amount,
35
unless as a result of subsection (3) the pension income is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
charged on the remittance basis).
(3)
That pension income is treated as relevant foreign income for the
purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign
40
income: remittance basis and deductions and reliefs).
(4)
But if that pension income arises in the Republic of Ireland, section
839 of that Act (annual payments payable out of relevant foreign
income) applies with the omission of condition B and subsection
(5)(a).
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
511

(5)
See also Chapter 4 of that Part (unremittable income).”
607   (1)
Amend section 613 (taxable pension income: foreign annuities) as follows.
      (2)
In subsection (2) for the words “the amount” onwards substitute “the full
amount of the annuity arising in the tax year, but subject to subsections (3)
and (4).”
5
      (3)
For subsections (3) and (4) substitute—
“(3)
The full amount of the annuity arising in the tax year is to be
calculated on the basis that the annuity is 90% of its actual amount,
unless as a result of subsection (4) the annuity is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
10
charged on the remittance basis).
(4)
The annuity is treated as relevant foreign income for the purposes of
Chapters 2 and 3 of Part 8 of that Act (relevant foreign income:
remittance basis and deductions and reliefs).
(5)
But if the annuity arises in the Republic of Ireland, section 839 of that
15
Act (annual payments payable out of relevant foreign income)
applies with the omission of condition B and subsection (5)(a).
(6)
See also Chapter 4 of that Part (unremittable income).
608   (1)
Amend section 631 (taxable pension income: pre-1973 pensions paid under
the Overseas Pensions Act 1973) as follows.
20
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
amount of the pension income arising in the tax year”.
      (3)
For subsection (2) substitute—
“(2)
The full amount of the pension income arising in the tax year is to be
calculated on the basis that the pension is 90% of its actual amount.
25
(3)
The pension income is treated as relevant foreign income for the
purposes of section 838 of that Act (expenses attributable to
collection or payment of relevant foreign income).”
609   (1)
Amend section 635 (taxable pension income: foreign voluntary annual
payments) as follows.
30
      (2)
In subsection (2) for the words “the amount” onwards substitute “the full
amount of the pension income arising in the tax year, but subject to
subsections (3) and (4)”.
      (3)
For subsection (3) substitute—
“(3)
The full amount of the pension income arising in the tax year is to be
35
calculated on the basis that the pension is 90% of its actual amount,
unless as a result of subsection (4) the pension income is charged in
accordance with section 832 of ITTOIA 2005 (relevant foreign income
charged on the remittance basis).
(4)
That pension income is treated as relevant foreign income for the
40
purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign
income: remittance basis and deductions and reliefs).

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
512

(5)
But if that pension income arises in the Republic of Ireland, section
839 of that Act (annual payments payable out of relevant foreign
income) applies with the omission of condition B and subsection
(5)(a).
(6)
See also Chapter 4 of that Part (unremittable income).”
5
610
After section 644 insert—
“644A
  Health and employment insurance payments
(1)
No liability to income tax arises in respect of a pension or annuity
payment if or to the extent that—
(a)
were the payment an annual payment falling within Chapter
10
7 of Part 5 of ITTOIA 2005, it would be exempt from income
tax under section 735 of that Act (health and employment
insurance payments), and
(b)
it meets conditions A and B.
(2)
Condition A is that the payments are made—
15
(a)
to a person (“the pensioner”) who made payments or
contributions in respect of premiums under an insurance
policy which another person took out wholly or partly for the
pensioner’s benefit, or
(b)
to the pensioner’s husband or wife.
20
(3)
Condition B is that the payments are attributable on a just and
reasonable basis to the payments or contributions in respect of
premiums.”
611
After section 646 insert—
“646A
  Foreign pensions of consular employees
25
(1)
No liability to income tax arises in respect of foreign pension income
of a consular officer or employee in the United Kingdom for a foreign
state if—
(a)
Her Majesty by Order in Council directs that this section
applies to the foreign state for the purpose of giving effect to
30
a reciprocal arrangement with that state, and
(b)
the officer or employee meets conditions A to C.
(2)
Condition A is that the officer or employee is not—
(a)
a British citizen,
(b)
a British overseas territories citizen,
35
(c)
a British National (Overseas), or
(d)
a British Overseas citizen.
(3)
Condition B is that the officer or employee is not engaged in any
trade, profession, vocation or employment in the United Kingdom,
otherwise than as a consular officer or employee of the state in
40
question.
(4)
Condition C is that the officer or employee—
(a)
is a permanent employee of that state, or