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
513

(b)
was not ordinarily resident in the United Kingdom
immediately before becoming a consular officer or employee
in the United Kingdom of that state.
(5)
In this section—
“consular officer or employee” includes any person employed
5
for the purposes of the official business of a consular officer
at—
(a)
any consulate,
(b)
any consular establishment, or
(c)
any other premises used for those purposes,
10
“foreign pension income” means—
(a)
income to which section 573 or 629 applies, and
(b)
income arising from a source outside the United
Kingdom to which section 609, 610, 611 or 633 applies;
and
15
“reciprocal agreement” has the same meaning as in section 302.
(6)
Section 302(5) to (7) apply to an Order under subsection (1) and the
operation of this section as they apply to an Order under section
302(1) and the operation of section 302.”
612
In section 655(2) (structure of Part 10) for the entries relating to sections 84
20
and 85 of FA 2000 substitute—

“section 781 of ITTOIA 2005 (exemption from income tax for
payments under New Deal 50plus);

section 782 of ITTOIA 2005 (exemption from income tax for
payments under employment zone programmes).”
25
613   (1)
Amend section 679 (taxable social security income: foreign benefits) as
follows.
      (2)
In subsection (1) for the words “the amount” onwards substitute “the full
amount of the social security income arising in the tax year, but subject to
subsection (2).”
30
      (3)
For subsection (2) substitute—
“(2)
That income is treated as relevant foreign income for the purposes of
Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income:
remittance basis and deductions and reliefs).
(3)
See also Chapter 4 of that Part (unremittable income).”
35
614
After section 681 insert—
“681A
  Foreign benefits of consular employees
(1)
No liability to income tax arises in respect of any benefit to which
section 678 applies of a consular officer or employee in the United
Kingdom for a foreign state if—
40
(a)
Her Majesty by Order in Council directs that this section
applies to the foreign state for the purpose of giving effect to
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—
45

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
514

(a)
a British citizen,
(b)
a British overseas territories citizen,
(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
5
trade, profession, vocation or employment in the United Kingdom,
otherwise than as a consular officer or employee of the state in
question.
(4)
Condition C is that the officer or employee—
(a)
is a permanent employee of that state, or
10
(b)
was not ordinarily resident in the United Kingdom
immediately before becoming a consular officer or employee
in the United Kingdom of that state.
(5)
In this section—
“consular officer or employee” includes any person employed
15
for the purposes of the official business of a consular officer
at—
(a)
any consulate,
(b)
any consular establishment, or
(c)
any other premises used for those purposes, and
20
“reciprocal agreement” has the same meaning as in section 302.
(6)
Section 302(5) to (7) apply to an Order under subsection (1) and the
operation of this section as they apply to an Order under section
302(1) and the operation of section 302.”
615
After section 716 (alteration of amounts by Treasury order) insert—
25
“Priority rule for certain dividends etc
716A
Priority rule for dividends etc. of UK resident companies etc.

Any income, so far as it falls within—
(a)
Part 2, 9 or 10 of this Act, and
(b)
Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK
30
resident companies etc.),
is dealt with under Chapter 3 of Part 4 of ITTOIA 2005.”
616   (1)
Amend Schedule 1 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 in the appropriate place insert—

“ITTOIA 2005
The Income Tax (Trading and Other

35

Income) Act 2005”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
515

      (3)
In Part 2 in the appropriate place insert—

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

Chapter 2 of Part 3 of

ITTOIA 2005”.

617   (1)
Amend Schedule 2 (approved share incentive plans) as follows.
5
      (2)
In paragraph 22(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1)
and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of
that Act)”.
      (3)
In paragraph 79(4) for the words from “section 68B(2)” to the end substitute
“Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK
10
resident companies etc.) as a result of section 394(2) or 407(2) of that Act
(distribution or dividend payment when dividend shares cease to be subject
to plan).”
      (4)
In paragraph 80(3)(b) (other duties of trustees in relation to tax liabilities) for
“Case V of Schedule D or Schedule F” substitute “Chapter 3 or 4 of Part 4 of
15
ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.)”.
      (5)
In paragraph 86(4)(c) at end insert “that is issued in a case where section
410(2) or (3) of ITTOIA 2005 applies”.
      (6)
In paragraph 87(2)(d) for sub-paragraph (ii) substitute—
“(ii)
sections 392 to 395 and 405 to 408 of ITTOIA 2005
20
(SIPs: 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
25
for reinvestment),”.
618   (1)
Amend Schedule 3 (approved SAYE option schemes) as follows.
      (2)
In paragraph 1(3) for “savings scheme” substitute “savings arrangement”.
      (3)
In paragraph 2(1)(b) for “savings schemes” substitute “savings
arrangements”.
30
      (4)
In paragraph 14(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1)
and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of
that Act)”.
      (5)
In paragraph 23—
(a)
in the heading (including the Part heading), for “scheme” substitute
35
“arrangement”, and
(b)
for “savings schemes”, in both places where it occurs, substitute
“savings arrangements”.
      (6)
In paragraph 24(1)—
(a)
in the heading, for “schemes” substitute “arrangements”,
40
(b)
for “CCS scheme” substitute “certified SAYE savings arrangement”,
and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
516

(c)
for “(“the CCS scheme”)” substitute “(“the approved savings
arrangement”)”.
      (7)
Omit paragraph 24(2).
      (8)
In paragraph 25—
(a)
in the heading, for “schemes” substitute “arrangements”,
5
(b)
in sub-paragraph (1), for “CCS scheme” substitute “the approved
savings arrangement”, and
(c)
in sub-paragraph (3)(a), for “CCS schemes linked to approved SAYE
option schemes” substitute “certified SAYE savings arrangements
linked to approved SAYE option schemes”.
10
      (9)
In paragraph 26—
(a)
in the heading, for “scheme” substitute “arrangement”,
(b)
in sub-paragraph (1), for “CCS scheme” substitute “certified SAYE
savings arrangement”, and
(c)
in sub-paragraph (2), for “scheme” substitute “arrangement”.
15
     (10)
In paragraph 30(3), for “the CCS scheme” substitute “the approved savings
arrangement”.
     (11)
In paragraph 48(1)—
(a)
for “certified contractual savings scheme” substitute “certified SAYE
savings arrangement”, and
20
(b)
for “section 326(2) to (6) of ICTA” substitute “section 703(1) of
ITTOIA 2005”.
     (12)
In paragraph 49, for “certified contractual savings scheme (CCS scheme)”
substitute “certified SAYE savings arrangement”.
619
In Schedule 4 (approved CSOP schemes), in paragraph 12(3), for “Chapter
25
1A of Part 15 of ICTA (see section 660G(1) and (2))” substitute “Chapter 5 of
Part 5 of ITTOIA 2005 (see section 620 of that Act)”.
620   (1)
Amend Schedule 5 (enterprise management incentives) as follows.
      (2)
In paragraph 27(3)(a), for “under Case I or II of Schedule D” substitute “as
the profits of a trade, profession or vocation carried on wholly or partly in
30
the United Kingdom”.
      (3)
In paragraph 31(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1)
and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of
that Act)”.
Finance Act 2003 (c.14)
35
621
The Finance Act 2003 is amended as follows.
622
In section 151(2) (non-resident companies: extent of charge to income tax)—
(a)
for paragraph (a) substitute—
“(a)
income (other than relevant foreign income)
chargeable to tax under—
40
(i)
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,

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
517

distributions from unauthorised unit trusts
and transactions in deposits),
(ii)
section 579 of that Act so far as it relates to
annual payments (royalties etc. from
intellectual property),
5
(iii)
Chapter 4 of Part 5 of that Act so far as it
relates to annual payments (certain
telecommunication rights: non-trading
income), or
(iv)
Chapter 7 of Part 5 of that Act (annual
10
payments not otherwise charged),
(aa)
income chargeable to tax under Chapter 3 of Part 4 of
that Act (dividends etc. from UK resident companies
etc.),”, and
(b)
omit paragraph (b).
15
623
Omit section 176 (foster carers).
624   (1)
Amend Schedule 24 (restriction of deductions for employee benefit
contributions) as follows.
      (2)
In paragraph 1—
(a)
in sub-paragraph (1)(a) for “tax purposes” substitute “corporation
20
tax purposes”, and
(b)
in sub-paragraph (2)(a) for “he” substitute “the employer”.
      (3)
In paragraph 3(a) for “tax purposes” substitute “corporation tax purposes”.
      (4)
In paragraph 9(1) omit the definition of “for tax purposes”.
625
In Schedule 34 (policies of life insurance etc: miscellaneous amendments), in
25
paragraph 15(1), after “1988” insert “or Chapter 9 of Part 4 of the Income Tax
(Trading and Other Income) Act 2005”.
626
Omit Schedule 36 (foster carers).
Courts Act 2003 (c. 39)
627
In section 101(4)(a) of the Courts Act 2003 (bankruptcy of individuals with
30
rights to receive periodical payments) for “section 329AA of the Income and
Corporation Taxes Act 1988” substitute “section 731 of the Income Tax
(Trading and Other Income) Act 2005”.
Child Trust Funds Act 2004 (c. 6)
628
In section 14(1) of the Child Trust Funds Act 2004 (insurance companies and
35
friendly societies) for “section 333 business” substitute “plan business”.
Finance Act 2004 (c. 12)
629
The Finance Act 2004 is amended as follows.
630
In section 71(3)(b) (collection and recovery of sums to be deducted:
construction industry scheme) for “any tax purposes” substitute “any
40
corporation tax purpose (but see also sections 54 and 869 of the Income Tax
(Trading and Other Income) Act 2005 for corresponding rule for income tax
purposes)”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 2 — Other enactments
518

631
Omit section 97 (exemption from income tax for certain interest and royalty
payments: introductory).
632
Omit section 98 (exemption from income tax for certain interest and royalty
payments).
633
Omit section 99 (permanent establishments and “25% associates”).
5
634
Omit section 100 (interest payments: exemption notices).
635   (1)
Amend section 101 (payment of royalties without deduction at source) as
follows.
      (2)
In subsection (1) for “section 98” substitute “section 758 (exemption from
income tax for certain interest and royalty payments) of the Income Tax
10
(Trading and Other Income) Act 2005”.
      (3)
In each of subsections (2) and (3) for “section 98” substitute “section 758 of
the Income Tax (Trading and Other Income) Act 2005”.
      (4)
In subsection (5)—
(a)
in paragraph (a) for “section 98” substitute “section 758 of the Income
15
Tax (Trading and Other Income) Act 2005”, and
(b)
in paragraph (b) for “Conditions 1 to 3 in section 98” substitute
“conditions A to C in that section”.
      (5)
After subsection (7) insert—
“(8)
In a case where section 763 of the Income Tax (Trading and Other
20
Income) Act 2005 (special relationships) applies, this section has
effect in relation to only so much of the payment as does not exceed
the arm’s length amount (within the meaning of that section).
(9)
Expressions used in this section and in sections 757 to 767 of the
Income Tax (Trading and Other Income) Act 2005 have the same
25
meaning in this section as in those sections.”
636
In section 102 (claim for tax deducted at source from exempt interest or
royalty payments) for “section 98” substitute “section 758 of the Income Tax
(Trading and Other Income) Act 2005”.
637
Omit section 103 (special relationships).
30
638
Omit section 104 (anti-avoidance).
639
Omit section 106 (transitional provision).
640
In section 119(4) (individuals benefited by film relief) for “, the individual
shall” to the end substitute “—
(a)
the individual shall be treated as receiving at the time of that
35
event an amount of income equal to the chargeable amount;
(b)
that income (which shall not be treated as profits of the trade)
shall be chargeable to income tax for the year of assessment
in which the event occurs; and
(c)
the individual shall be liable for any tax so chargeable.”
40
641
In section 123(1) (meaning of “film-related loss”) for “any of the following”
to the end substitute “any provision of Chapter 9 of Part 2 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
519

642
In section 127(2) (losses derived from exploiting licence: individuals in
partnership (charge to income tax)) for “, so much of” to the end substitute
“—
(a)
the individual shall be treated as receiving in that year of
assessment an amount of income equal to so much of the total
5
consideration as does not exceed the chargeable amount;
(b)
that income (which shall not be treated as profits of the trade)
shall be chargeable to income tax for that year of assessment;
and
(c)
the individual shall be liable for any tax so chargeable.”
10
643   (1)
Amend section 130 (“A significant amount of time”) as follows.
      (2)
In subsection (3) for “sections 60 to 63” to the end substitute “Chapter 15 of
Part 2 of the Income Tax (Trading and Other Income) Act 2005 as applied by
section 853 of that Act.”
      (3)
In subsection (4) for “section 61(1)” substitute “section 199(1)”.
15
644
In section 186(1)(b) (scheme investments: income) for “which would” to the
end substitute “which are not relevant foreign income and which would
otherwise be chargeable to income tax under Chapter 8 of Part 5 of ITTOIA
2005 (income not otherwise charged).”
645   (1)
Amend section 189(2) (meaning of “relevant UK earnings”) as follows.
20
      (2)
In paragraph (b) for “Schedule D” substitute “Part 2 of ITTOIA 2005”.
      (3)
For paragraph (c) substitute—
“(c)
income to which section 833(5B) of ICTA (patent income)
applies.”
646
In section 196(2) (relief for employers in respect of contributions paid) after
25
“the purposes of” insert “Part 2 of ITTOIA 2005 (trading income) or”.
647
In section 197(10)(a) (spreading relief) after “charged under” insert “Part 2 of
ITTOIA 2005 (trading income) or”.
648
In section 199(2)(a) (deemed contributions) at the beginning insert “Part 2 of
ITTOIA 2005 (trading income) or”.
30
649
In section 200(a) (no other relief for employers in connection with
contributions) after “the purposes of” insert “Part 2 of ITTOIA 2005 (trading
income) or”.
650   (1)
Amend section 246 (restriction of deduction for non-contributory provision)
as follows.
35
      (2)
In subsection (2)(a) after “the purposes of” insert “Part 2 of ITTOIA 2005
(trading income) or”.
      (3)
In subsection (3)(a) after “charged under” insert “Part 2 of ITTOIA 2005
(trading income) or”.
651   (1)
Amend section 249 of FA 2004 (amendments of ITEPA 2003) as follows.
40
      (2)
In subsection (3), in subsection (4) of the inserted section 393B—