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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 8 — Miscellaneous income

562

 

section applies with the substitution for subsection (4) of—

“(4)   

In subsection (3) a child’s “relevant settlement income” means

income which (apart from that subsection) would be treated as

income of the settlor under subsection (1) and which—

(a)   

so far as consisting of such income as is mentioned in

5

paragraph 133 of Schedule 2, is income paid to or for the

benefit of the child, and

(b)   

so far as consisting of other income, is income paid to or for

the benefit of, or otherwise treated as income of, the child.”

      (4)  

Any apportionment required for the purposes of sub-paragraph (1)(b) is to

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be made on a just and reasonable basis.

Amounts treated as income of settlor: capital sums paid to settlor by trustees of settlement

134   (1)  

In relation to any case which involves any previous tax years before 1995-96,

subsection (3) of section 635 applies in accordance with sub-paragraphs (2)

and (3) below.

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      (2)  

So far as that subsection applies in relation to those previous tax years, for

paragraph (c) substitute—

“(c)   

so much of any income arising under the settlement in any

previous year which has not been distributed as is shown to

consist of income which has been treated as income of the

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settlor by virtue of section 671, 672, 674, 674A or 683 of ICTA,

(d)   

any income arising under the settlement in any previous year

which has been treated as the income of the settlor by virtue

of section 673 of ICTA,

(e)   

any sums paid by virtue or in consequence of the settlement,

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to the extent that they are not allowable, by virtue of section

676 of ICTA, as deductions in computing the settlor's income

for any previous year,

(f)   

any sums paid by virtue or in consequence of the settlement

in any previous year which have been treated as the income

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of the settlor by virtue of section 664(2)(b) of ICTA,

(g)   

any sums included in the income arising under the settlement

as amounts which have been or could have been apportioned

to a beneficiary as mentioned in section 681(1)(b) of ICTA,

and”.

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      (3)  

For paragraph (d) of that subsection substitute—

“(h)   

an amount equal to the sum of tax at the rate applicable to

trusts on—

(i)   

the total amount of income arising under the

settlement in that year and any previous year which

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has not been distributed, less

(ii)   

the total amount of the income and sums referred to

in paragraph (c) (in relation to tax years 1995-96

onwards) and paragraphs (c), (d), (e), (f) and (g) as

substituted by paragraph 134 of Schedule 2 (in

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relation to tax years before 1995-96).”

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 8 — Miscellaneous income

563

 

      (4)  

In relation to any sum paid before 6th April 1995, subsection (3) of section

634 applies with the substitution of “in one of the events specified in section

673(3) of ICTA” for paragraphs (a) and (b).

      (5)  

Subsection (5)(a) of section 634 does not apply if the direction or assignment

was given or made before 6th April 1981.

5

Amounts treated as income of settlor: capital sums paid to settlor by body connected with

settlement

135        

In relation to any capital sum paid to the settlor before tax year 1995-96,

section 641 applies with the insertion after subsection (6) of—

“(6A)   

Where a capital sum is paid to the settlor in a tax year by a body

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corporate connected with the settlement in that year it is to be

assumed until the contrary is shown that an associated payment of

an amount not less than that of the capital sum has been made to that

body by the trustees of the settlement.”

Beneficiaries’ income from estates in administration: basic amounts

15

136   (1)  

Sub-paragraph (2) applies if any previous tax year to which regard is to be

had for the purposes of section 665 (assumed income entitlement) is a tax

year before 2005-06 (an “old tax year”).

      (2)  

In relation to the old tax year, the reference in step 4 in subsection (1) of that

section to basic amounts relating to the person’s absolute interest in respect

20

of which the person is liable to income tax for that year is to be taken as a

reference to the amount deemed to have been paid to that person as income

for that year in respect of that interest by virtue of section 696 of ICTA.

      (3)  

Sub-paragraph (4) applies if one or more of the absolute interests referred to

in section 671(1) (successive absolute interests) was held in one or more old

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tax years.

      (4)  

The reference in section 671(2)(b) to the basic amounts relating to any

previous such interest includes a reference to the amounts deemed to have

been paid to the previous holder as income for the old tax years in respect of

that interest by virtue of section 696 of ICTA.

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      (5)  

Sub-paragraph (6) applies if any of the limited interests referred to in section

672(1)(d) (successive interests: assumed income entitlement of holder of

absolute interest following limited interest) was held in one or more old tax

years.

      (6)  

The reference in section 672(4) to the basic amounts relating to any previous

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such interest includes a reference to the amounts deemed to have been paid

to the holders of any such interests as income for the old tax years in respect

of those interests by virtue of section 695 of ICTA.

      (7)  

In the case of a UK estate, references in this paragraph to the amounts

deemed to have been paid are references to the amounts that would be

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deemed to have been paid apart from sections 695(4)(a) and 696(4) of ICTA

(grossing up).

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 9 — Exempt income

564

 

Beneficiaries’ income from estates in administration: income treated as bearing income tax

137        

A sum treated as part of the aggregate income of an estate by virtue of

section 547(1)(c) of ICTA (gains from life insurance contracts etc.) as the

result of an event that occurred before 6th April 2004 is treated for the

purposes mentioned in section 680 of this Act as bearing income tax at the

5

basic rate.

Part 9

Exempt income

Ulster savings certificates

138        

In the case of certificates acquired before 27th July 1981, section 693(5)

10

applies with the substitution for “the Department of Finance and Personnel”

of “the Treasury”.

SAYE interest

139        

Any scheme which was certified as mentioned in section 326(2)(c), (3)(b) or

(4)(b) of ICTA before 1st December 1994 is treated as a certified SAYE

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savings arrangement for the purposes of Chapter 4 of Part 6 of this Act.

140        

A European authorised institution arrangement is not an institutional

arrangement for the purposes of Chapter 4 of Part 6 if the arrangement was

established before 2nd May 1995.

141   (1)  

Neither—

20

(a)   

the Treasury specification rules, nor

(b)   

the Treasury authorisation rules,

           

apply to any scheme which was certified as mentioned in section 326(3)(b),

(4)(b) or (5)(b) of ICTA before 31st July 1995.

      (2)  

In sub-paragraph (1)—

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“the Treasury specification rules” means sections 705(1)(b) and (2) to (4)

and 706 of this Act, and

“the Treasury authorisation rules” means sections 707 and 708 of this

Act.

Venture capital trust dividends: shares acquired before the tax year 2004-05

30

142        

In the case of dividends paid in respect of shares acquired before the tax year

2004-05, Chapter 5 of Part 6 (venture capital trust dividends) applies as if the

references in section 709(4) (annual acquisition limit) to £200,000 were

references to £100,000.

Purchased life annuity payments: old determinations concerning capital elements

35

143   (1)  

Any determination in relation to an annuity as to the amount of the capital

element that was made under Chapter 5 of Part 14 of ICTA before 6th April

2005 and any decision on appeal that was so made against such a

determination have effect on and after that date, so far as is required for the

purposes of this Act, as a determination or decision as to the extent to which

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annuity payments made under the annuity are within section 717(1)

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 9 — Exempt income

565

 

(exemption for part of purchased life annuity payments) in accordance with

section 719 (extent of exemption under that section).

      (2)  

And a notification of such a determination or appeal or of an alteration of

such a determination has effect accordingly.

Purchased life annuity payments: carry forward of excess capital elements

5

144   (1)  

This paragraph applies if, in the case of an annuity to which section 656(2) of

ICTA applied immediately before 6th April 2005, the total of the amounts

determined in accordance with that section to be capital elements in respect

of the annuity payments that arose before that date (and accordingly not to

be annual payments for income tax purposes) exceeded the total of those

10

annuity payments.

      (2)  

The amount of the excess is to be added to the fixed sum mentioned in

section 719(4) for the first payment that arises after 5th April 2005.

Purchased life annuity payments: penalty for false statements

145   (1)  

Section 723(7) (liability to penalty for false statements and representations to

15

obtain exemption under Chapter 7 of Part 6) does not apply (and section

658(5) of ICTA continues to apply) to any statement or representation made

before 6th April 2005, despite the fact that it relates to the tax year 2005-06 or

any subsequent tax year.

      (2)  

Section 723(7) (liability to penalty for false statements and representations to

20

obtain exemption under Chapter 7 of Part 6) applies (and section 658(5) of

ICTA does not apply) to any statement or representation made on or after

6th April 2005, despite the fact that it relates to a tax year before the tax year

2005-06.

Certain annual payments by individuals

25

146   (1)  

Sections 727 (exemption for certain annual payments by individuals) and

730 (exemption for foreign maintenance payments) do not apply to—

(a)   

any payment falling due before 16th March 1988, or

(b)   

any payment falling due on or after that date but before 6th April

2000 to which this paragraph applies.

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      (2)  

Paragraph (b) of sub-paragraph (1) applies to a payment made in pursuance

of an existing obligation (within the meaning of section 36(3) of FA 1988)

unless it meets any of conditions A to E.

      (3)  

Condition A is that the payment is treated as income of the payer under

Chapter 5 of Part 5 as a result of section 624 or 629.

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      (4)  

Condition B is that the payment fell due from a husband to a wife or a wife

to a husband at a time after 5th April 1990 when they were living together.

      (5)  

Condition C is that an election is duly made under section 39 of FA 1988 in

respect of the payment.

      (6)  

Condition D is that the payment fell due on or after 6th April 1994 and is

40

made—

(a)   

in pursuance of an obligation within section 36(4)(a) to (c) of FA 1988

that is an obligation under—

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 9 — Exempt income

566

 

(i)   

an order made by a court,

(ii)   

a written or oral agreement, or

(iii)   

a deed executed for giving effect to an agreement, and

(b)   

for the benefit, maintenance or education of a person (whether or not

the person to whom the payment is made) who attained the age of 21

5

on or before the day on which the payment fell due but after 5th

April 1994.

      (7)  

Condition E is that—

(a)   

the payment is made in pursuance of an obligation within section

36(4)(a) of FA 1988 (existing obligations under certain court orders),

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(b)   

the payment is made for the benefit, maintenance or education of a

person (whether or not the person to whom the payment is made)

who attained the age of 21 before 6th April 1994, and

(c)   

section 38 of FA 1988 (treatment of certain maintenance payments

under existing obligations) does not apply to the payment.

15

Annual payments for non-taxable consideration

147        

Section 729 (exemption for payments for non-taxable consideration) applies

in the case of an annuity granted before 30th March 1977—

(a)   

with the substitution in subsection (1) of “condition B, C or D” for

“condition B or C”, and

20

(b)   

with the substitution of the following subsections for subsection

(5)—

“(5)   

Condition D is that the payment is a payment under an

annuity charged on an interest in settled property and

granted by an individual to a company—

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(a)   

whose business then consisted wholly or mainly in

the acquisition of interests in settled property, or

(b)   

which was then carrying on life assurance business in

the United Kingdom.

(6)   

In the application of subsections (4) and (5) to Scotland, the

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references in those subsections to settled property are to be

read as references to property held in trust.”

Periodical payments of personal injury damages etc.

148   (1)  

Subject to sub-paragraphs (4) and (5), sections 731, 733 and 734 apply with

the modifications in sub-paragraphs (2) and (3).

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      (2)  

In section 731 (periodical payments of personal injury damages)—

(a)   

for subsection (2) substitute—

“(2)   

This subsection applies to periodical payments made in

pursuance of—

(a)   

a court order making a final or interim award of

40

damages in respect of personal injury,

(b)   

an agreement settling a claim or action for such

damages, or

(c)   

an agreement for a payment on account of the

damages that may be awarded in such an action.”,

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Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 11 — Foreign income: special rules

567

 

(b)   

in subsection (3)(b) for the words from “agreement” to the end of the

paragraph substitute “or agreement as is mentioned in subsection (2)

or a subsequent agreement”, and

(c)   

omit subsection (6).

      (3)  

In sections 733(a) and 734(1)(a)(i) for “agreement, undertaking” substitute

5

“or agreement”.

      (4)  

The modifications in sub-paragraphs (2) and (3) do not apply if an order has

been made under section 110(1) of the Courts Act 2003 (c. 39)

(commencement) making provision for section 100(2) and (3) of that Act to

come into force on a day earlier than 6th April 2005.

10

      (5)  

The power in section 110(1) of that Act includes power to make provision in

accordance with which the modifications in sub-paragraphs (2) and (3) do

not apply on or after a day appointed by the order that is later than 5th April

2005.

Part 10

15

Foster-care relief

149   (1)  

This paragraph applies if—

(a)   

a disposal event is treated as occurring in relation to an individual

under paragraph 17(2) of Schedule 36 to FA 2003 (foster-care relief:

capital allowances),

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(b)   

the individual is a relevant individual for the tax year 2004-05,

(c)   

the individual has a chargeable period which corresponds to the

income period for the individual’s foster-care receipts in that tax

year (and therefore the chargeable period is a relevant chargeable

period), and

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(d)   

the next chargeable period of the individual is not a relevant

chargeable period.

      (2)  

Subsection (4) of section 825 applies (despite anything in subsection (1) of

that section to the contrary) as if the reference to the first subsequent

chargeable period which is not a relevant chargeable period were to the

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period mentioned in sub-paragraph (1)(d).

Part 11

Foreign income: special rules

Relevant foreign income charged on remittance basis: income arising before the tax year 2005-

06

35

150        

A claim may be made under section 831 (claim for relevant foreign income

to be charged on the remittance basis) for relevant foreign income to be

charged in accordance with section 832 for the tax year 2005-06 or any later

tax year, despite that income having arisen in a tax year before the tax year

2005-06; and sections 832 to 834 apply accordingly.

40

Relevant foreign income charged on remittance basis: delayed remittances

151   (1)  

The fact that income arose in a tax year before 2005-06 does not prevent—

 

 

Income Tax (Trading and Other Income) Bill
Schedule 2 — Transitionals and savings etc.
Part 11 — Foreign income: special rules

568

 

(a)   

a claim being made in respect of it under section 835(1) (relief for

delayed remittances), or

(b)   

section 835(5) applying as respects the tax year in which the income

arose.

      (2)  

But sub-paragraphs (3) to (5) apply if—

5

(a)   

such a claim is made in respect of any income (“the delayed

income”),

(b)   

the delayed income arose in the tax year 1996-97 or an earlier tax

year,

(c)   

the basis year for that year is a different year, and

10

(d)   

that basis year is not the basis year for two tax years.

      (3)  

Section 835(5) does not apply and the delayed income is to be treated as if it

were income received in the United Kingdom in that basis year.

      (4)  

In this paragraph “basis year”, in relation to tax chargeable for any tax year

in respect of any income, means the year by reference to which the amount

15

of the income chargeable finally falls to be calculated.

      (5)  

This paragraph does not affect which year is to be taken as the basis year for

calculating tax chargeable for any tax year.

Relief for backdated pensions charged on arising basis

152        

The fact that the earlier year referred to in subsections (1)(b) and (2) of

20

section 840 (relief for backdated pensions charged on the arising basis) is a

tax year before 2005-06 does not prevent—

(a)   

a claim being made under that section, or

(b)   

such adjustments (by way of repayment of tax, assessment or

otherwise) as are necessary to give effect to that section being made

25

as respects such a tax year.

Unremittable income that arose before the tax year 2005-06

153   (1)  

A claim may be made under section 842 (claim for relief on unremittable

income) for the tax year 2005-06 or any later tax year, despite the income

having arisen in a tax year before 2005-06.

30

      (2)  

Without prejudice to paragraph 4 of this Schedule, section 843 (withdrawal

of relief) applies for the tax year 2005-06 or any later tax year, despite the

income having arisen originally in a tax year before the tax year 2005-06

(whether the claim in respect of it was made under section 584 of ICTA

(relief for unremittable overseas income) or section 842 of this Act).

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      (3)  

Sub-paragraph (4) applies if an appeal against an assessment for the tax year

2005-06 or a later tax year involves a question as to the operation of section

584 of ICTA or Chapter 4 of Part 8 of this Act as respects income that arose

in a tax year before 2005-06.

      (4)  

Section 31D of TMA 1970 (appeals: election to bring appeal before Special

40

Commissioners) applies with the omission of—

(a)   

paragraph (b) of subsection (2),

(b)   

the word “or” preceding that paragraph, and

(c)   

subsections (3) to (7) (by virtue of which such an election may be

disregarded if the General Commissioners so direct).

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