Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
234

440
Meaning and amount of “disposal-related liability”
(1)
In this Chapter a liability is a “disposal-related liability” in the case of a
qualifying investment if it is a liability of the charity under a disposal-related
obligation in relation to the qualifying investment.
(2)
If the disposal-related obligation is contingent, the amount to be brought into
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account for the purposes of section 437 at any time in respect of the disposal-
related liability, so far as contingent, is—
(a)
if the contingency occurs, the amount or value of the liability actually
incurred in consequence of the occurrence of the contingency, or
(b)
if the contingency does not occur, nil.
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Special provisions about qualifying interests in land
441
Certificate required from charity
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
No individual may make a claim for relief under this Chapter unless the
individual has received a certificate given by or on behalf of the charity.
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(3)
The certificate must—
(a)
describe the qualifying interest in land,
(b)
specify the date of the disposal, and
(c)
state that the charity has acquired the qualifying interest in land.
442
Qualifying interests in land held jointly
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(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
It applies if two or more persons (“the owners”)—
(a)
are jointly beneficially entitled to the qualifying interest in land, or
(b)
are, taken together, beneficially entitled in common to the qualifying
interest in land.
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(3)
Relief under this Chapter is available if—
(a)
at least one of the owners is an individual, and
(b)
all the owners dispose of the whole of their beneficial interests in the
qualifying interest in land to the charity.
(4)
Relief under this Chapter is available to each of the owners who is an
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individual.
(5)
The amount of relief under this Chapter to be given to an individual is such
share of the relievable amount as is allocated to the individual by an agreement
made between those owners who are—
(a)
individuals, or
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(b)
qualifying companies.
(6)
A company is a qualifying company if—
(a)
it is not itself a charity, and
(b)
it is not within section 587B(8)(a) of ICTA.
(7)
If one or more of the owners is not an individual—
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Income Tax Bill
Part 8 — Other reliefs
Chapter 3 — Gifts of shares, securities and real property to charities etc
235

(a)
for the purpose of determining whether the owners’ beneficial interests
are disposed of as mentioned in subsection (3)(b) of this section,
subsections (2) to (4) of section 433 apply as if references to an
individual included a reference to a person who is not an individual,
and
5
(b)
the total amount of relief given under this Chapter and section 587B of
ICTA as a result of the disposal of the qualifying interest in land is not
to exceed the relievable amount.
443
Calculation of relievable amount where joint disposal of interest in land
(1)
This section applies for the purpose of calculating the relievable amount in a
10
case where relief under this Chapter is available as a result of section 442(3).
(2)
Calculate the relievable amount as if—
(a)
the owners were a single individual, and
(b)
the disposals of the owners’ beneficial interests were a single disposal
by that single individual of the whole of the beneficial interest in the
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qualifying interest in land.
(3)
In particular, calculate the consideration mentioned at Step 1 in section 434(4)
by—
(a)
calculating, for each owner, the consideration for which the disposal of
the owner’s beneficial interest is treated as made for the purposes of
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TCGA 1992 as a result of section 257(2)(a) of that Act, and
(b)
adding together all the consideration calculated under paragraph (a).
(4)
Subsection (5) applies if one or more of the owners is neither—
(a)
an individual, nor
(b)
a qualifying company (see section 442(6)).
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(5)
In calculating the relievable amount make just and reasonable adjustments to
reduce the relievable amount to reflect the fact that relief under this Chapter or
section 587B of ICTA is not available to that owner or to those owners.
(6)
If one or more of the owners is a company within paragraph (b) of section
587B(8) of ICTA, in calculating the relievable amount make just and reasonable
30
adjustments to reduce the relievable amount to reflect the requirements of sub-
paragraph (ii) of that paragraph.
444
Disqualifying events
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
If a disqualifying event occurs at any time in the provisional period, the
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following are treated as never having been entitled to relief under this Chapter
in respect of the disposal of the qualifying interest in land—
(a)
in a case to which section 442 does not apply, the individual who made
the disposal, or
(b)
in a case to which section 442 applies, each individual who is an owner.
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(3)
All such assessments and adjustments of assessments are to be made as are
necessary to give effect to subsection (2).
(4)
A disqualifying event occurs if a person mentioned in subsection (5) becomes,
otherwise than for full consideration in money or money’s worth—

Income Tax Bill
Part 8 — Other reliefs
Chapter 4 — Annual payments and patent royalties
236

(a)
entitled to an interest or right in relation to all or part of the land to
which the disposal relates, or
(b)
party to an arrangement under which the person enjoys some right in
relation to all or part of that land.
(5)
The persons are—
5
(a)
in a case to which section 442 does not apply—
(i)
the individual who made the disposal, or
(ii)
a person connected with that individual, and
(b)
in a case to which section 442 applies—
(i)
a person who is an owner, or
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(ii)
a person connected with such a person.
(6)
A disqualifying event does not occur if a person becomes entitled to an interest
or right as mentioned in subsection (4)(a) as a result of a disposition of property
on death (whether the disposition is effected by will, under the law relating to
intestacy or otherwise).
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(7)
“The provisional period” is the period beginning with the date of the disposal
of the qualifying interest in land and ending with the fifth anniversary of the
normal self-assessment filing date for the tax year in which the disposal was
made.
Supplementary
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445
Prohibition against double relief
(1)
If a claim is made for relief under this Chapter in respect of a disposal—
(a)
section 108 of ITTOIA 2005 (gifts of trading stock to charities etc) does
not apply in relation to the disposal, and
(b)
no relief in respect of the disposal is allowable under any other
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provision of the Income Tax Acts.
(2)
For the effect on capital gains tax or corporation tax on chargeable gains where
an individual is entitled to relief under this Chapter, see section 257(2A) to (2C)
of TCGA 1992 (gifts to charities etc).
446
“Charity” to include exempt bodies
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In this Chapter “charity” includes—
(a)
the Trustees of the National Heritage Memorial Fund,
(b)
the Historic Buildings and Monuments Commission for England, and
(c)
the National Endowment for Science, Technology and the Arts.
Chapter 4
35
Annual payments and patent royalties
447
Overview of Chapter
(1)
This Chapter gives relief for some of the payments from which sums
representing income tax must be deducted under Chapter 6 of Part 14
(deduction from annual payments and patent royalties).
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Income Tax Bill
Part 8 — Other reliefs
Chapter 4 — Annual payments and patent royalties
237

(2)
For the payments which attract relief, see sections 448 and 449.
448
Relief for individuals
(1)
This section applies to a payment made in a tax year if—
(a)
the person who makes it is an individual,
(b)
a sum representing income tax is required by section 833(2) or 836(5)
5
(deduction from annual payments and patent royalties) to be deducted
from it, and
(c)
the payment is not deductible in calculating the individual’s income
from any source.
(2)
The individual is entitled to relief for the tax year equal to the gross amount of
10
the payment.
(3)
But this is subject to the restrictions in subsection (4) and section 451.
(4)
The total amount of relief given under this section to an individual for a tax
year cannot be greater than the amount of the individual’s modified net
income for the tax year (see section 958).
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(5)
The relief is given by deducting the amount of the relief in calculating the
individual’s net income for the tax year (see Step 2 of the calculation in section
23).
449
Relief for other persons
(1)
This section applies to a payment made in a tax year if—
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(a)
the person who makes it is not an individual,
(b)
a sum representing income tax is required by section 834(3) or 836(6)
(deduction from annual payments and patent royalties) to be deducted
from it, and
(c)
the payment is not deductible in calculating the person’s income from
25
any source.
(2)
The person who makes the payment is entitled to relief for the tax year equal
to the gross amount of the payment.
(3)
But this is subject to the restrictions in subsections (4) and (5) and section 451.
(4)
Relief is not given for the payment so far as it is ineligible for relief (see section
30
450).
(5)
The total amount of relief given under this section to a person for a tax year
cannot be greater than the amount of the person’s modified net income for the
tax year (see section 958).
(6)
The relief is given by deducting the amount of the relief in calculating the
35
person’s net income for the tax year (see Step 2 of the calculation in section 23).
450
Other persons: payments ineligible for relief
(1)
This section sets out the circumstances in which a payment to which section
449 applies, or part of it, is ineligible for relief.
(2)
The payment is ineligible for relief if, or so far as, it can lawfully be made only
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out of—

Income Tax Bill
Part 8 — Other reliefs
Chapter 4 — Annual payments and patent royalties
238

(a)
capital, or
(b)
income that is exempt from income tax.
(3)
If the payment or any part of it is charged to capital, the payment or that part
is ineligible for relief.
(4)
If—
5
(a)
the person who makes the payment treats it or any part of it as made
out of income that is exempt from income tax, and
(b)
the rights or obligations of any person are or may in the future be
different from what they would have been if the payment or part had
not been so treated,
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the payment, or the part concerned, is ineligible for relief.
(5)
If the payment or a part of it is not ultimately borne by the person who makes
it, the payment or the part concerned is ineligible for relief.
(6)
But subsection (5) does not apply to a payment or part of a payment if—
(a)
the person who makes the payment is liable to income tax on an
15
amount, and
(b)
it is because the person receives that amount or benefits from it in some
other way that the payment or the part concerned is not ultimately
borne by that person.
451
Special rule for persons affected by section 733 of ICTA
20
(1)
This section applies if—
(a)
interest payable to a person in respect of securities (“the affected
income”) is attributable to a tax year,
(b)
because of section 733(1) of ICTA (dividend buying etc: persons
entitled to exemptions), some part of the affected income is not exempt
25
from income tax, and
(c)
the person makes one or more relievable payments in the tax year
which are qualifying annual payments.
(2)
Relief under this Chapter for those payments is given only for—
(a)
the sum of the gross amounts of the payments, or
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(b)
if less, the amount of the person’s non-affected income.
(3)
The person’s non-affected income is—
(a)
the person’s modified net income for the tax year (see section 958), less
(b)
the affected income.
(4)
Apply this section before working out the result of section 448(4) or 449(5).
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(5)
In this section—
“interest” and “securities” are to be read in accordance with section 731(9)
of ICTA,
“relievable payment” means a payment to which section 448 or 449
applies, and
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“qualifying annual payment” has the same meaning as in Chapter 6 of
Part 14 (see section 832).