Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 19 — General
452

911
Application to public departments
(1)
This Part applies in relation to payments made by public offices and
departments of the Crown except as mentioned in subsection (2).
(2)
This Part does not apply to payments made by public offices and departments
of—
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(a)
any country mentioned in Schedule 3 to the British Nationality Act 1981
(c. 61) (which contains a list of Commonwealth countries) or the
Republic of Ireland, or
(b)
any state or province of a country within paragraph (a).
912
Designated international organisations: exceptions from duties to deduct
10
(1)
The Treasury may by order designate for the purposes of this section any
international organisation of which the United Kingdom is a member.
(2)
The duty to deduct under section 807 (duty to deduct from certain payments
of yearly interest) does not apply to a payment of interest made by—
(a)
an organisation designated under subsection (1), or
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(b)
a partnership of which an organisation so designated is a member.
(3)
None of the duties to deduct under Chapters 6, 7 (deduction from annual
payments, patent royalties and other payments connected with intellectual
property) and 14 (directions for duty to deduct to apply in tax avoidance cases)
apply to a payment made by an organisation designated under subsection (1).
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(4)
The duties to deduct under sections 852(2) and 855(2) do not apply in a case
where the payer of the manufactured interest or (as the case may be) the
manufactured overseas dividend is an organisation designated under
subsection (1).
913
Derivative contracts: exception from duties to deduct
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(1)
Despite the provisions of this Part, a company is not required to deduct a sum
representing income tax from a payment made under a derivative contract to
which this section applies.
(2)
This section applies to a derivative contract if profits and losses arising from it
are calculated in accordance with Schedule 26 to FA 2002.
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914
Foreign currency securities etc: exception from duties to deduct
Despite the provisions of this Part there is no duty to deduct a sum
representing income tax from a payment of interest within section 755(1) of
ITTOIA 2005 (interest on foreign currency securities etc owned by non-UK
residents).
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915
Income tax is calculated by reference to gross amounts
If any provision of this Part requires the deduction from a payment of a sum
representing income tax at a specified rate, the rate is to be applied to the gross
payment, that is to the payment before deduction of a sum representing
income tax under this Part.
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Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 19 — General
453

Interpretation
916
Meaning of “deposit”
In this Chapter “deposit” means a sum of money paid on terms which mean
that it will be repaid (with or without interest)—
(a)
on demand, or
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(b)
at a time or in circumstances agreed by or on behalf of the person who
pays it and the person who receives it.
917
Meaning of “financial instrument”
(1)
In this Part “financial instrument” includes—
(a)
any money,
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(b)
any shares or securities,
(c)
an option, future or contract for differences if its underlying subject-
matter is (or is primarily) one or more financial instruments, and
(d)
an instrument the underlying subject-matter of which is (or is
primarily) creditworthiness.
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(2)
For the purposes of subsection (1) if the effect of an instrument depends on an
index or factor, the “underlying” subject-matter of the instrument is the matter
by reference to which the index or factor is determined.
918
Meaning of “gilt-edged securities”
In this Part “gilt-edged securities” means any securities which—
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(a)
are gilt-edged securities for the purposes of TCGA 1992 (see Schedule
9 to that Act), or
(b)
will be such securities on the making of an order under paragraph 1 of
that Schedule, if the making of the order is anticipated in the prospectus
under which the securities were issued.
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919
Meaning of “qualifying certificate of deposit”
(1)
In this Part “qualifying certificate of deposit” means a certificate of deposit
under which—
(a)
the amount payable is at least £50,000, exclusive of interest, and
(b)
that amount is payable at a specified time within 5 years beginning
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with the date on which the deposit is made.
(2)
If an amount is denominated in a foreign currency, subsection (1)(a) has effect
as if it referred to an amount which is at least the equivalent in that currency of
£50,000 at the time the deposit is made.
(3)
For the meaning of “certificate of deposit”, see section 953.
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920
Meaning of “qualifying uncertificated eligible debt security unit”
(1)
In this Part “qualifying uncertificated eligible debt security unit” means an
uncertificated eligible debt security unit under which—
(a)
the amount payable is at least £50,000, exclusive of interest, and

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
454

(b)
that amount is payable at a specified time within 5 years beginning
with the date on which the deposit is made.
(2)
If an amount is denominated in a foreign currency, subsection (1)(a) has effect
as if it referred to an amount which is at least the equivalent in that currency of
£50,000 at the time the deposit is made.
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(3)
In this section “uncertificated eligible debt security unit” means an
uncertificated unit of an eligible debt security where the issue of the unit
corresponds, in accordance with the current terms of issue of the eligible debt
security, to the issue of a certificate of deposit.
(4)
In subsection (3)—
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(a)
“eligible debt security”,
(b)
“uncertificated” (in relation to a unit), and
(c)
“unit”,

have the meanings given by regulation 3(1) of the Uncertificated Securities
Regulations 2001 (S.I. 2001/3755).
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(5)
For the meaning of “certificate of deposit”, see section 953.
921
Meaning of “quoted Eurobond”
In this Part “quoted Eurobond” means a security, including a share (in
particular any permanent interest bearing share as defined in section 117 of
TCGA 1992), that—
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(a)
is issued by a company,
(b)
is listed on a recognised stock exchange, and
(c)
carries a right to interest.
Part 15
Income Tax Acts definitions etc
25
Chapter 1
Definitions
922
Overview of Chapter
(1)
This Chapter contains definitions which apply for the purposes of the Income
Tax Acts, except where, in those Acts, the context otherwise requires.
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(2)
To find a definition go first to section 923, which sets out some of the
definitions in full.
(3)
If a definition is not set out in full in section 923, the section indicates where it
is set out in full.
(4)
In some cases it is stated that a definition does not apply for the purposes of
35
specified provisions of the Income Tax Acts (see, for example, sections 924(2),
926(3) and 941(4)).
(5)
And in some cases it is stated that a definition has effect only for the purposes
of specific provisions of the Income Tax Acts (see, for example, sections 925,
927, 929 and 940).
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Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
455

923
The definitions
The following definitions apply for the purposes of the Income Tax Acts—
“Act” has the meaning given by section 924,
“authorised unit trust” is to be read in accordance with section 468(6) to
(9) of ICTA,
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“bank” is to be read in accordance with section 925,
“basic rate” means the rate of income tax determined in pursuance of
section 6(2),
“basic rate limit” has the meaning given by section 20(2),
“body of persons” means any body politic, corporate or collegiate and any
10
company, fraternity, fellowship or society of persons whether
corporate or not corporate,
“building society” means a building society within the meaning of the
Building Societies Act 1986 (c. 53),
“capital allowance” means any allowance under CAA 2001,
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“the Capital Allowances Act” means CAA 2001,
“chargeable gain” has the same meaning as in TCGA 1992,
“chargeable period” means an accounting period of a company or a tax
year,
“charity” means a body of persons or trust established for charitable
20
purposes only,
“close company” has the same meaning as in the Corporation Tax Acts
(see sections 414 and 415 of ICTA),
“company” has the meaning given by section 926,
“connected”, in relation to two persons being connected with one another,
25
is to be read in accordance with sections 927 and 928,
“control”, in relation to the control of a body corporate or a partnership, is
to be read in accordance with section 929,
“distribution” has the same meaning as in the Corporation Tax Acts (see
Part 6, and section 418, of ICTA),
30
“dividend income” has the meaning given by section 19,
“dividend ordinary rate” means the rate of income tax specified in section
8(1),
“dividend trust rate” means the rate of income tax specified in section 9(2),
“dividend upper rate” means the rate of income tax specified in section
35
8(2),
“farming” has the meaning given by section 930,
“for accounting purposes” has the meaning given by section 931(4),
“forestry” is to be read in accordance with section 930,
“generally accepted accounting practice” has the meaning given by
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section 931(1) and (3),
“grossing up” is to be read in accordance with section 932,
“higher rate” means the rate of income tax determined in pursuance of
section 6(2),
“international accounting standards” has the meaning given by section
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931(5),
“local authority” has the meaning given by section 933,
“local authority association” has the meaning given by section 934,
“market gardening” has the meaning given by section 930,

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Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
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“net income” has the meaning given by section 23 (see Step 2 in that
section),
“non-UK resident” means not resident in the United Kingdom (and
references to a non-UK resident or a non-UK resident person are to a
person who is not resident there),
5
“normal self-assessment filing date”, in relation to a tax year, means the 31
January following the tax year,
“notice” means notice in writing or in a form authorised (in relation to the
case in question) by directions under section 118 of FA 1998,
“offshore installation” has the meaning given by sections 935 and 936,
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“oil and gas exploration and appraisal” has the meaning given by section
937,
“ordinary share capital”, in relation to a company, means all the
company’s issued share capital (however described), other than capital
the holders of which have a right to a dividend at a fixed rate but have
15
no other right to share in the company’s profits,
“overseas property business” has the meaning given by Chapter 2 of Part
3 of ITTOIA 2005,
“period of account”—
(a)
in relation to a person, means any period for which the person
20
draws up accounts, and
(b)
in relation to a trade, profession, vocation or other business,
means any period for which the accounts of the business are
drawn up,
“permanent establishment”, in relation to a company, has the meaning
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given by section 148 of FA 2003,
“personal representatives” in relation to a person who has died, means—
(a)
in the United Kingdom, persons responsible for administering
the estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having
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functions under its law equivalent to those of administering the
estate of the deceased,
“profits or gains” does not include chargeable gains,
“property investment LLP” has the meaning given by section 938,
“qualifying distribution” has the meaning given by section 14(2) of ICTA,
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“qualifying policy” means a policy of insurance which is a qualifying
policy for the purposes of Chapter 1 of Part 7 of ICTA,
“recognised stock exchange” has the meaning given by section 939,
“registered pension scheme” has the meaning given by section 150(2) of
FA 2004,
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“relevant foreign income” has the meaning given by section 830(1) to (3)
of ITTOIA 2005 but also includes, for any purpose mentioned in any
provision listed in section 830(4) of that Act, income treated as relevant
foreign income for that purpose by that provision,
“research and development” is to be read in accordance with section 940,
45
“retail prices index” means—
(a)
the general index of retail prices (for all items) published by the
Office for National Statistics, or
(b)
if that index is not published for a relevant month, any
substituted index or index figures published by that Office,
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“savings income” has the meaning given by section 18,

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
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“savings rate” means the rate of income tax specified in section 7,
“Schedule A business” means any business the profits of which are
chargeable to corporation tax under Schedule A, including the business
in the course of which any transaction is (as a result of paragraph 1(2)
of that Schedule) to be treated as entered into,
5
“scheme administrator”, in relation to a pension scheme, has the meaning
given by section 270 of FA 2004 (but see also sections 271 to 274 of that
Act),
“settled property” (together with references to property comprised in a
settlement) is to be read in accordance with section 466,
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“settlor” is to be read in accordance with sections 467 to 473,
“starting rate” means the rate of income tax determined in pursuance of
section 6(2),
“starting rate limit” has the meaning given by section 20(1),
“stepchild”, in relation to a civil partner, is to be read in accordance with
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section 246 of the Civil Partnership Act 2004 (c. 33),
“51% subsidiary”, in relation to bodies corporate, has the same meaning
as in the Corporation Tax Acts (see section 838 of ICTA),
“75% subsidiary”, in relation to bodies corporate, has the same meaning
as in the Corporation Tax Acts (see section 838 of ICTA),
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“tax” is to be read in accordance with section 832(3) of ICTA,
“tax credit” means a tax credit under section 397(1) of ITTOIA 2005,
“tax year” has the meaning given by section 4(2),
“the tax year 2007-08” (and any corresponding expression in which two
years are similarly mentioned) has the meaning given by section 4(4),
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“total income” has the meaning given by section 23 (see Step 1 in that
section and also section 31),
“trade” includes any venture in the nature of trade,
“trust rate” means the rate of income tax specified in section 9(1),
“UK generally accepted accounting practice” has the meaning given by
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section 931(2),
“UK property business” has the meaning given by Chapter 2 of Part 3 of
ITTOIA 2005,
“UK resident” means resident in the United Kingdom (and references to a
UK resident or a UK resident person are to a person who is resident
35
there),
“umbrella scheme” is to be read in accordance with section 468(6) to (9) of
ICTA,
“unauthorised unit trust” means a unit trust scheme which is neither an
authorised unit trust nor an umbrella scheme,
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“unit holder” is to be read in accordance with section 468(6) to (9) of ICTA,
“unit trust scheme” has the meaning given by section 941,
“venture capital trust” and “VCT” have the same meaning as in Part 6 (see
section 259(1)),
“woodlands” has the meaning given by section 930,
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“year of assessment” means a tax year, and
“the year 1988-1989” means the tax year 1988-1989 (and any
corresponding expression in which two years are similarly mentioned
is to be read in the same way).