Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
458

924
Meaning of “Act”
(1)
In the Income Tax Acts “Act” includes Northern Ireland legislation.
(2)
This section does not apply for the purposes of—
(a)
this Act (see instead section 952), or
(b)
ITTOIA 2005 (see instead sections 879 and 880 of that Act).
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925
Meaning of “bank”
(1)
This section has effect for the purposes of the provisions of the Income Tax Acts
which apply this section.
(2)
“Bank” means—
(a)
the Bank of England,
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(b)
a person who has permission under Part 4 of FISMA 2000 to accept
deposits (but see subsection (3) for exclusions),
(c)
an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to
FISMA 2000 which has permission under paragraph 15 of that Schedule
to accept deposits (as a result of qualifying for authorisation under
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paragraph 12(1) of that Schedule),
(d)
the European Investment Bank, and
(e)
an international organisation designated as a bank for the purposes of
this section by an order made by the Treasury.
(3)
The reference to a person who has permission under Part 4 of FISMA 2000 to
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accept deposits does not include—
(a)
a building society,
(b)
a society registered within the meaning of the Friendly Societies Act
1974 (c. 46) or incorporated under the Friendly Societies Act 1992
(c. 40),
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(c)
a society registered as a credit union under the Industrial and
Provident Societies Act 1965 (c. 12) or the Credit Unions (Northern
Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d)
an insurance company within the meaning of section 275 of FA 2004.
(4)
The Treasury may designate an international organisation for the purposes of
30
this section only if the United Kingdom is a member of the organisation.
926
Meaning of “company”
(1)
In the Income Tax Acts “company” means any body corporate or
unincorporated association, but does not include a partnership, a local
authority or a local authority association.
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(2)
Subsection (1) needs to be with read with section 468 of ICTA (authorised unit
trusts).
(3)
This section does not apply for the purposes of—
(a)
Part 6 (venture capital trusts),
(b)
Chapters 1, 3 and 4 of Part 12 (transactions in securities and land and
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sales of income from occupation), and
(c)
sections 927 and 928 (meaning of “connected” persons).

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
459

927
Meaning of “connected” persons
(1)
This section has effect for the purposes of the provisions of the Income Tax Acts
which apply this section.
(2)
An individual (“A”) is connected with another individual (“B”) if—
(a)
A is B’s spouse or civil partner,
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(b)
A is a relative of B,
(c)
A is the spouse or civil partner of a relative of B,
(d)
A is a relative of B’s spouse or civil partner, or
(e)
A is the spouse or civil partner of a relative of B’s spouse or civil
partner.
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(3)
A person, in the capacity as trustee of a settlement, is connected with—
(a)
any individual who is a settlor in relation to the settlement,
(b)
any person connected with such an individual,
(c)
any close company whose participators include the trustees of the
settlement,
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(d)
any non-UK resident company which, if it were UK resident, would be
a close company whose participators include the trustees of the
settlement,
(e)
any body corporate controlled (within the meaning of section 929) by a
company within paragraph (c) or (d),
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(f)
if the settlement is the principal settlement in relation to one or more
sub-fund settlements, a person in the capacity as trustee of such a sub-
fund settlement, and
(g)
if the settlement is a sub-fund settlement in relation to a principal
settlement, a person in the capacity as trustee of any other sub-fund
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settlements in relation to the principal settlement.
(4)
A person who is a partner in a partnership is connected with—
(a)
any partner in the partnership,
(b)
the spouse or civil partner of any individual who is a partner in the
partnership, and
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(c)
a relative of any individual who is a partner in the partnership.

But this subsection does not apply in relation to acquisitions or disposals of
assets of the partnership pursuant to genuine commercial arrangements.
(5)
A company is connected with another company if—
(a)
the same person has control of both companies,
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(b)
a person (“A”) has control of one company and persons connected with
A have control of the other company,
(c)
A has control of one company and A together with persons connected
with A have control of the other company, or
(d)
a group of two or more persons has control of both companies and the
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groups either consist of the same persons or could be so regarded if (in
one or more cases) a member of either group were replaced by a person
with whom the member is connected.
(6)
A company is connected with another person (“A”) if—
(a)
A has control of the company, or
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(b)
A together with persons connected with A have control of the
company.

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
460

(7)
In relation to a company, any two or more persons acting together to secure or
exercise control of the company are connected with—
(a)
one another, and
(b)
any person acting on the directions of any of them to secure or exercise
control of the company.
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928
Meaning of “connected” persons: supplementary
(1)
In section 927 and this section—
“company” includes any body corporate or unincorporated association,
but does not include a partnership (and see also subsection (2)),
“control” is to be read in accordance with section 416 of ICTA (except
10
where otherwise indicated),
“principal settlement” has the meaning given by paragraph 1 of Schedule
4ZA to TCGA 1992,
“relative” means brother, sister, ancestor or lineal descendant,
“settlement” has the same meaning as in Chapter 5 of Part 5 of ITTOIA
15
2005 (see section 620 of that Act), and
“sub-fund settlement” has the meaning given by paragraph 1 of Schedule
4ZA to TCGA 1992.
(2)
For the purposes of section 927—
(a)
a unit trust scheme is treated as if it were a company, and
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(b)
the rights of the unit holders are treated as if they were shares in the
company.
(3)
For the purposes of section 927 “trustee”, in the case of a settlement in relation
to which there would be no trustees apart from this subsection, means any
person—
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(a)
in whom the property comprised in the settlement is for the time being
vested, or
(b)
in whom the management of that property is for the time being vested.

Section 466(4) does not apply for the purposes of this subsection.
(4)
If any provision of section 927 provides that a person (“A”) is connected with
30
another person (“B”), it also follows that B is connected with A.
929
Meaning of “control”
(1)
This section has effect for the purposes of the provisions of the Income Tax Acts
which apply this section.
(2)
In relation to a body corporate (“company A”), “control” means the power of a
35
person (“P”) to secure—
(a)
by means of the holding of shares or the possession of voting power in
relation to that or any other body corporate, or
(b)
as a result of any powers conferred by the articles of association or other
document regulating that or any other body corporate,
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that the affairs of company A are conducted in accordance with P’s wishes.
(3)
In relation to a partnership, “control” means the right to a share of more than
half the assets, or of more than half the income, of the partnership.

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
461

930
Meaning of “farming” and related expressions
(1)
In the Income Tax Acts “farming” means the occupation of land wholly or
mainly for the purposes of husbandry, but does not include market gardening
(see subsection (5)).
(2)
In subsection (1) “husbandry” includes—
5
(a)
hop growing, and
(b)
the breeding and rearing of horses and the grazing of horses in
connection with those activities.
(3)
For the purposes of the Income Tax Acts the cultivation of short rotation
coppice is regarded as husbandry and not as forestry.
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(4)
In the Income Tax Acts “woodlands” does not include land on which short
rotation coppice is cultivated.
(5)
In the Income Tax Acts “market gardening” means the occupation of land as a
garden or nursery for the purpose of growing produce for sale.
(6)
For the purposes of this section “short rotation coppice” means a perennial
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crop of tree species planted at high density, the stems of which are harvested
above ground level at intervals of less than 10 years.
(7)
In the application of this section for the purposes of section 192(1) or 303(1) of
this Act or paragraph 16 of Schedule 5 to ITEPA 2003—
(a)
both references to the occupation of land, and the reference to land on
20
which short rotation coppice is cultivated, refer to land in the United
Kingdom, and
(b)
the reference to the cultivation of such coppice refers to its cultivation
in the United Kingdom.
931
Meaning of “generally accepted accounting practice” and related expressions
25
(1)
In the Income Tax Acts “generally accepted accounting practice” means UK
generally accepted accounting practice.

This is subject to subsection (3).
(2)
In the Income Tax Acts “UK generally accepted accounting practice”—
(a)
means generally accepted accounting practice in relation to accounts of
30
UK companies (other than IAS accounts) that are intended to give a
true and fair view, and
(b)
has the same meaning in relation to—
(i)
individuals,
(ii)
entities other than companies, and
35
(iii)
companies that are not UK companies,

as it has in relation to UK companies.
(3)
In relation to the affairs of a company or other entity that prepares IAS
accounts, in the Income Tax Acts “generally accepted accounting practice”
means generally accepted accounting practice in relation to IAS accounts.
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(4)
In the Income Tax Acts “for accounting purposes” means for the purposes of
accounts drawn up in accordance with generally accepted accounting practice.
(5)
In the Income Tax Acts “international accounting standards” has the same
meaning as in the Corporation Tax Acts (see section 50(2) and (3) of FA 2004).

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
462

(6)
In this section—
“IAS accounts” means accounts prepared in accordance with
international accounting standards, and
“UK companies” means companies incorporated or formed under the law
of a part of the United Kingdom.
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932
Meaning of “grossing up”
(1)
In the Income Tax Acts references to grossing up by reference to a rate of tax
are to calculating the amount (“the grossed up amount”) which after deduction
of income tax at that rate would equal the amount to be grossed up (“the net
amount”).
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(2)
The grossed up amount is the sum of the net amount and the tax deducted.
(3)
The grossed up amount may also be expressed as—

where—
GA is the grossed up amount,
NA is the net amount, and
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R is the percentage rate of tax by reference to which the net amount is to
be grossed up.
933
Meaning of “local authority”
(1)
In the Income Tax Acts “local authority”, in relation to England and Wales,
means—
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(a)
a billing authority as defined in section 69 of the Local Government
Finance Act 1992 (c. 14),
(b)
a precepting authority as defined in that section,
(c)
a body with power to issue a levy (by virtue of regulations under
section 74 of the Local Government Finance Act 1988 (c. 41)),
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(d)
a body with power to issue a special levy (by virtue of regulations
under section 75 of that Act),
(e)
a fire and rescue authority in Wales constituted by a scheme under
section 2 of the Fire and Rescue Services Act 2004 (c. 21) or a scheme to
which section 4 of that Act applies,
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(f)
an authority with power to make or determine a rate, or
(g)
a residuary body established by order under section 22(1) of the Local
Government Act 1992 (c. 19).
(2)
In the Income Tax Acts “local authority”, in relation to Scotland, means—
(a)
a council constituted under section 2 of the Local Government etc
35
(Scotland) Act 1994 (c. 39),
(b)
a joint board or committee within the meaning of the Local
Government (Scotland) Act 1973 (c. 65), or

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
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(c)
an authority with power to requisition any sum from a council such as
is mentioned in paragraph (a).
(3)
In the Income Tax Acts “local authority”, in relation to Northern Ireland,
means—
(a)
an authority with power to make or determine a rate, or
5
(b)
an authority with power to issue a precept, requisition or other demand
for the payment of money to be raised out of a rate.
(4)
In this section “rate” means a rate—
(a)
whose proceeds are applicable for public local purposes, and
(b)
which is leviable by reference to the value of land or property.
10
934
Meaning of “local authority association”
(1)
In the Income Tax Acts “local authority association” means any incorporated
or unincorporated association which meets conditions A and B.
(2)
Condition A is that all of its members are local authorities, groups of local
authorities or local authority associations.
15
(3)
Condition B is that its purpose, or primary purpose, is to protect and further
the general interests of local authorities or any description of local authorities.
(4)
For the purposes of condition A, a local authority, group of local authorities or
local authority association is treated as a member if it has appointed a person
to be a member or is represented by a member.
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(5)
And, in that case, the appointee or representative is treated as not being a
member for the purpose of the condition.
935
Meaning of “offshore installation”
(1)
In the Income Tax Acts “offshore installation” means a structure which is, is to
be, or has been, put to a relevant use while in water (see subsections (3) and (4)).
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(2)
But a structure is not an offshore installation if—
(a)
it has permanently ceased to be put to a relevant use,
(b)
it is not, and is not to be, put to any other relevant use, and
(c)
since permanently ceasing to be put to a relevant use, it has been put to
a use which is not relevant.
30
(3)
A use is a relevant use if it is—
(a)
for the purposes of exploiting mineral resources by means of a well,
(b)
for the purposes of exploration with a view to exploiting mineral
resources by means of a well,
(c)
for the storage of gas in or under the shore or the bed of any waters,
35
(d)
for the recovery of gas so stored,
(e)
for the conveyance of things by means of a pipe, or
(f)
mainly for the provision of accommodation for individuals who work
on or from a structure which is, is to be, or has been, put to any of the
above uses while in water.
40
(4)
For the purposes of this section references to a structure being put to a use
while in water are to the structure being put to a use while—

Income Tax Bill
Part 15 — Income Tax Acts definitions etc
Chapter 1 — Definitions
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(a)
standing in any waters,
(b)
stationed (by whatever means) in any waters, or
(c)
standing on the foreshore or other land intermittently covered with
water.
(5)
In this section “structure” includes a ship or other vessel.
5
936
Regulations about the meaning of “offshore installation”
(1)
The Treasury may by regulations make provision as to the meaning of
“offshore installation” in the Income Tax Acts.
(2)
The regulations may—
(a)
add to, amend or repeal any provision of section 935,
10
(b)
make different provision for different purposes,
(c)
contain incidental, supplemental, consequential and transitional
provision and savings.
937
Meaning of “oil and gas exploration and appraisal”
(1)
In the Income Tax Acts “oil and gas exploration and appraisal” means activities
15
carried out for the purpose of—
(a)
searching for petroleum anywhere in an area,
(b)
ascertaining a petroleum-bearing area’s extent or characteristics, or
(c)
ascertaining its reserves of petroleum,

so that it may be determined whether the petroleum is suitable for commercial
20
exploitation.
(2)
In this section “petroleum” has the meaning given by section 1 of the Petroleum
Act 1998 (c. 17).
938
Meaning of “property investment LLP”
(1)
In the Income Tax Acts “property investment LLP” means a limited liability
25
partnership—
(a)
whose business consists wholly or mainly in the making of investments
in land, and
(b)
the principal part of whose income is derived from investments in land.
(2)
Whether a limited liability partnership is a property investment LLP is
30
determined for each period of account of the partnership.
939
Meaning of “recognised stock exchange”
(1)
In the Income Tax Acts “recognised stock exchange” means—
(a)
the Stock Exchange, and
(b)
any stock exchange outside the United Kingdom which is for the time
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being designated as a recognised stock exchange for the purposes of
this section by an order made by the Commissioners for Her Majesty’s
Revenue and Customs.
(2)
An order under this section may designate a stock exchange—
(a)
by name, or
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