Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
491

86
In section 468A(1) (open-ended investment companies) for “lower rate”
substitute “savings rate”.
87    (1)
Amend section 469 (unauthorised unit trusts) as follows.
      (2)
In subsection (2)—
(a)
for “Tax Acts” substitute “Corporation Tax Acts”, and
5
(b)
omit the words from “and, in the case of income” to the end.
      (3)
Omit subsections (2A) to (4).
      (4)
Before subsection (5) insert—
“(4A)
For the purposes of the Corporation Tax Acts, the trustees are treated
as making an annual payment (under deduction of income tax) to
10
each unit holder if an amount is shown in the scheme’s accounts as
income available for payment to unit holders or for investment.
(4B)
The amount of an annual payment to a unit holder for a distribution
period before the deduction of income tax is its gross amount.
(4C)
Section 548(2) of ITTOIA 2005 applies for the purpose of calculating
15
the gross amount of an annual payment for a distribution period as
it applies for the purpose of calculating the gross amount of income
treated as received for a distribution period under Chapter 10 of Part
4 of that Act.
(4D)
Section 874 of ITA 2007 deals with the deduction of income tax from
20
the gross amount so calculated.”
      (5)
In subsection (5) for “payments are”, in both places where it occurs,
substitute “payment is”.
      (6)
Omit subsections (5A) to (5D) and (7) to (10).
88    (1)
Amend section 477A (building societies: regulations for deduction of tax) as
25
follows.
      (2)
Omit subsections (1) to (2A).
      (3)
In subsection (3)—
(a)
omit the words from “For any” to “above apply,”, and
(b)
in paragraph (b) omit the words “paid or credited in the year of
30
assessment”.
      (4)
Omit subsection (7).
      (5)
For subsection (9) substitute—
“(9)
In this section “dividend” includes any distribution (whether or not
described as a dividend).”
35
      (6)
In subsection (10) omit the definitions of “qualifying certificate of deposit”,
“qualifying deposit right” and “security”.
      (7)
In the sidenote for “regulations for deduction of tax” substitute “loan
relationships”.
89
Omit sections 480A to 482 (deduction of tax by deposit-takers).
40

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
492

90    (1)
Amend section 486 (industrial and provident societies and co-operative
associations) as follows.
      (2)
Omit subsections (2), (3) and (6).
      (3)
In subsection (7) for “subsection (6)” substitute “section 820(2) of ITA 2007”.
91
In section 487(2) (credit unions) for “section 486(6)” substitute “section 820(2)
5
of ITA 2007”.
92    (1)
Amend section 492 (treatment of oil extraction activities etc for tax purposes)
as follows.
      (2)
Omit subsection (2).
      (3)
For subsection (4) substitute—
10
“(4)
In any case where—
(a)
in any accounting period a company incurs a loss in activities
(“separate activities”) which, for that or any subsequent
accounting period, are treated by virtue of subsection (1)
above as a separate trade for the purposes specified in that
15
subsection, and
(b)
in any subsequent accounting period any of its trading
income is derived from activities (“related activities”) which
are not part of the separate activities but which, apart from
subsection (1) above, would together with those activities
20
constitute a single trade,

then, notwithstanding anything in subsection (1) above, the amount
of the loss may be set off, in accordance with section 393(1), against
so much of its trading income in any subsequent accounting period
as is derived from the related activities.”
25
93
Omit section 504A (letting of furnished holiday accommodation treated as
trade for certain income tax purposes).
94    (1)
Amend section 505 (charities: general) as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a) omit “, or under Parts 2 and 3 of ITTOIA 2005,”,
30
(b)
in paragraph (c)—
(i)
in sub-paragraph (ii) omit the words from “or under Chapter
2, 7, 8 or 10” to the end of the sub-paragraph,
(ii)
omit sub-paragraphs (iiaa) and (iii), and
(iii)
for “charity” substitute “charitable company”,
35
(c)
in paragraph (d) omit “or Chapter 2 of Part 4 of ITTOIA 2005
(interest)”,
(d)
in paragraph (e)—
(i)
omit “or Part 2 of ITTOIA 2005 (trading income)”, and
(ii)
for “charity”, in each place where it occurs, substitute
40
“charitable company”, and
(e)
in paragraph (f)—
(i)
omit “or Part 2 or 5 of ITTOIA 2005 (trading and
miscellaneous income)”,
(ii)
for “charity” substitute “charitable company”, and
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
493

(iii)
in sub-paragraph (ii) for “charity’s” substitute “charitable
company’s”.
      (3)
In subsection (1AA) for “(1)(c)(iiaa) and (iib)” substitute “(1)(c)(iib)”.
      (4)
In subsection (1B) for “charity” substitute “charitable company”.
      (5)
In subsection (2)—
5
(a)
in paragraph (a), for “a charity” substitute “a charitable company”,
(b)
in paragraph (c) for “tax” substitute “corporation tax”, and
(c)
omit the words from “chargeable to income tax” to “and shall be”.
      (6)
In subsection (4)—
(a)
for “charity” substitute “charitable company”, and
10
(b)
for “a chargeable” substitute “an accounting”.
      (7)
In subsection (5)—
(a)
for “a chargeable” substitute “an accounting”, and
(b)
for “charity’s” substitute “charitable company’s”.
      (8)
In subsection (6) for “a chargeable” in both places where it occurs substitute
15
“an accounting”.
      (9)
In subsection (7)—
(a)
for “charity’s” substitute “charitable company’s”, and
(b)
for “charity” in each place where it occurs substitute “charitable
company”.
20
     (10)
In the sidenote for “Charities” substitute “Charitable companies”.
95    (1)
Amend section 506 (charitable and non-charitable expenditure) as follows.
      (2)
In subsection (1) in the appropriate place insert—
““charitable company” means any body of persons established
for charitable purposes only;”.
25
      (3)
In subsection (2)—
(a)
for “chargeable”, in both places where it occurs, substitute
“accounting”, and
(b)
for “charity” substitute “charitable company”.
      (4)
In subsection (3) for “charity” substitute “charitable company”.
30
      (5)
In subsection (4)—
(a)
for “chargeable” substitute “accounting”, and
(b)
for “charity”, in both places where it occurs, substitute “charitable
company”.
      (6)
In subsection (5)—
35
(a)
for “chargeable” substitute “accounting”, and
(b)
for “charity” substitute “charitable company”.
96    (1)
Amend section 506A (transactions with substantial donors) as follows.
      (2)
For “charity” in each place where it occurs substitute “charitable company”.
      (3)
In subsection (2)—
40

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
494

(a)
for “a chargeable” in both places where it occurs substitute “an
accounting”,
(b)
for “the chargeable” in both places where it occurs substitute “the
accounting”, and
(c)
for “five chargeable” substitute “five accounting”.
5
97    (1)
Amend section 506B (section 506A: exceptions) as follows.
      (2)
In subsections (1) to (4), (7) and (9), for “charity” in each place where it occurs
substitute “charitable company”.
      (3)
In subsection (5) for “to which section 587B applies” substitute “in respect of
which relief is available under section 587B of this Act or section 431 of ITA
10
2007 (gifts of shares, securities and real property to charities etc)”.
      (4)
In subsection (7) for the words after “so far as” substitute “they relate to a
donation by the donor, and—
(a)
if the donation is made by a company, the payments or
benefits do not prevent the donation being a qualifying
15
donation for the purposes of section 339 because of
subsection (3B)(b) of that section (restrictions on associated
benefits), or
(b)
if the donation is made by an individual, the payments or
benefits do not prevent the donation being a qualifying
20
donation for the purposes of section 416 of ITA 2007 because
of subsection (7)(b) of that section (restrictions on associated
benefits).”
      (5)
In subsection (8) for the words from “the charity” to the end substitute “a
charitable company which owns it (or any part of it)”.
25
98    (1)
Amend section 506C (sections 506A and 506B: supplemental) as follows.
      (2)
In subsection (1)—
(a)
omit paragraph (d),
(b)
omit the “or” at the end of paragraph (h),
(c)
insert “or” at the end of paragraph (i), and
30
(d)
after that paragraph insert—
“(j)
Chapters 2 and 3 of Part 8 of ITA 2007 (gift aid and
gifts of shares, securities and real property).”
      (3)
In subsections (2) and (4) for “charity” substitute “charitable company”.
      (4)
In subsection (3) for “a chargeable” substitute “an accounting”.
35
      (5)
In subsection (5) for the words from the beginning to “single charity”
substitute “A charitable company and any other charities with which it is
connected are to be treated as a single charitable company”.
99
In section 507(1) (the National Heritage Memorial fund etc) for “charity”
substitute “charitable company”.
40
100
In section 508(1) (scientific research organisations) for “charity” substitute
“charitable company”.
101   (1)
Amend section 510A (tax treatment of European Economic Interest
Groupings) as follows.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
495

      (2)
In subsection (2) for “tax in respect of income and gains” substitute
“corporation tax”.
      (3)
In subsection (3) omit paragraph (b) and the “and” immediately before it.
      (4)
In subsection (6) for “tax in respect of income and gains” substitute
“corporation tax”.
5
102
Omit section 515 (exemption for signatories to Operating Agreement for
INMARSAT).
103
In section 517 (exemption for Reserve Bank of India and State Bank of
Pakistan) after “exempt from” insert “corporation”.
104
In section 519 (exemption for local authorities and local authority
10
associations) for subsection (1) substitute—
“(1)
A local authority in the United Kingdom shall be exempt from
corporation tax.”
105   (1)
Amend section 519A (exemption for Health Service bodies) as follows.
      (2)
For subsection (1) substitute—
15
“(1)
A health service body shall be exempt from corporation tax.”
      (3)
In subsections (3) and (4) for “subsection (1)(b)” substitute “subsection (1)”.
106   (1)
Amend section 524 (taxation of receipts from sale of patent rights) as follows.
      (2)
In subsection (3)—
(a)
omit the “and” immediately after paragraph (a), and
20
(b)
omit paragraphs (b) and (c).
      (3)
For subsection (9) substitute—
“(9)
If a company is chargeable to corporation tax under subsection (3)
above, nothing in subsections (7) and (8) above shall affect the sum
representing income tax which is to be deducted under section 843 of
25
ITA 2007 (payments to non-UK residents) from payments of, or of
instalments of, the proceeds of the sale.
(9A)
If any sum representing income tax is deducted under section 843 of
ITA 2007, any adjustment necessary to give effect to the provisions of
subsection (9) above shall be made by way of repayment of tax.”
30
107   (1)
Amend section 527 (spreading of royalties over several years) as follows.
      (2)
For subsection (1) substitute—
“(1)
Where—
(a)
a royalty or other sum is paid to a company in respect of the
user of a patent,
35
(b)
the user extended over a period of six complete years or
more, and
(c)
the payment is one from which a sum representing income
tax must be deducted under section 836 of ITA 2007,

the company may on the making of a claim require that the
40
corporation tax payable by it by reason of the receipt of that sum
shall be reduced so as not to exceed the total amount of corporation

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
496

tax which would have been payable by it if that royalty or sum had
been paid in six equal instalments at yearly intervals, the last of
which was paid on the date on which the payment was in fact made.”
      (3)
Omit subsection (4).
108
In section 532 (application of Capital Allowances Act) for “Tax Acts”
5
substitute “Corporation Tax Acts”.
109
Omit sections 536 (taxation of royalties where owner abroad), 537 (public
lending right) and 537B (taxation of design royalties where owner abroad).
110
In section 539A(8) (conditions for being an excepted group life policy) for
paragraph (ii) substitute—
10
“(ii)
“tax advantage” has the meaning given by section 840ZA”.
111
In section 552(5)(f)(i) (information: duty of insurers) for “lower rate”
substitute “savings rate”.
112
Omit section 555 (entertainers and sportsmen: payment of tax).
113   (1)
Amend section 556 (activity treated as trade etc and attribution of income)
15
as follows.
      (2)
After subsection (4) insert—
“(4A)
In this section “payment” and “transfer” have the same meanings as
in section 13 of ITTOIA 2005.”
      (3)
In subsection (5) omit the words from the beginning to “, and”.
20
114
In section 558 (supplementary provisions) omit subsections (1) to (4).
115
In section 571 (schemes for rationalising industry: cancellation of
certificates) after subsection (1) insert—
“(1A)
An amount charged to income tax under subsection (1) above is
treated for income tax purposes as an amount of income.”
25
116   (1)
Amend section 573 (relief for companies) as follows.
      (2)
In subsection (4) omit the words from “and where” to “chargeable gains”.
      (3)
Transpose section 573 as so amended to the beginning of a new Chapter of
Part 13 that follows Chapter 5 as Chapter 5A and is entitled “Share loss
relief”.
30
117
Omit section 574 (share loss relief for individuals).
118   (1)
Amend section 575 (exclusion of relief under section 573 or 574 in certain
cases) as follows.
      (2)
In the sidenote omit “or 574”.
      (3)
In subsection (1) for “Sections 573 and 574 do” substitute “Section 573 does”.
35
      (4)
In subsection (2)—
(a)
for “person” substitute “company”,
(b)
for “him” and, in both places where it occurs, “he” substitute “it”, and
(c)
omit “or 574”, in each place where it occurs.
      (5)
In subsection (3) omit “or 574”.
40

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
497

      (6)
After subsection (3) insert—
“(4)
In this section “new consideration” means consideration in money or
money’s worth other than consideration of the kind excluded by
paragraph (a) or (b) of section 128(2) of the 1992 Act.”
      (7)
Transpose section 575 as so amended to after section 573.
5
119   (1)
Amend section 576 (provisions supplementary to sections 573 to 575) as
follows.
      (2)
In the sidenote for “sections 573 to 575” substitute “sections 573 and 575”.
      (3)
In subsection (1)—
(a)
for “subsections (1A) to (1C)” substitute “subsection (1C)”,
10
(b)
for “a person” substitute “a company”,
(c)
for “a company” substitute “another company”,
(d)
for “he” and “him”, in each place where they occur, substitute “it”,
and
(e)
omit “or 574”.
15
      (4)
Omit subsections (1A) and (1B).
      (5)
After subsection (1C) insert—
“(1D)
In this section “holding” means any number of shares of the same
class held by one company in one capacity, growing or diminishing
as shares of that class are acquired or disposed of.
20

For this purpose—
(a)
shares are not treated as being of the same class unless they
are so treated by the practice of a recognised stock exchange
or would be so treated if dealt in on such an exchange, and
(b)
subsection (4) of section 104 of the 1992 Act applies as it
25
applies for the purposes of subsection (1) of that section.”
      (6)
Omit subsections (2) to (5).
      (7)
Transpose section 576 as so amended to after section 575.
120
After section 576 insert—
“576A
Qualifying trading companies
30
(1)
For the purposes of this Chapter a qualifying trading company is a
company which meets each of conditions A to D.
(2)
Condition A is that the company either—
(a)
meets each of the following requirements on the date of the
disposal—
35
(i)
the trading requirement (see section 576B),
(ii)
the control and independence requirement (see
section 576D),
(iii)
the qualifying subsidiaries requirement (see section
576E), and
40
(iv)
the property managing subsidiaries requirement (see
section 576F), or