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
516

annual payments not to form part of the income of a company for
corporation tax purposes)”.
186   (1)
Amend section 776 (transactions in land: taxation of capital gains) as follows.
      (2)
In subsection (1) for “persons” substitute “companies”.
      (3)
In subsection (3)—
5
(a)
for “Tax Acts” substitute “Corporation Tax Acts”, and
(b)
for “person by whom” substitute “company by which”.
      (4)
In subsection (3A) omit paragraph (a).
      (5)
Omit subsection (3B).
      (6)
In subsection (6)—
10
(a)
in paragraph (a)—
(i)
omit “Part 2 of ITTOIA 2005 or”, and
(ii)
for “person” substitute “company”, and
(b)
in paragraph (b) omit from “section 158” to “be)”.
      (7)
In subsection (7)—
15
(a)
omit “Part 2 of ITTOIA 2005 or”, and
(b)
for “person who” substitute “company which”.
      (8)
In subsection (8)—
(a)
for “some other person” substitute “another person which is a
company”, and
20
(b)
for “that other person” substitute “that company”.
      (9)
Omit subsection (9).
     (10)
In subsection (11)—
(a)
for “person” wherever it occurs substitute “company”,
(b)
for “who” substitute “which”,
25
(c)
for “he”, in the first two places where it occurs, substitute “it”, and
(d)
for “his”, in the first place where it occurs, substitute “its”.
187   (1)
Amend section 777 (provisions supplementary to sections 775 and 776) as
follows.
      (2)
In subsection (1) for the words from “sections 775” to the end substitute
30
“section 776”.
      (3)
In subsection (2)—
(a)
for “the relevant provisions” substitute “section 776 and this section”,
and
(b)
for “sections 775 and 776” substitute “section 776”.
35
      (4)
In subsection (4) for “the relevant provisions” substitute “section 776 and
this section”.
      (5)
In subsection (6)—
(a)
for “the relevant provisions” substitute “section 776 and this section”,
and
40
(b)
for “sections 775 and 776” substitute “section 776”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
517

      (6)
In subsection (7) for “the relevant provisions” to “receipts)” substitute
“section 776 and this section”.
      (7)
In subsection (8)—
(a)
for “a person” substitute “a company”,
(b)
for “tax under the relevant provisions” substitute “corporation tax
5
under section 776”,
(c)
in paragraph (a) for “he”, in both places where it occurs, substitute
“it”,
(d)
in paragraph (b) for “the person”, in both places where it occurs,
substitute “the company”, and
10
(e)
omit the second sentence.
      (8)
Omit subsection (9).
      (9)
In subsection (10) for “Sections 775 and 776 have” substitute “Section 776
has”.
     (10)
In subsection (11) for “person” substitute “company”.
15
     (11)
For subsection (12) substitute—
“(12)
Where under section 776(8) the company charged to corporation tax
is not the person (“P”) by whom the gain was realised and the tax has
been paid, then for the purposes of sections 37 and 39 of the 1992 Act
(profits taxable as income excluded from tax on chargeable gains) P
20
shall be regarded as having been charged to that tax.”
     (12)
In subsection (13)—
(a)
for “the relevant provisions” substitute “section 776 and this section”,
(b)
for ““capital amount”” to “accordingly” substitute—
““capital”, in relation to a gain, means that, apart from section 776,
25
the gain does not fall to be included in any calculation of income
for corporation tax purposes;”, and
(c)
omit the words from “and any” to the end.
     (13)
In the sidenote for “sections 775 and 776” substitute “section 776”.
188
In section 778 (power to obtain information)—
30
(a)
in subsection (1) for “sections 775 and 776” substitute “section 776”.
(b)
in subsection (2)(b)—
(i)
for “sections 775 and 776” substitute “section 776”, and
(ii)
for “those sections” substitute “that section”.
189
In section 779(13)(ca) (sale and lease-back: limitation on tax reliefs)—
35
(a)
for “section 836B” substitute “section 950 of ITA 2007”, and
(b)
for “section 392” substitute “section 152 of ITA 2007”.
190
In section 780 (sale and lease-back: taxation of consideration received) after
subsection (3B) insert—
“(3C)
An amount charged to income tax by virtue of subsection (3A)(a)
40
above is treated for income tax purposes as an amount of income.”
191   (1)
Amend section 781 (assets leased to traders and others) as follows.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
518

      (2)
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.”
      (3)
In subsection (4)(ab)—
(a)
for “section 836B” substitute “section 950 of ITA 2007”, and
5
(b)
for “section 392” substitute “section 152 of ITA 2007”.
192
In section 785 (definitions for the purposes of sections 781 to 784) in the
definition of “capital sum” for “section 836B” substitute “section 950 of ITA
2007”.
193   (1)
Amend section 789 (double taxation arrangements made under old law) as
10
follows.
      (2)
In subsection (2) for paragraph (a) substitute—
“(a)
to bear income tax at—
(i)
the savings rate, where that income is savings income;
(ii)
the dividend ordinary rate, where that income is
15
dividend income; or
(iii)
the basic rate, in any other case; and”.
      (3)
In subsection (2)(b) for the words from “except” to the end substitute
“except—
(i)
for the purpose of section 274 (limits on relief under
20
sections 266 and 273); and
(ii)
for the purpose of calculating “adjusted net income”
for the purposes of Chapter 1 of Part 7 of this Act (see
section 256A) or Chapters 2 and 3 of Part 3 of ITA 2007
(see section 58 of that Act).”
25
194
In section 793 (reduction of United Kingdom taxes by amount of credit due)
after subsection (2) insert—
“(3)
Credit against income tax is given effect at Step 6 of the calculation
in section 23 of ITA 2007.”
195   (1)
Amend section 796 (limits on credit for foreign tax: income tax) as follows.
30
      (2)
In subsection (1) after “Income Tax Acts” insert “, except a reduction under
section 26 of FA 2005”.
      (3)
After subsection (2) insert—
“(2A)
See section 29(2) and (3) of ITA 2007 (tax reductions limited by
reference to tax liability) for further limits on the total amount of
35
credit for foreign tax to be allowed to a person against income tax.”
      (4)
Omit subsection (3).
196
In section 798C (disallowed credit: use as deduction) for subsection (2)
substitute—
“(2)
The taxpayer’s income shall be treated as reduced by the amount of
40
disallowed credit.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
519

(3)
Subsection (2) applies only in so far as the amount of disallowed
credit does not exceed the amount of any loss attributable to the
income or gain in respect of which the foreign tax was paid.
(4)
For the purpose of subsection (3), payment of the foreign tax is to be
taken into account despite section 795(2).”
5
197
In section 801A (restriction of relief for underlying tax) for subsection (9)
substitute—
“(9)
For the purposes of this section, whether a person is connected with
another is determined in accordance with section 839.”
198
In section 803(10) (underlying tax reflecting interest on loans) for “section
10
839” to the end substitute “, for the purposes of that subsection, whether a
company is connected with a bank is determined in accordance with section
839.”
199   (1)
Amend section 804 (relief against income tax in respect of income arising in
years of commencement) as follows.
15
      (2)
In subsection (5B)(a) for the words from “be treated” to “excess” substitute
“be chargeable for that year to an amount of income tax equal to the excess”.
      (3)
Omit subsection (6).
200
In section 809(1)(a) (relief in respect of discretionary trusts) for the words
from the beginning to “687(2)” substitute “income tax is treated under
20
section 494 of ITA 2007 as having been paid in relation to a payment made
by the trustees of a settlement”.
201
In section 811(2) (deduction for foreign tax where no credit allowable)—
(a)
insert “and” immediately after paragraph (a), and
(b)
omit paragraph (b) and the “and” immediately after it.
25
202
In section 812(5) (withdrawal of right to tax credit of certain non-resident
companies connected with unitary states) for paragraph (c) substitute—
“(c)
whether a person is connected with another is determined in
accordance with section 839;”.
203
In section 816 (disclosure of information)—
30
(a)
in subsection (3) after “bank” insert “(within the meaning of that
subsection)”, and
(b)
omit subsection (3A).
204
Omit section 818 (arrangements for payments of interest less tax or of fixed
net amount).
35
205
Omit section 819 (old references to standard rate tax).
206
In section 821(3) (under-deductions from payments made before passing of
annual Act)—
(a)
for paragraph (a) substitute—
“(a)
any payment to which section 839 of ITA 2007 applies
40
(certain royalties etc where usual place of abode of
owner is abroad), and”, and
(b)
omit paragraph (aa) and the “and” immediately after it.
207
Omit section 823 (adjustments of reliefs where given at different times).

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
520

208
Omit section 827A (territorial scope of charges under certain provisions to
which section 836B applies).
209   (1)
Amend section 828 (orders and regulations made by the Treasury or the
Board) as follows.
      (2)
In subsection (1) for “other provision of the Tax Acts” substitute “provision
5
of the Corporation Tax Acts not contained in this Act”.
      (3)
In subsection (2) omit “841(1)(b) or”.
      (4)
In subsection (3) for “other provision of the Tax Acts” substitute “provision
of the Corporation Tax Acts not contained in this Act”.
      (5)
In subsection (4)—
10
(a)
omit “1(6),”
(b)
omit “257C, 582A(1),”, and
(c)
omit “or section 82(4)(d) of the Capital Allowances Act”.
      (6)
In subsection (5)—
(a)
before “section 717 of ITEPA 2003” insert “section 570B of the Capital
15
Allowances Act or”,
(b)
omit “or section 873 of ITTOIA 2005”,
(c)
in paragraph (a) after “regulations under” insert “the Capital
Allowances Act or”, and
(d)
in paragraph (a) omit “or ITTOIA 2005”.
20
210
Omit section 829 (application of Income Tax Acts to public departments and
avoidance of exempting provisions).
211
In section 830(1) (territorial sea) omit “income tax and”.
212
In section 831(3) (interpretation of ICTA) after the definition of “ITTOIA
2005” insert—
25
““ITA 2007” means the Income Tax Act 2007;”.
213   (1)
Amend section 832 (interpretation of the Tax Acts) as follows.
      (2)
In subsection (1)—
(a)
for “In the Tax Acts, except” substitute “In the Corporation Tax Acts,
except”,
30
(b)
omit the definitions of “basic rate” and “basic rate limit”,
(c)
omit the definition of “higher rate”,
(d)
omit the definition of “industrial assurance business”,
(e)
omit the definition of “interest”,
(f)
omit the definitions of “investment LLP” and “property investment
35
LLP”,
(g)
omit the definition of “lower rate”,
(h)
in the definition of “notice” omit “or in a form authorised (in relation
to the case in question) by directions under section 118 of the Finance
Act 1998”,
40
(i)
in the definition of “overseas property business” omit paragraph (a)
and, in paragraph (b), omit “for the purposes of corporation tax,”,
(j)
omit the definition of “preference dividend”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
521

(k)
in the appropriate place insert—
““property investment LLP” has the meaning given by
section 842B;”,
(l)
omit the definition of “the rate applicable to trusts”,
(m)
omit the definition of “relevant foreign income”,
5
(n)
omit the definitions of “starting rate” and “starting rate limit”,
(o)
omit the definition of “step-child”,
(p)
in the definition of “tax credit”, in paragraph (a) omit “for the
purposes of corporation tax” and omit paragraph (b),
(q)
omit the definitions of “the dividend ordinary rate”, “the dividend
10
trust rate” and “the dividend upper rate”,
(r)
omit the definition of “UK property business”, and
(s)
for the definition of “unit trust scheme” substitute—
““unit trust scheme” has the same meaning as in the Income Tax
Acts (see section 941 of ITA 2007);”.
15
      (3)
After subsection (2) insert—
“(2A)
Chapter 2 of Part 9 of ITA 2007 (which relates to settlements and
trustees) applies for the purposes of the Corporation Tax Acts as it
applies for the purposes of the Income Tax Acts.”
      (4)
In subsection (4A) for “Tax Acts” substitute “Corporation Tax Acts”.
20
      (5)
Omit subsection (5).
      (6)
In the sidenote for “Tax Acts” substitute “Corporation Tax Acts etc”.
214
Omit section 833 (interpretation of the Income Tax Acts).
215
In section 834(1) (interpretation of the Corporation Tax Acts), at the end
insert—
25
““venture capital trust” has the same meaning as in Part 6 of ITA
2007.”
216
Omit section 835 (“total income” in the Income Tax Acts).
217
Omit section 836 (returns of total income).
218
Omit section 836B (table of provisions to which that section applies).
30
219
Omit section 837 (“annual value” of land).
220   (1)
Amend section 837A (meaning of “research and development”) as follows.
      (2)
In subsection (1) for “Tax Acts” substitute “Corporation Tax Acts”.
      (3)
In subsection (2) for “regulations under subsection (3)” substitute
“subsections (2A) and (2B)”.
35
      (4)
For subsections (3) and (4) substitute—
“(2A)
Activities that, as a result of regulations made under section 940 of
ITA 2007, are “research and development” for the purposes of that
section are also “research and development” for the purposes of this
section.
40

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
522

(2B)
And activities that, as a result of any such regulations, are not
“research and development” for the purposes of that section are also
not “research and development” for the purposes of this section.”
221
In section 837B(1) (meaning of “oil and gas exploration and appraisal”) for
“Tax Acts” substitute “Corporation Tax Acts”.
5
222
In section 837C(1) and (5) (meaning of “offshore installation”) for “Tax Acts”
substitute “Corporation Tax Acts”.
223
In section 838(1) (subsidiaries) for “Tax Acts” substitute “Corporation Tax
Acts”.
224   (1)
Amend section 839 (connected persons) as follows.
10
      (2)
In subsection (1) for “Tax Acts” substitute “Corporation Tax Acts”.
      (3)
In subsection (3B)(b) for the words from “in whom” to “vested” substitute—
“(i)
in whom the property comprised in the settlement is
for the time being vested, or
(ii)
in whom the management of that property is for the
15
time being vested,”.
225
In section 840 (meaning of “control” in certain contexts) for “Tax Acts”
substitute “Corporation Tax Acts”.
226
After section 840 insert—
“840ZA
Meaning of “tax advantage”
20
(1)
In any provision of the Corporation Tax Acts in relation to which it
is provided that “tax advantage” has the meaning given by this
section, “tax advantage” means—
(a)
a relief from tax or increased relief from tax,
(b)
a repayment of tax or increased repayment of tax,
25
(c)
the avoidance or reduction of a charge to tax or an assessment
to tax, or
(d)
the avoidance of a possible assessment to tax.
(2)
For the purposes of subsection (1)(c) and (d) it does not matter
whether the avoidance or reduction is effected—
30
(a)
by receipts accruing in such a way that the recipient does not
pay or bear tax on them, or
(b)
by a deduction in calculating profits or gains.
(3)
In this section “relief from tax” includes—
(a)
a tax credit under section 231 for the purposes of corporation
35
tax, and
(b)
a tax credit under section 397(1) of ITTOIA 2005 for the
purposes of income tax.”
227
In section 840A(1) (banks)—
(a)
after “In any provision” insert “of the Corporation Tax Acts”, and
40
(b)
after paragraph (c) insert—
“(ca)
the European Investment Bank; or”.
228   (1)
Amend section 841 (recognised stock exchanges and recognised investment
exchanges) as follows.