Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
544

(c)
immediately before the reconstruction or amalgamation,
CITR is attributable to the shares or debentures included in
the existing holding in respect of one or more years of
assessment or accounting periods, and
(d)
the shares or debentures included in the existing holding
5
have been held by the investor continuously from the time
they were issued until the reconstruction or amalgamation,

sections 135 and 136 (share exchanges and company reconstructions)
do not apply in respect of the existing holding.
(2)
Subsection (1)(a) applies only if the shares or debentures are held by
10
the investor in the same capacity.
(3)
For the purposes of subsection (1) a “reconstruction or
amalgamation” means an issue by a company of shares in or
debentures of that company in exchange for or in respect of shares in
or debentures of company A.
15
(4)
The following provisions of this Act have effect subject to this
section—
section 116 (reorganisations, conversions and reconstructions),
Chapter 2 of Part 4 (reorganisation of share capital, conversion
of securities etc).
20
(5)
The investor is treated as disposing of any securities or shares which
but for subsection (1) the investor—
(a)
would be treated as exchanging for other securities or shares
by virtue of section 136, or
(b)
would be so treated but for section 137(1) (which restricts
25
section 136 to genuine reconstructions).”
318
In section 151C(5) (strips: manipulation of price: associated payment giving
rise to loss) for “section 709(1)” substitute “section 840ZA”.
319
In section 151D(5) (corporate strips: manipulation of price: associated
payment giving rise to loss) for “section 709(1)” substitute “section 840ZA”.
30
320
In section 161 (stock in trade: appropriations to and from stock) after
subsection (4) insert—
“(5)
If—
(a)
any person is charged to income tax under section 688 of ITA
2007 (charge to tax from transactions in land) on the
35
realisation of a gain because the condition in section 689(3)(d)
is met, and
(b)
the gain is calculated on the basis that any property was
appropriated as trading stock,

the property shall be treated on that basis also for the purposes of this
40
section.”
321
In section 169D(1) (gifts to settlor-interested settlements: exceptions) for
“691(2) of the Taxes Act (certain income of maintenance funds for historic
buildings not to be income of settlor etc)” substitute “508 of ITA 2007
(trustees’ election in respect of income arising from heritage maintenance
45
property)”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
545

322
In section 226B(1) (private residence relief: special cases) for “691(2) of the
Taxes Act (certain income of maintenance funds for historic buildings not to
be income of settlor etc)” substitute “508 of ITA 2007 (trustees’ election in
respect of income arising from heritage maintenance property)”.
323
In section 231(1) and (3) (shares: special provision) after “Taxes Act” insert
5
“or Part 5 of ITA 2007”.
324
In section 241(3)(a) (furnished holiday lettings) for the words from “the
Taxes Act)” to “that Act)” substitute “the Income Tax Acts), or any Schedule
A business (within the meaning of the Taxes Act)”.
325   (1)
Amend section 256 (charities) as follows.
10
      (2)
In subsection (1) for the words “subsection (2) below” substitute “the
following provisions of this section”.
      (3)
After subsection (2) insert—
“(3)
Subsection (4) below applies if a charitable trust has a non-exempt
amount under section 540 of ITA 2007 for a year of assessment.
15
(4)
Gains accruing to the charitable trust in the year of assessment are
treated as being, and always having been, chargeable gains so far as
they are attributed under section 256A to the non-exempt amount.
(5)
For restrictions on exemptions under Part 10 of ITA 2007 (special
rules about charitable trusts etc) see section 539 of that Act.”
20
326
After section 256 insert—
“256A
Attributing gains to the non-exempt amount
(1)
This section applies if a charitable trust has a non-exempt amount
under section 540 of ITA 2007 for a year of assessment.
(2)
Attributable gains of the charitable trust for the year of assessment
25
may be attributed to the non-exempt amount but only so far as the
non-exempt amount has not been used up.
(3)
The non-exempt amount can be used up (in whole or in part) by—
(a)
attributable gains being attributed to it under this section, or
(b)
attributable income being attributed to it under section 541 of
30
ITA 2007.
(4)
The whole of the non-exempt amount must be used up by—
(a)
attributable gains being attributed to the whole of it under
this section,
(b)
attributable income being attributed to the whole of it under
35
section 541 of ITA 2007, or
(c)
a combination of attributable gains being attributed to some
of it under this section and attributable income being
attributed to the rest of it under section 541 of ITA 2007.
(5)
See section 256B for the way in which gains are to be attributed to the
40
non-exempt amount under this section.
(6)
In this section and section 256B a charitable trust’s “attributable
income”, and “attributable gains”, for a tax year have the same
meaning as in Part 10 of ITA 2007 (see section 540 of that Act).

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
546

256B
How gains are attributed to the non-exempt amount
(1)
This section is about the ways in which attributable gains can be
attributed to a non-exempt amount under section 256A.
(2)
The trustees of the charitable trust may specify the attributable gains
that are to be attributed to the non-exempt amount.
5
(3)
A specification under subsection (2) is made by notice to an officer of
Revenue and Customs.
(4)
Subsection (6) applies if—
(a)
an officer of Revenue and Customs requires the trustees of a
charitable trust to make a specification under this section,
10
and
(b)
the trustees have not given notice under subsection (3) of the
specification before the end of the required period.
(5)
The required period is 30 days beginning with the day on which the
officer made the requirement.
15
(6)
An officer of Revenue and Customs may determine the attributable
gains that are to be attributed to the non-exempt amount.”
327
In section 257 (gifts to charities etc) after subsection (2) insert—
“(2A)
Subsection (2B) applies if relief—
(a)
is available under Chapter 3 of Part 8 of ITA 2007 or section
20
587B of the Taxes Act (gifts of shares, securities and real
property to charities) in relation to the disposal of a
qualifying investment to a charity, or
(b)
would be so available if a claim were made.
(2B)
The consideration for which the charity’s acquisition of the
25
qualifying investment is treated by virtue of subsection (2) above as
having been made—
(a)
is reduced by the relievable amount if relief in relation to the
disposal is available only under Chapter 3 of Part 8 of ITA
2007,
30
(b)
is reduced by the relevant amount if relief in relation to the
disposal is available only under section 587B of the Taxes Act,
(c)
is reduced by the relievable amount if relief in relation to the
disposal is available both under that Chapter and that section
as a result of section 442 of ITA 2007 and section 587BA of the
35
Taxes Act, or
(d)
is reduced to nil if that consideration is less than the amount
referred to in paragraph (a), (b) or (c) (as the case may be).
(2C)
In subsections (2A) and (2B)—
“qualifying investment” has the same meaning as in Chapter 3
40
of Part 8 of ITA 2007 (see section 432 of that Act),
“relevant amount” has the same meaning as in section 587B of
the Taxes Act, and
“relievable amount” has the same meaning as in Chapter 3 of
Part 8 of ITA 2007 (see section 434 of that Act).”
45
328
After section 261A insert—

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
547

“Deduction of trading losses or post-cessation expenditure etc
“261B
Treating trade loss etc as CGT loss
(1)
A person may make a claim under this section if—
(a)
relief is available to the person under section 64 or 128 of ITA
2007 (trade or employment loss relief against general income)
5
for a tax year in relation to an amount of loss,
(b)
the person makes a claim under that section for the amount
to be deducted in calculating the person’s net income for the
tax year, and
(c)
not all the amount is deducted in calculating the person’s net
10
income for the tax year.
(2)
A person may also make a claim under this section if—
(a)
relief is available to the person as mentioned in subsection
(1)(a) for a tax year in relation to an amount of loss, but
(b)
the person’s total income for the tax year is nil or does not
15
include any income from which the amount can be deducted.
(3)
A claim under this section is for determining so much of the amount
of the loss (“the relevant amount”) as—
(a)
is not deducted in calculating the person’s net income for the
tax year, and
20
(b)
has not already been taken into account for the purposes of
any relief for any other tax year or any year of assessment
(whether under ITA 2007, this section or otherwise).
(4)
When the relevant amount can no longer be varied—
(a)
by the Commissioners on appeal, or
25
(b)
on the order of a court,

it is treated for the purposes of capital gains tax as an allowable loss
accruing to the person in the year of assessment corresponding to the
tax year.
(5)
But so much of the relevant amount as exceeds the maximum
30
amount (see section 261C) is not to be treated for the purposes of
capital gains tax as an allowable loss.
(6)
The excess may, however, be used in giving effect to any other loss
relief under Part 4 of ITA 2007 (depending on the terms of the relief).
(7)
The amount treated as an allowable loss under this section—
35
(a)
is no longer to be regarded as an amount available for income
tax relief, and
(b)
is not to be deductible from chargeable gains accruing to a
person in any year of assessment that begins after the person
has permanently ceased to carry on the trade, profession,
40
vocation, employment or office in which the loss was made.
(8)
A claim under this section must be made on or before the first
anniversary of the normal self-assessment filing date for the tax year
in which the loss was made in the trade, profession, vocation,
employment or office.
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
548

(9)
In this section “normal self-assessment filing date”, “tax year” and
“total income” have the same meaning as in the Income Tax Acts (see
section 923 of ITA 2007).
261C
Meaning of “the maximum amount” for purposes of section 261B
(1)
For the purposes of section 261B “the maximum amount” is the
5
amount on which the person would be chargeable to capital gains tax
for the year of assessment if—
(a)
the provisions mentioned below were ignored, and
(b)
no account were taken of the event mentioned below.
(2)
The provisions are—
10
(a)
section 2A (taper relief),
(b)
section 3(1) (annual exempt amount), and
(c)
section 261B.
(3)
The event is any event—
(a)
which occurs after the date on which the relevant amount
15
(see section 261B(3)) can no longer be varied by the
Commissioners on appeal or on the order of a court, and
(b)
in consequence of which the amount chargeable to capital
gains tax is reduced as a result of an enactment relating to
capital gains tax.
20
261D
Treating excess post-cessation trade or property relief as CGT loss
(1)
A person may make a claim under this section if—
(a)
relief is available to the person under section 96 or 125 of ITA
2007 (post-cessation trade or property relief) for a tax year in
relation to an amount,
25
(b)
the person makes a claim under that section to deduct the
amount in calculating the person’s net income for the tax
year, and
(c)
not all the amount is deducted in calculating the person’s net
income for the tax year.
30
(2)
A person may also make a claim under this section if—
(a)
relief is available to the person as mentioned in subsection
(1)(a) for a tax year in relation to an amount, but
(b)
the person’s total income for the tax year is nil.
(3)
A claim under this section is for treating for the purposes of capital
35
gains tax so much of the amount as is not deducted in calculating the
person’s net income for the tax year (“the relevant amount”) as an
allowable loss accruing to the person in the year of assessment
corresponding to the tax year.
(4)
But so much of the relevant amount as exceeds the maximum
40
amount (see section 261E) is not to be treated for the purposes of
capital gains tax as an allowable loss.
(5)
The relevant amount is no longer to be regarded as an amount
available for income tax relief.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
549

(6)
A claim under this section must be made on or before the first
anniversary of the normal self-assessment filing date for the tax year
mentioned in subsection (1) or (2) (as the case may be).
(7)
In this section “normal self-assessment filing date”, “tax year” and
“total income” have the same meaning as in the Income Tax Acts (see
5
section 923 of ITA 2007).
261E
Meaning of “the maximum amount” for purposes of section 261D
(1)
For the purposes of section 261D “the maximum amount” is the
amount on which the person would be chargeable to capital gains tax
for the year of assessment if the following were ignored.
10
(2)
The matters to be ignored are—
(a)
any allowable losses falling to be carried forward to that year
from a previous year for the purposes of section 2(2),
(b)
section 3(1) (annual exempt amount), and
(c)
any relief under section 261B or 261D.”
15
329
After section 261E insert—
“Repurchase price under repos
261F
Deemed manufactured payments: effect on repurchase price
(1)
This section applies if —
(a)
the repurchase price of UK shares, UK securities or overseas
20
securities is treated by section 604(2), (4) or (5) of ITA 2007
(deemed increase in repurchase price: repos and options) as
increased for the purposes of section 607 of that Act
(treatment of price differences under repos),
(b)
condition A or B is met, and
25
(c)
section 263A does not apply.
(2)
Condition A is that, as a result of the increase, there is no difference
for the purposes of section 607 of that Act between the sale price and
the repurchase price.
(3)
Condition B is that, as a result of an exception in section 608 of that
30
Act, section 607 of that Act does not apply.
(4)
The deemed increase of the repurchase price also has effect for
capital gains tax purposes.
(5)
Expressions used in this section and in section 605 of ITA 2007
(deemed increase in repurchase price: other income tax purposes)
35
have the same meanings in this section as in that section.
330
After section 261F insert—
261G
Price differences under repos: effect on repurchase price
(1)
Subsections (2) and (3) apply if—
(a)
section 607 of ITA 2007 (treatment of price differences under
40
repos) applies,
(b)
an amount is treated under that section as a payment of
interest, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
550

(c)
section 263A does not apply.
(2)
If the repurchase price is more than the sale price, the repurchase
price is treated for capital gains tax purposes as reduced by the
amount of the payment of interest.
(3)
If the sale price is more than the repurchase price, the repurchase
5
price is treated for capital gains tax purposes as increased by the
amount of the payment of interest.
(4)
Expressions used in this section and in section 609 of ITA 2007
(additional income tax consequences of price differences under
repos) have the same meanings in this section as in that section.
10
331
After section 261G insert—
“261H
Power to modify section 261G in non-arm’s length case
(1)
The Treasury may by regulations provide for section 261G to apply
with modifications if the exception in section 608(2) of ITA 2007
(agreement not at arm’s length) would otherwise prevent it from
15
applying.
(2)
Regulations under this section may make different provision for
different cases.
(3)
Regulations under this section may contain incidental,
supplemental, consequential and transitional provision and savings.
20
(4)
The incidental, supplemental, and consequential provision may
include modifications of section 261F (deemed manufactured
payments: effect on repurchase price).
(5)
In this section “modifications” includes exceptions and omissions.
(6)
Accordingly, the power in subsection (1) includes power to provide
25
for any provision of section 261G not to apply in relation to the case
mentioned in that subsection.”
332   (1)
Amend section 263ZA (former employees: employment-related liabilities)
as follows.
      (2)
In subsection (1)(a)—
30
(a)
for “from total income” substitute “in calculating net income”, and
(b)
for “when computing a former employee’s total income” substitute
“in calculating a former employee’s net income”.
      (3)
In subsection (1)(b) for “the total income” substitute “the remaining total
income”.
35
      (4)
In subsection (2)(b) for “the total income” substitute “the remaining total
income”.
      (5)
After subsection (2) insert—
“(2A)
In this section “the remaining total income”, in relation to a tax year,
means the former employee’s total income for the tax year less reliefs
40
already deducted for the tax year at Step 2 of the calculation in
section 23 of ITA 2007 for the purpose of calculating the former
employee’s income tax liability.”