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
551

      (6)
In subsection (5)—
(a)
in paragraph (d) for “against capital gains tax under section 72 of the
Finance Act 1991” substitute “under section 261B”, and
(b)
in paragraph (e) for “against capital gains tax under section 90(4) of
the Finance Act 1995” substitute “under section 261D”.
5
333   (1)
Amend section 263A (agreements for sale and repurchase of securities) as
follows.
      (2)
In subsection (1)—
(a)
after “Taxes Act” insert “or section 607(1) of ITA 2007”, and
(b)
for “that subsection” substitute “section 730A(1) of the Taxes Act”.
10
      (3)
In subsection (5) at the beginning insert “For corporation tax purposes,”.
      (4)
After subsection (5) insert—
“(6)
For capital gains tax purposes, expressions used in this section and
section 607 of ITA 2007 have the same meanings in this section as in
that section.”
15
334   (1)
Amend section 263D (gains accruing to persons paying manufactured
dividends) as follows.
      (2)
In subsection (2)(b) and (d) for “United Kingdom equities” substitute “UK
shares”.
      (3)
In subsection (3)(b) and (d) for “United Kingdom equities” substitute “UK
20
shares”.
      (4)
In subsection (4)(a), (b) and (d) for “United Kingdom equities” substitute
“UK shares”.
      (5)
In subsection (7) for “paragraph 2A of Schedule 23A to the Taxes Act”
substitute “sections 574 and 575 of ITA 2007 (manufactured dividends:
25
allowable deductions)”.
      (6)
In subsection (9)—
(a)
for “paragraph 2 of Schedule 23A to the Taxes Act” substitute
“Chapter 2 of Part 11 of ITA 2007 (manufactured payments)”,
(b)
in paragraph (a)—
30
(i)
for “section 737A(5) of that Act” substitute “section 602(1) of
that Act (deemed manufactured payments: repos)”, and
(ii)
for “Schedule 23A” substitute “that Chapter of that Part of
that Act”, and
(c)
in paragraph (b)—
35
(i)
for “section 736B(2) of that Act” substitute “section 596(2) of
that Act (deemed manufactured payments: stock lending
arrangements)”, and
(ii)
for “that Schedule” substitute “that Chapter of that Part of
that Act”.
40
      (7)
In subsection (10) for the words from “the following” to “and, in any such
case,” substitute “those in which there is a repo for the purposes of Part 11 of
ITA 2007 (see section 569 of that Act); and, in any such case,”.
      (8)
In subsection (12)—

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
552

(a)
for “United Kingdom equities” substitute “UK shares”, and
(b)
for “paragraph 1(1) of Schedule 23A to the Taxes Act” substitute
“section 566(2) of ITA 2007”.
335
After section 263E insert—
“263F
Power to modify repo provisions: non-standard repo cases
5
(1)
The Treasury may by regulations provide for—
(a)
section 261F (deemed manufactured payments: effect on
repurchase price),
(b)
section 261G (price differences under repos: effect on
repurchase price),
10
(c)
section 263A (agreements for sale and repurchase of
securities),
(d)
section 263D (gains accruing to persons paying
manufactured dividends), or
(e)
any of those sections,
15

to apply with modifications in relation to non-standard repo cases.
(2)
The power in subsection (1) to make provision for section 263A or
263D to apply with modifications is exercisable only so far as the
section applies to cases falling within section 607 of ITA 2007
(treatment of price differences under repos).
20
(3)
A case is a non-standard repo case if—
(a)
there is a repo in respect of securities,
(b)
under the repo there has been a sale (“the original sale”) of the
securities by the original owner to the interim holder, and
(c)
any of conditions A to E is met in relation to the repo.
25
(4)
Condition A is that—
(a)
the obligation to buy back the securities is not performed, or
(b)
the option to buy them back is not exercised.
(5)
Condition B is that provision is made by or under an agreement for
different or additional UK shares, UK securities or overseas
30
securities to be treated as (or as included with) representative
securities.
(6)
Condition C is that provision is made by or under an agreement for
any UK shares, UK securities or overseas securities to be treated as
not included with representative securities.
35
(7)
Condition D is that provision is made by or under an agreement for
the sale price or repurchase price to be decided or varied wholly or
partly by reference to post-agreement fluctuations.
(8)
Condition E is that provision is made by or under an agreement for
a person to be required, in a case where there are post-agreement
40
fluctuations, to make a payment in the period—
(a)
beginning immediately after the making of the agreement for
the original sale, and
(b)
ending when the repurchase price becomes due.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
553

(9)
Expressions used in this section and in section 612 of ITA 2007
(powers to modify repo provisions: non-standard repo cases) have
the same meanings in this section as in that section.”
336
After section 263F insert—
“263G
Power to modify repo provisions: redemption arrangements
5
(1)
The Treasury may by regulations provide for—
(a)
section 261F (deemed manufactured payments: effect on
repurchase price),
(b)
section 261G (price differences under repos: effect on
repurchase price),
10
(c)
section 263A (agreements for sale and repurchase of
securities),
(d)
section 263D (gains accruing to persons paying
manufactured dividends), or
(e)
any of those sections,
15

to apply with modifications in relation to cases involving
redemption arrangements.
(2)
The power in subsection (1) to make provision for section 263A or
263D to apply with modifications is exercisable only so far as the
section applies to cases falling within section 607 of ITA 2007
20
(treatment of price differences under repos).
(3)
A case involves redemption arrangements if—
(a)
arrangements, corresponding to those made in cases where
there is a repo, are made by an agreement, or one or more
related agreements, in relation to securities that are to be
25
redeemed in the period after their sale,
(b)
the securities are UK shares, UK securities or overseas
securities, and
(c)
the arrangements are such that the seller or a person
connected with the seller (instead of being required to
30
repurchase the securities or acquiring an option to do so) is
granted rights in respect of the benefits that will result from
the redemption.
(4)
Expressions used in this section and in section 613 of ITA 2007
(powers to modify repo provisions: redemption arrangements) have
35
the same meanings in this section as in that section.”
337
After section 263G insert—
“263H
Sections 263F and 263G: supplementary provisions
(1)
Regulations under section 263F or 263G may make different
provision for different cases.
40
(2)
Regulations under either section may contain incidental,
supplemental, consequential and transitional provision and savings.
(3)
The incidental, supplemental and consequential provision may
include—
(a)
in the case of regulations about section 261G, modifications of
45
section 261F, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
554

(b)
in the case of regulations about section 263A or 263D,
modifications of the operation of this Act in relation to cases
where, by virtue of the regulations, any acquisition or
disposal is excluded from those which are to be ignored for
the purposes of capital gains tax.
5
(4)
In this section and sections 263F and 263G “modifications” includes
exceptions and omissions.
(5)
Accordingly, a power in sections 263F and 263G to provide for a
provision to apply with modifications in relation to a particular case
includes power to provide for the provision not to apply in relation
10
to that case.”
338
After section 263H insert—
“263I
Powers about manufactured overseas dividends
(1)
The Treasury may by regulations make provision as mentioned in
subsection (2) about prescribed cases where a person—
15
(a)
pays or receives a manufactured overseas dividend as
mentioned in section 581(1) of ITA 2007 (manufactured
overseas dividends), or
(b)
is treated as doing so for any purposes of Chapter 2 of Part 11
of that Act or regulations made under it (manufactured
20
payments).
(2)
The regulations may provide for adjusting a relevant amount by
reference to a provision which has effect under the law of a territory
outside the United Kingdom.
(3)
A “relevant amount” is an amount which is treated for prescribed
25
capital gains tax purposes as the amount paid or payable to a person
in respect of a relevant transaction.
(4)
A “relevant transaction” is a sale, repurchase or other transfer of the
overseas securities to which the manufactured overseas dividend
relates.
30
(5)
In this section “prescribed” means prescribed in regulations under
this section.
(6)
Subject to that, expressions used in this section and in section 582 of
ITA 2007 (manufactured payments: powers about manufactured
overseas dividends) have the same meanings in this section as in that
35
section.”
339   (1)
Amend section 271 (miscellaneous exemptions) as follows.
      (2)
In subsection (3) for the words from “In this subsection” to the end
substitute—

“In this subsection—
40
“health service body” has the meaning given by section 519A of
the Taxes Act, and
“local authority association” has the meaning given by section
934 of ITA 2007.”

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
555

      (3)
After subsection (7) insert—
“(7A)
Chargeable gains are exempt from tax if they accrue to a bank, or
issue department of a bank, to which this subsection applies for the
time being.
(7B)
Her Majesty may by Order in Council direct that subsection (7A)
5
applies to a bank or its issue department if it appears to Her Majesty
that the bank—
(a)
is not resident in the United Kingdom, and
(b)
is entrusted by the government of a territory outside the
United Kingdom with the custody of the territory’s principal
10
foreign exchange reserves.
(7C)
No recommendation may be made to Her Majesty in Council to
make an order under subsection (7B) unless a draft of the order has
been laid before and approved by a resolution of the House of
Commons.”
15
340
After section 285 insert—
“285A
European Economic Interest Groupings
(1)
The following rules about European Economic Interest Groupings
apply for the purposes of charging tax in respect of chargeable
gains—
20


Rule 1

A grouping is treated as acting as the agent of its members.


Rule 2
25

The activities of a grouping are treated as those of its members acting
jointly.


Rule 3

Each member of a grouping is treated as having a share of the
30
grouping’s property, rights and liabilities.


Rule 4

Any trade or profession carried on by the grouping is treated as
carried on in partnership by members of the grouping.
35


Rule 5

A person is to be regarded as acquiring or disposing of a share of the
assets of the grouping not only where there is an acquisition or
disposal of assets by the grouping while he is a member of it, but also
40
where he becomes or ceases to be a member of a grouping or there is
a change in his share of the property of the grouping.
(2)
For the purposes of Rule 3, a member’s share of any property, rights
or liabilities of a grouping is determined according to the contract
under which the grouping is established.
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
556

(3)
If the contract does not provide for this, the member’s share is
determined by reference to the share of the profits of the grouping to
which the member is entitled under the contract.
(4)
If the contract does not provide for this either, the members are
treated as having equal shares of the property, rights and liabilities
5
of the grouping.
(5)
“European Economic Interest Grouping” means a European
Economic Interest Grouping formed under Council Regulation
(EEC) No 2137/85 of 25th July 1985, whether registered in Great
Britain, Northern Ireland or elsewhere.”
10
341   (1)
Amend section 288 (interpretation) as follows.
      (2)
In subsection (1)—
(a)
in the definition of “allowable loss” after “16” insert “, 261B, 261D”,
(b)
after the definition of “ITTOIA 2005” insert—
““ITA 2007” means the Income Tax Act 2007;”,
15
(c)
in the definition of “local authority” for “section 842A of the Taxes
Act” substitute “section 933 of ITA 2007”,
(d)
after the definition of “the Management Act” insert—
““net income” has the same meaning as in the Income
Tax Acts (see section 923 of ITA 2007);”,
20
(e)
in the definition of “period of account” for “section 832(1) of the
Taxes Act” substitute “section 923 of ITA 2007”,
(f)
in the definition of “property investment LLP” for “section 842B of
the Taxes Act” substitute “section 938 of ITA 2007”,
(g)
in the definition of “recognised stock exchange” for “section 841 of
25
the Taxes Act” substitute “section 939 of ITA 2007”,
(h)
in the definition of “venture capital trust” for “the meaning given by
section 842AA of the Taxes Act” substitute “the same meaning as in
Part 6 of ITA 2007”, and
(i)
in the definition of “year of assessment” for the words from ““1992-
30
93”” to the end substitute ““year of assessment 1992-93” means the
year of assessment beginning on 6th April 1992 (and any
corresponding expression in which two years are similarly
mentioned is to be read in the same way)”.
      (3)
In subsection (2) for “section 833(2) of the Taxes Act” substitute “section 923
35
of ITA 2007”.
      (4)
In subsection (3) for “section 282 of the Taxes Act” substitute “section 945 of
ITA 2007”.
342
In paragraph 22(1) of Schedule A1 (application of taper relief) in the
definition of “ordinary share capital” for “section 832(1) of the Taxes Act”
40
substitute “section 923 of ITA 2007”.
343
In paragraph 14 of Schedule 4A (deemed disposal of underlying assets
where disposal of interest in settled property: exception) 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
45
respect of income arising from heritage maintenance property)”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
557

344   (1)
Amend Schedule 5B (enterprise investment scheme: re-investment) as
follows.
      (2)
In paragraph 1(2) (application of Schedule)—
(a)
in paragraph (e) after “that Act)” insert “, or the requirements of
section 183 of ITA 2007,”, and
5
(b)
in paragraph (g) after “Taxes Act” insert “or section 175(3) of ITA
2007”.
      (3)
In paragraph 1A (failure of conditions of application)—
(a)
in sub-paragraph (4A) after “Taxes Act” insert “or section 175(3) of
ITA 2007”,
10
(b)
in sub-paragraph (5) for “or section 310(2) of the Taxes Act”
substitute “, section 310(2) of the Taxes Act or section 241(3) of ITA
2007”, and
(c)
in sub-paragraph (7) after “Taxes Act” insert “or section 236(1) of ITA
2007”.
15
      (4)
In paragraph 4 (gains accruing on chargeable event)—
(a)
in sub-paragraph (4) after “Taxes Act” insert “or Part 5 of ITA 2007”
and after “that Chapter”, in each place where it occurs, insert “or that
Part”,
(b)
in sub-paragraph (4A) after “Taxes Act” insert “or Part 5 of ITA
20
2007”, after “that Chapter” insert “or that Part” and for “that Act”
substitute “the Taxes Act or section 245 of ITA 2007”, and
(c)
in sub-paragraph (4C) after “Taxes Act” insert “or Part 5 of ITA
2007”.
      (5)
In paragraph 6 (claims)—
25
(a)
in sub-paragraph (1) after “Taxes Act” insert “or sections 202(1),
203(1) and 204 to 207 of ITA 2007” and for “that Act in respect of
eligible shares” substitute “the Taxes Act or Part 5 of ITA 2007 in
respect of eligible or relevant shares”,
(b)
in sub-paragraph (2) for “That section” substitute “Section 306”, and
30
(c)
after that sub-paragraph insert—
    “(3)
Sections 202(1), 203(1) and 204 to 207 of ITA 2007, as they
so apply, shall have effect as if any reference to the
requirements for the relief were a reference to the
conditions for the application of this Schedule.”
35
      (6)
In paragraph 7(1) (reorganisations)—
(a)
after “the Taxes Act” insert “or Part 5 of ITA 2007”, and
(b)
after “that Chapter” insert “or that Part”.
      (7)
In paragraph 8 (acquisition of share capital by new company)—
(a)
in sub-paragraph (1)(e)(ii) for “subsection (2) of section 306 of the
40
Taxes Act” substitute “section 306(2) of the Taxes Act or section
203(1) of ITA 2007” and for “that section” substitute “section 306 of
the Taxes Act or sections 204 and 205 of ITA 2007”,
(b)
in sub-paragraph (5)(a) after “Taxes Act” insert “or section 203(1) of
ITA 2007”, and
45
(c)
in sub-paragraph (7) after “Taxes Act” insert “or section 185 of ITA
2007”.