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
565

(b)
for “charity”, in both places where it occurs, substitute “charitable
company”,
(c)
in paragraph (a) for “charity’s” substitute “charitable company’s”,
and
(d)
in that paragraph for “chargeable” substitute “accounting”.
5
      (6)
In subsection (4)(b)—
(a)
for “charity’s” substitute “charitable company’s”, and
(b)
for “chargeable” substitute “accounting”.
      (7)
In subsection (5) for “a chargeable” substitute “an accounting”.
      (8)
In subsection (6)—
10
(a)
in the appropriate place insert—
““charitable company” means any body of persons
established for charitable purposes only;”,
(b)
omit the definition of “charity”,
(c)
in the definition of “gross income”, for “charity” substitute
15
“charitable company”, and
(d)
in the definition of “income”—
(i)
for “charity” substitute “charitable company”, and
(ii)
omit paragraph (a) and the “or” at the end of that paragraph.
      (9)
In subsection (7) omit the words from “for the year” to “companies,”.
20
390   (1)
Amend Schedule 15 (the corporate venturing scheme) as follows.
      (2)
In paragraph 16(4) (the unquoted status requirement) after “Taxes Act 1988”
insert “or section 184(3) of ITA 2007”.
      (3)
In paragraph 55(4) (provision supplementary to paragraph 54) after “Taxes
Act 1988” insert “or Part 5 of ITA 2007”.
25
      (4)
In paragraph 56(3) (value received by other persons)—
(a)
after “Taxes Act 1988”, in the first place where it occurs, insert “or
Part 5 of ITA 2007”,
(b)
for “section 299 of that Act” substitute “section 299 of the Taxes Act
1988 or section 209 of ITA 2007”,
30
(c)
for “section 300(2)(a) of that Act” substitute “section 300(2)(a) of the
Taxes Act 1988 or section 216(2)(a) of ITA 2007”, and
(d)
after “section 300 of the Taxes Act 1988” insert “, section 214 of ITA
2007”.
      (5)
In paragraph 102 (minor definitions etc) after sub-paragraph (8) insert—
35
    “(9)
References in this Schedule to Part 5 of ITA 2007 or any provision
of that Part are to a Part or provision that applies only in relation
to shares issued after 5 April 2007.”
391
In paragraph 41 of Schedule 22 (tonnage tax: the requirement not to enter
into tax avoidance arrangements) for sub-paragraph (3) substitute—
40
“(3)
In this paragraph “tax advantage” has the meaning given by section
840ZA of the Taxes Act 1988.”

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
566

Capital Allowances Act 2001 (c.2)
392
The Capital Allowances Act 2001 is amended as follows.
393   (1)
Amend section 4 (capital expenditure) as follows.
      (2)
In subsection (4) for “section 348 or 349(1) of ICTA (annual payments)”
substitute “Chapter 6 of Part 14 of ITA 2007 (deduction from annual
5
payments or patent royalties) or under section 839 of that Act (certain
royalties etc where usual place of abode of owner is abroad)”.
      (3)
Omit subsection (5).
394
In section 70V(4) (tax avoidance involving international leasing) for
“Chapter 1” to the end substitute “section 840ZA of ICTA”.
10
395
Omit section 70YI(4) (application of section 839 of ICTA).
396
In section 138(2)(b) (limit on amount deferred) for “section 385 or” substitute
“section 83 of ITA 2007 or section”.
397
In section 156(1)(a) and (c) (connected persons) for “section 839 of ICTA”
substitute “section 575”.
15
398
In section 220(8)(a) (allocation of expenditure to a chargeable period) omit “,
within the meaning of section 840 of ICTA”.
399
In section 232(1)(a) (meaning of connected person) for “section 839 of ICTA”
substitute “section 575”.
400
In section 258 (special leasing: income tax) after subsection (3) insert—
20
“(3A)
The allowance or (as the case may be) the proportionate part of the
allowance is given effect at Step 2 of the calculation in section 23 of
ITA 2007.”
401
In section 266(5)(a) (election where predecessor and successor are connected
persons) for “section 839 of ICTA” substitute “section 575”.
25
402
In section 355 (buildings for miners etc: carry-back of allowances) after
subsection (2) insert—
“(2A)
For income tax purposes the allowance is given effect at Step 2 of the
calculation in section 23 of ITA 2007.”
403
In section 437 (research and development allowances) for subsection (2)
30
substitute—
“(2)
In this Part “research and development”—
(a)
means activities that fall to be treated as research and
development in accordance with generally accepted
accounting practice, and
35
(b)
includes oil and gas exploration and appraisal.
(3)
But—
(a)
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”
40
for the purposes of this Part, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
567

(b)
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 Part.”
404
In section 479 (persons having qualifying non-trade expenditure: income
5
tax) after subsection (2) insert—
“(2A)
The allowance is given effect at Step 2 of the calculation in section 23
of ITA 2007.”
405
At the beginning of Chapter 6 of Part 12 insert—
“Orders and regulations
10
570B
Orders and regulations made by Treasury or Commissioners
(1)
Any orders or regulations made by the Treasury or the
Commissioners for Her Majesty’s Revenue and Customs under this
Act must be made by statutory instrument.
(2)
Any orders or regulations made by the Treasury or the
15
Commissioners under this Act are subject to annulment in
pursuance of a resolution of the House of Commons.
(3)
Subsection (2) does not apply to any order made under section
82(4)(d).”
406
In section 574(1) at the end insert “(but, for the purposes of section 575, this
20
definition applies only where expressly indicated)”.
407
For section 575 (connected persons) substitute—
“575
Meaning of “connected” persons
(1)
For the purposes of this Act whether a person is connected with
another is determined in accordance with this section unless
25
otherwise indicated.
(2)
An individual (“A”) is connected with another individual (“B”) if—
(a)
A is B’s spouse or civil partner,
(b)
A is a relative of B,
(c)
A is the spouse or civil partner of a relative of B,
30
(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.
(3)
A person, in the capacity as trustee of a settlement, is connected
with—
35
(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,
(d)
any non-UK resident company which, if it were UK resident,
40
would be a close company whose participators include the
trustees of the settlement,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
568

(e)
any body corporate controlled (within the meaning of section
574) by a company within paragraph (c) or (d),
(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
5
(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 settlements in relation to the principal
settlement.
(4)
A person who is a partner in a partnership is connected with—
10
(a)
any partner in the partnership,
(b)
the spouse or civil partner of any individual who is a partner
in the partnership, and
(c)
a relative of any individual who is a partner in the
partnership.
15

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,
20
(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
25
companies and the 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—
30
(a)
A has control of the company, or
(b)
A together with persons connected with A have control of the
company.
(7)
In relation to a company, any two or more persons acting together to
secure or exercise control of the company are connected with—
35
(a)
one another, and
(b)
any person acting on the directions of any of them to secure
or exercise control of the company.
575A
Section 575: supplementary
(1)
In section 575 and this section—
40
“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 where otherwise indicated),
45
“principal settlement” has the meaning given by paragraph 1 of
Schedule 4ZA to TCGA 1992,
“relative” means brother, sister, ancestor or lineal descendant,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
569

“settlement” has the same meaning as in Chapter 5 of Part 5 of
ITTOIA 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 575—
5
(a)
a unit trust scheme is treated as if it were a company, and
(b)
the rights of the unit holders are treated as if they were shares
in the company.
(3)
For the purposes of section 575 “trustee”, in the case of a settlement
in relation to which there would be no trustees apart from this
10
subsection, means any person—
(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.
15

Section 466(4) of ITA 2007 does not apply for the purposes of this
subsection.
(4)
If any provision of section 575 provides that a person (“A”) is
connected with another person (“B”), it also follows that B is
connected with A.”
20
408
In section 577(1) (other definitions)—
(a)
omit the definition of “tax year”, and
(b)
omit the definition of “the tax year 2001-02”.
409   (1)
Amend Schedule 1 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 in the appropriate place insert—
25

“ITA 2007
The Income Tax Act 2007”.

      (3)
In Part 2—
(a)
in the entry for “body of persons”, in the second column, before
“section 832(1) of ICTA” insert “section 923 of ITA 2007 and”,
(b)
in the entry for “connected persons (general meaning)”, in the second
30
column, for “section 575(1)” substitute “section 575”,
(c)
in the entry for “offshore installation”, in the second column, before
“section 837C of ICTA” insert “sections 935 and 936 of ITA 2007 and”,
(d)
in the entry for “overseas property business”, in the second column,
at the end insert “(as applied by section 923 of ITA 2007)”,
35
(e)
in the entry for “research and development”, in the second column,
for “437(2) and section 837A of ICTA” substitute “437(2) and (3)”,
(f)
in the entry for “Schedule A business”, in the second column, before
“section 832(1) of ICTA” insert “section 923 of ITA 2007 and”,
(g)
in the entry for “tax year”, in the second column, for “section 577(1)”
40
substitute “section 4(2) of ITA 2007 (as applied by section 923 of that
Act)”,
(h)
in the entry for “UK property business”, in the second column, omit
“section 832(1) of ICTA and” and at the end insert “(as applied by
section 923 of ITA 2007)”,
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
570

(i)
in the entry for “United Kingdom”, in the second column, for
“section 830 of ICTA and section 41 of ITEPA 2003” substitute
“section 947 of ITA 2007 and section 830(1) of ICTA”, and
(j)
in the entry for “within the charge to tax”, in the second column,
before “section 832(1) of ICTA” insert “section 943 of ITA 2007 and”.
5
Finance Act 2002 (c.23)
410
The Finance Act 2002 is amended as follows.
411
Omit section 98.
412
In section 142 (interpretation) at the end insert “, and “ITA 2007” means the
Income Tax Act 2007”.
10
413
In paragraph 19 of Schedule 12 (tax relief for expenditure on research and
development) for sub-paragraph (2) substitute—
    “(2)
For the purposes of this Schedule whether a person is connected
with another is determined in accordance with section 839 of the
Taxes Act 1988.”
15
414
In paragraph 27 of Schedule 13 (tax relief for expenditure on vaccine
research etc) for sub-paragraph (2) substitute—
    “(2)
For the purposes of this Schedule whether a person is connected
with another is determined in accordance with section 839 of the
Taxes Act 1988.”
20
415   (1)
Amend Schedule 16 (community investment tax relief) as follows.
      (2)
In paragraph 1(1), for “An individual or company” substitute “A company”.
      (3)
In paragraph 2—
(a)
in sub-paragraph (1), for “person” substitute “company” and for
“he”, in both places where it occurs, and “him” substitute “it”, and
25
(b)
in sub-paragraph (2), for “person”, in each place where it occurs,
substitute “company”.
      (4)
For paragraphs 4 to 7 substitute—
“Application of Chapter 2 of Part 7 of ITA 2007
4     (1)
Chapter 2 of Part 7 of ITA 2007 applies for the purposes of this
30
Schedule as it applies for the purposes of that Part.
      (2)
Chapter 2 of Part 7 of that Act makes provision with respect to—
(a)
applications and criteria for accreditation as community
development finance institutions (see section 340),
(b)
the terms and conditions of accreditation (see section 341),
35
(c)
the period of accreditation (see section 342), and
(d)
the delegation of the Secretary of State’s functions under
that Chapter (see section 343).
      (3)
In this Schedule “accreditation period” has the meaning given by
section 342(1) of ITA 2007.”
40
      (5)
In paragraph 9(5), for “person” substitute “company”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
571

      (6)
For paragraph 12(2) substitute—
    “(2)
The CDFI must not issue tax relief certificates in respect of
investments made in the CDFI in an accreditation period if the
aggregate value of—
(a)
those investments, and
5
(b)
any investments to which sub-paragraph (2A) applies,

will exceed the limit for that period.
    (2A)
This sub-paragraph applies to investments which—
(a)
have been made in the CDFI in the accreditation period,
and
10
(b)
in respect of which the CDFI has issued tax relief
certificates under section 348 of ITA 2007 (which makes in
relation to income tax provision corresponding to that
made by this paragraph).
     (2B)
The limit for an accreditation period is—
15
(a)
£10 million if the CDFI is accredited for the period as a
retail community development finance institution (see
section 340(8) of ITA 2007 as applied by paragraph 4), and
(b)
£20 million in any other case.”
      (7)
In paragraph 14—
20
(a)
in sub-paragraph (4), for “he” substitute “it” and for “his” substitute
“its”, and
(b)
in sub-paragraph (6), for “his” substitute “its”.
      (8)
Omit paragraph 19.
      (9)
In paragraph 20(1), omit paragraph (a).
25
     (10)
In paragraph 21—
(a)
in sub-paragraph (2), omit “tax year or”, in each place where it
occurs, and
(b)
in sub-paragraph (3), for “a tax year or” substitute “an”.
     (11)
In paragraph 22(1) and (2), for “a tax year or” substitute “an” and for “that
30
year or period” substitute “that period”.
     (12)
In paragraph 23—
(a)
in sub-paragraph (1), for “a tax year or” substitute “an” and, in
paragraph (b), omit “tax year or”,
(b)
in sub-paragraph (2), for “a tax year or” substitute “an” and for “that
35
year or period” substitute “that period”, and
(c)
in sub-paragraph (3), for “a tax year or” substitute “an” and for “that
year or period” substitute “that period”.
     (13)
In paragraph 24—
(a)
in sub-paragraph (1), omit “tax year or” in both places where it
40
occurs, and
(b)
in sub-paragraph (2)—
(i)
omit “tax year or” in both places where it occurs, and
(ii)
in paragraph (b), omit “year or” in both places where it
occurs.
45