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Income Tax Bill


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

586

 

(b)   

in the second column after paragraph (f) insert “or—

(g)   

the Income Tax Act 2007 (so far as relating to

functions previously exercised under the Income and

Corporation Taxes Act 1988).”

Constitutional Reform Act 2005 (c. 4)

5

485        

The Constitutional Reform Act 2005 is amended as follows.

486        

In paragraph 4 of Schedule 7 (protected functions of the Lord Chancellor) at

the end of Part A (general) insert—

          

Income Tax Act 2007

          

Section 637(1)”.

10

487        

In the table in Part 3 of Schedule 14 (appointments by the Lord Chancellor:

offices to which paragraph 2(2)(d) of Schedule 12 to the Act applies) at the

end add—

 

“Chairman of section 637

Section 637(1) of the Income

 
 

tribunal

Tax Act 2007”

 

15

 

Member of section 637

  
 

tribunal

  

Income Tax (Trading and Other Income) Act 2005 (c. 5)

488        

The Income Tax (Trading and Other Income) Act 2005 is amended as

follows.

20

489        

In section 1 (overview of Act) omit subsection (2).

490        

In section 12(3) (profits of mines etc) for “Chapter 1 of Part 10 of ICTA”

substitute “Part 4 of ITA 2007”.

491   (1)  

Amend section 13 (visiting performers) as follows.

      (2)  

In subsection (8) omit the definitions of “payment” and “transfer”.

25

      (3)  

After that subsection insert—

“(9)   

In this section and section 14—

(a)   

references to a payment include references to a payment by

way of loan of money, and

(b)   

references to a transfer do not include references to a transfer

30

of money but, subject to that, include references to—

(i)   

a temporary transfer (as by way of loan), and

(ii)   

a transfer of a right (whether or not a right to receive

money).

(10)   

This section does not apply to payments or transfers of a kind

35

prescribed in regulations under section 899(6) of ITA 2007.”

492        

In section 17(3) (effect of becoming or ceasing to be a UK resident) for “set

off under section 385 of ICTA against” substitute “deducted under section 83

of ITA 2007 from”.

 

 

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

587

 

493        

Omit section 51 (patent royalties).

494   (1)  

Amend section 52 (exclusion of double relief for interest) as follows.

      (2)  

In subsections (1), (5) and (6) for “section 353 of ICTA” substitute “section

383 of ITA 2007”.

      (3)  

In subsection (6) for “section 368(3) of ICTA” substitute “section 387(2) and

5

(3) of that Act”.

495        

In section 87(5) (expenses of research and development) for “section 837A of

ICTA” substitute “section 940 of ITA 2007”.

496        

In section 108(4) (gifts of trading stock etc to charities) omit paragraphs (c)

and (d).

10

497        

In section 179(a) (connected persons) for “section 839 of ICTA” substitute

“section 927 of ITA 2007”.

498   (1)  

Amend section 232 (treatment of trading adjustment income) as follows.

      (2)  

In subsection (3) for “Chapter 1 of Part 10 of ICTA” substitute “Part 4 of ITA

2007”.

15

      (3)  

In subsection (4) for the words from “the trade” to the end substitute “the

trade is relevant UK earnings within section 189(2)(b) of FA 2004,

adjustment income is similarly relevant UK earnings.”

499        

In section 248(3) (debts paid after cessation) for “under section 109A(4) or

(4A) of ICTA” substitute “as a result of section 98 of ITA 2007”.

20

500   (1)  

Amend section 250 (receipts relating to post-cessation expenditure) as

follows.

      (2)  

In subsection (1) for “section 109A of ICTA” substitute “section 96 of ITA

2007”.

      (3)  

In subsection (2)—

25

(a)   

in paragraph (a) for “section 109A(2)(a) or (b) of ICTA” substitute

“section 97(2) or (3) of ITA 2007”,

(b)   

in paragraph (b) for “section 109A(2)(c) of ICTA” substitute “section

97(4) of ITA 2007”, and

(c)   

in paragraph (c) for “section 109A(2)(d) of ICTA” substitute “section

30

97(5) of ITA 2007”.

501        

In section 254(3)(b) (allowable deductions) for “section 90(4) of FA 1995”

substitute “section 261D of TCGA 1992”.

502   (1)  

Amend section 256 (treatment of post-cessation receipts) as follows.

      (2)  

In subsection (1)(b) omit “earned income within section 833(4)(c) of ICTA

35

or”.

      (3)  

In subsection (2) omit “earned income or”.

503        

In section 272(2) (profits of a property business: application of trading

income rules), omit the entry in the table relating to section 51.

504        

In section 322(2) (commercial letting of furnished holiday

40

accommodation)—

(a)   

omit paragraphs (b) and (c), and

 

 

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

588

 

(b)   

for paragraph (f) and the “and” immediately before that paragraph

substitute—

“(f)   

section 189(2)(ba) of FA 2004 (meaning of “relevant

UK earnings” for pension purposes),

(g)   

Part 4 of ITA 2007 ( loss relief: see section 127 of that

5

Act), and

(h)   

section 769(3) of ITA 2007 (jointly held property: see

exception D).”

505        

In section 327(2)(b) (capital allowances and loss relief) for “Chapter 1 of Part

10 of ICTA” substitute “Part 4 of ITA 2007”.

10

506   (1)  

Amend section 328 (earned income and relevant UK earnings for pension

purposes) as follows.

      (2)  

In subsection (2) for “treated as” to the end substitute “relevant UK earnings

within section 189(2)(ba) of FA 2004.”

      (3)  

In the sidenote omit “Earned income and”.

15

507        

In section 333(3) (treatment of property business adjustment income) for

“Chapter 1 of Part 10 of ICTA” substitute “Part 4 of ITA 2007”.

508        

In section 354(2) (other rules about what counts as a “post-cessation receipt”)

after “section 250 (receipts relating to post-cessation expenditure)” insert

“(reading the reference in subsection (1) to section 96 of ITA 2007 as a

20

reference to section 125 of that Act)”.

509        

In section 372(2) (building society dividends) for the words from “has” to the

end substitute “includes any distribution (whether or not described as a

dividend)”.

510   (1)  

Amend section 397 (tax credits for qualifying distributions: UK residents

25

and eligible non-UK residents) as follows.

      (2)  

In subsection (2) omit paragraph (b) and the “or” immediately before it.

      (3)  

In subsection (4) after “ICTA” insert “or section 56(3) of ITA 2007”.

      (4)  

In subsection (6) for the words from “section 231AA” to “umbrella scheme),”

substitute—

30

“section 504(4) of ITA 2007 (disapplication of certain provisions

for income of unauthorised unit trusts),

section 592 of ITA 2007 (no tax credits for borrower under stock

lending arrangement),

section 593 of ITA 2007 (no tax credits for interim holder under

35

repo),

section 594 of ITA 2007 (no tax credits for original owner under

repo),”.

511   (1)  

Amend section 399 (qualifying distributions received by persons not entitled

to tax credits) as follows.

40

      (2)  

In subsection (4) for the words from “and the distribution” to “treated”

substitute “, the amount or value of the distribution is treated for the

purposes of Chapters 3, 4 and 6 of Part 9 of ITA 2007 (special rates for

trustees’ income)”.

      (3)  

In subsection (7) for the words from “section 231AA(1A)” to the end

45

 

 

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

589

 

substitute—

“section 504(4) of ITA 2007 (disapplication of certain provisions

for income of unauthorised unit trusts),

section 592 of ITA 2007 (no tax credits for borrower under stock

lending arrangement),

5

section 593 of ITA 2007 (no tax credits for interim holder under

repo), and

section 594 of ITA 2007 (no tax credits for original owner under

repo).”

512   (1)  

Amend section 400 (non-qualifying distributions) as follows.

10

      (2)  

In subsection (4) for the words from “income to which” to the end substitute

“assessed (in whole or in part) at the dividend trust rate by virtue of Chapter

3 of Part 9 of ITA 2007 (trustees’ accumulated or discretionary income to be

charged at special rates), the trustees’ liability for income tax at that rate is

reduced”.

15

      (3)  

After subsection (6) insert—

“(7)   

Subsection (2) is subject to section 504(4) of ITA 2007 (disapplication

of certain provisions for income of unauthorised unit trusts).”

513        

In section 401 (relief: qualifying distribution after linked non-qualifying

distribution) after subsection (6) insert—

20

“(6A)   

The reduction under this section is given effect at Step 6 of the

calculation in section 23 of ITA 2007.”

514        

In section 410(3)(b) (stock dividend income arising to trustees) for the words

from “income” to the end substitute “accumulated or discretionary income

(as defined in section 480 of ITA 2007 but excluding income arising under a

25

trust established for charitable purposes only or an unauthorised unit trust

in relation to which section 504 of that Act applies)”.

515   (1)  

Amend section 414 (stock dividends from UK resident companies: income

tax to be treated as paid) as follows.

      (2)  

In subsection (1) for “income to which section 686 of ICTA applies”

30

substitute “accumulated or discretionary income (as defined in section 480

of ITA 2007)”.

      (3)  

In subsection (4) after “fall to be made” insert “at Step 2 or 3 of the calculation

in section 23 of ITA 2007 (calculation of income tax liability)”.

516        

In section 418(5) (loans to participator in close company: relief where

35

borrowers liable as settlors) for “rate applicable to trusts” substitute “trust

rate”.

517        

In section 421(4) (loans to participator in close company: income tax treated

as paid) after “fall to be made” insert “at Step 2 or 3 of the calculation in

section 23 of ITA 2007 (calculation of income tax liability)”.

40

518   (1)  

Amend section 426 (annuity payments received after deduction of tax) as

follows.

      (2)  

For “Income tax deducted under either of the following sections” substitute

“In accordance with section 781 of ITA 2007 a sum representing income tax

deducted under section 834 of that Act”.

45

 

 

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

590

 

      (3)  

Omit the words after “recipient”.

519        

In section 446 (strips of government securities: relief for losses) for

subsection (2) substitute—

“(2)   

If a person makes a claim under this section, the relief is given by

deducting the loss in calculating the person’s net income for the tax

5

year in which the disposal occurs (see Step 2 of the calculation in

section 23 of ITA 2007).”

520        

In section 454 (listed securities held since 26th March 2003: relief for losses)

for subsection (4) substitute—

“(4)   

If a claim under this section is made by a person other than a trustee,

10

the relief is given by deducting the loss in calculating the person’s net

income for the tax year in which the disposal occurs (see Step 2 of the

calculation in section 23 of ITA 2007).”

521   (1)  

Amend section 457 (disposal of deeply discounted securities by trustees) as

follows.

15

      (2)  

Omit subsection (3).

      (3)  

For subsection (5) substitute—

“(5)   

If the trustees are trustees of a scheme in relation to which section 504

of ITA 2007 applies, subsection (2) does not apply to profits which

are shown in the scheme’s accounts as income available for payment

20

to unit holders or for investment.”

522        

In section 459(2) (profits from deeply discounted securities: transfer of assets

abroad) for “sections 739 and 740 of ICTA (transfer of assets abroad) have”

substitute “Chapter 2 of Part 12 of ITA 2007 (transfer of assets abroad) has”.

523        

In section 460(2) (profits from deeply discounted securities: minor

25

definitions) for “section 709(1)” substitute “section 840ZA”.

524        

After section 465 insert—

“465A   

Amounts for which individuals liable to be treated as highest part of

total income

(1)   

This section applies if—

30

(a)   

an individual is liable for tax under this Chapter in respect of

an amount, and

(b)   

the individual is treated by section 530 as having paid income

tax at the savings rate on the amount.

(2)   

The amount is treated as the highest part of the individual’s total

35

income.

(3)   

Subsection (2) has effect for all income tax purposes except the

purposes of sections 535 to 537 (gains from contracts for life

insurance etc: top slicing relief).

(4)   

See section 946 of ITA 2007 (relationship between highest part rules)

40

for the relationship between—

(a)   

the rule in subsection (2), and

(b)   

other rules requiring particular income to be treated as the

highest part of a person’s total income.”

 

 

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

591

 

525        

In section 466(2) (person liable: personal representatives) for “lower rate”

substitute “savings rate”.

526   (1)  

Amend section 467 (liability of trustees for tax on gains from contracts for

life insurance etc) as follows.

      (2)  

After subsection (1) insert—

5

“(1A)   

If trustees are liable for tax under this Chapter, the gain is treated for

income tax purposes as income of the trustees.”

      (3)  

For subsection (7) substitute—

“(7)   

If trustees are liable for tax under this Chapter, it is charged at the

savings rate if—

10

(a)   

condition A is met, or

(b)   

condition D is met and the trustees are trustees of a charitable

trust.”

527        

In section 468 (gains from contracts for life insurance etc: non-UK resident

trustees and foreign institutions)—

15

(a)   

in subsection (2) for “Sections 739 and 740”, “prevent” and “apply”

substitute “Chapter 2 of Part 12 of ITA 2007”, “prevents” and

“applies” respectively, and

(b)   

in subsections (3) and (4) for “sections 739 and 740 apply” substitute

“Chapter 2 of Part 12 of ITA 2007 applies”.

20

528        

In section 482 (excepted group life policies: conditions about persons

intended to benefit)—

(a)   

in subsection (6) omit the definition of “tax advantage”, and

(b)   

after that subsection insert—

“(7)   

In this section “tax advantage” has the meaning given by

25

section 840ZA of ICTA.”

529        

In section 520(4) (the property categories) after the definition of “internal

linked fund” insert—

““investment trust” has the meaning given by section 842 of

ICTA,”.

30

530   (1)  

Amend section 530 (income tax treated as paid) as follows.

      (2)  

In subsection (1) for “lower rate” substitute “savings rate”.

      (3)  

In subsection (4) after “fall to be made” insert “at Step 2 or 3 of the calculation

in section 23 of ITA 2007 (calculation of income tax liability)”.

531   (1)  

Amend section 535 (top slicing relief) as follows.

35

      (2)  

After subsection (2) insert—

“(2A)   

If the relief is given by a reduction in income tax, it is given effect at

Step 6 of the calculation in section 23 of ITA 2007.”

      (3)  

In subsection (3)—

(a)   

for “LRL”, in both places where it occurs, substitute “SRL”, and

40

(b)   

for “lower rate” substitute “savings rate”.

 

 

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

592

 

      (4)  

After subsection (6) insert—

“(7)   

For the purposes of the calculations mentioned in subsection (1) any

relief under Chapter 2 or 3 of Part 8 of ITA 2007 (which relate to gift

aid and other gifts to charities) is ignored.”

532        

In section 536(1) (top slicing relieved liability: one chargeable event) in

5

paragraph (b) of Step 2 for “lower rate” substitute “savings rate”.

533        

In section 537 (top slicing relieved liability: two or more chargeable events)

in paragraph (b) of Step 2 for “lower rate” substitute “savings rate”.

534        

For section 539 (relief for deficiencies) substitute—

“539    

Relief for deficiencies

10

(1)   

An individual is entitled to a tax reduction for a tax year in which a

deficiency arises from a policy or contract on a chargeable event if—

(a)   

the condition in subsection (2) is met,

(b)   

the individual would (apart from this section) be liable to

income tax at the higher rate or the dividend upper rate (or

15

both) for the tax year, and

(c)   

the individual makes a claim.

(2)   

The condition is that, if a gain had arisen instead on the chargeable

event—

(a)   

the individual would have been liable to income tax on the

20

gain for the year, or

(b)   

the individual would have been so liable apart from the

requirement in section 465(1) that the individual must be UK

resident in the tax year in which the gain arises.

(3)   

The tax reduction is given effect at Step 6 of the calculation in section

25

23 of ITA 2007.

(4)   

See section 540 for the cases in which a deficiency is treated as arising

from a policy or contract on a chargeable event, section 541 for how

the deficiency is calculated and section 469(5) for the apportionment

of deficiencies in cases where two or more persons are interested in

30

a policy or contract.

(5)   

The amount of the tax reduction is calculated as follows.

   

   

Step 1

   

Attribute to the amount of the deficiency an amount of the

35

individual’s income for the tax year which is liable at the dividend

upper rate, so far as is possible.

   

   

Step 2

   

If there is an amount of the deficiency remaining after Step 1,

40

attribute to the remaining amount of the deficiency an amount of the

individual’s savings income for the tax year which is liable at the

higher rate, so far as is possible.

   

   

Step 3

45

 

 

 
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