Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 10 — Special rules about settlements and trustees
642

(b)
that was the case only because the trustees’ section 686
income for that year was insufficient or they had no section
686 income for that year.

“Section 686 income” means income to which section 686 of ICTA
applies.”
5
      (6)
It applies as if for subsection (4) there were substituted—
“(4)
Condition B is that—
(a)
for no tax year prior to the tax year 2007-08 has the allowable
expense been used to reduce the trustees’ liability to tax, and
(b)
the allowable expense has not been set against the trustees’
10
trust rate income for a tax year prior to the current tax year as
a result of this section.”
Share incentive plans: definition of “applicable period”
103   (1)
This paragraph applies for the purposes of section 489 if the relevant shares
(see subsection (1) of that section) were acquired by the trustees before 11
15
May 2001.
      (2)
That section applies in relation to those shares with the following
modifications.
      (3)
It applies as if subsection (2) were omitted.
      (4)
It applies as if in subsection (3) the words “If any were” were omitted.
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      (5)
It applies as if in subsection (4)—
(a)
for “If none were” there were substituted “But if when the trustees
acquired the relevant shares none of the shares in the relevant
company were readily convertible assets”, and
(b)
in paragraph (b) for “any shares in the relevant company” there were
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substituted “the relevant shares”.
      (6)
It applies as if in subsection (5) for “(2) to” there were substituted “(3) and”.
Discretionary payments: trustees’ tax pool
104   (1)
Section 497 applies with the following modification in relation to any
trustees if the current tax year is the tax year 2007-08.
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      (2)
It also so applies if—
(a)
the current tax year is a tax year subsequent to the tax year 2007-08,
and
(b)
the trustees have been UK resident for no tax year prior to the current
tax year or the last tax year for which they were UK resident is a tax
35
year prior to the tax year 2007-08.
      (3)
It applies as if in subsection (1) for Step 1 there were substituted—

“Step 1

Take the amount of the trustees’ final section 687(3) tax pool and
deduct from that amount (but not so that it goes below nil) the total
40
of all tax (if any) treated under section 687(2)(a) of ICTA as being
paid as a result of payments made by the trustees in the tax year
2006-07.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 11 — Special rules about charitable trusts etc
643


“The amount of the trustees’ final section 687(3) tax pool” is the total
amount—
(a)
available to the trustees under section 687(3) of ICTA for
setting against tax assessable on them under section 687(2)(b)
of that Act for the tax year 2006-07, or
5
(b)
which would have been so available had tax been so
assessable.”
      (4)
It applies as if subsections (2) and (3)(b) were omitted.
Part 11
Special rules about charitable trusts etc
10
Transactions with substantial donors
105
Section 543(1)(g) and (h) and sections 549 to 557 (non-charitable
expenditure: transactions with substantial donors) do not have effect in
relation to—
(a)
a transaction occurring before 22 March 2006, or
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(b)
a transaction entered into in pursuance of a contract made before 22
March 2006 (otherwise than in pursuance of a variation on or after
that date).
106
For the purposes of section 549 a person may meet the definition of
“substantial donor” by reference to gifts made at a time before this Act comes
20
into force.
Non-charitable expenditure
107   (1)
This paragraph applies if, as a result of sections 562 to 564, an amount of
expenditure for the tax year 2007-2008 or any subsequent tax year (“the carry
back tax year”) is treated as non-charitable expenditure for the tax year 2005-
25
2006 or any earlier tax year.
      (2)
The amount of relief or exemption to be disallowed in respect of the tax year
2005-2006 or any earlier tax year is not to exceed the amount which would
have been disallowed in respect of that tax year if—
(a)
sections 562 to 564 had not applied in relation to the carry back tax
30
year, and
(b)
the amount of expenditure for the carry back tax year to be treated as
non-charitable expenditure for an earlier tax year had instead been
calculated in accordance with the provisions mentioned in sub-
paragraph (3).
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      (3)
Those provisions are—
(a)
sections 505 and 506 of ICTA, and
(b)
Part 3 of Schedule 20 to that Act,

as those provisions would have had effect in relation to the carry back tax
year if the amendments made to them by section 55 of FA 2006 had not been
40
made and the amendments made to them by this Act had not been made.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 12 — Manufactured payments and repos
644

Part 12
Manufactured payments and repos
Tax credits: stock lending arrangements and repos
108
Sections 592 and 593 do not apply if the qualifying distribution was made
before 8 April 1998.
5
109   (1)
Section 592(3) does not apply if the qualifying distribution was received by
the borrower before the relevant date.
      (2)
The relevant date is—
(a)
if the borrower is an individual, 6 November 2003, and
(b)
if the borrower is not an individual, 17 March 2004.
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110   (1)
Section 593(3) does not apply if the qualifying distribution was received by
the interim holder before the relevant date.
      (2)
The relevant date is—
(a)
if the interim holder is an individual, 6 November 2003, and
(b)
if the interim holder is not an individual, 17 March 2004.
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Deemed manufactured payments: stock lending arrangements
111
Section 596 does not apply if the stock lending arrangement was made
before 1 July 1997.
112   (1)
Section 597 does not apply if the stock lending arrangement was made
before 5 December 2005.
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      (2)
In relation to a stock lending arrangement made on or after 5 December 2005
but before 22 March 2006, section 597 has effect with the omission of
subsection (6).
      (3)
If—
(a)
a stock lending arrangement was made before 5 December 2005 in
25
respect of any securities (“the original securities”), and
(b)
on or after that date the lender under the stock lending arrangement
transfers securities (“the substituted securities”) in substitution for
some or all of the original securities,

section 597 has effect as if that arrangement were made on the date of the
30
substitution (and the substituted securities were the relevant securities).
113
Sections 596(5) and 599 do not apply in relation to any arrangement made
before 22 March 2006.
Deemed manufactured payments: repos
114   (1)
Section 602 does not apply if—
35
(a)
the securities are UK shares or UK securities, and
(b)
the agreement to sell them was entered into by the original owner
before 1 May 1995.
      (2)
Section 602 does not apply if—
(a)
the securities are overseas securities, and
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Income Tax Bill
Schedule 2 — Transitionals and savings
Part 12 — Manufactured payments and repos
645

(b)
the agreement to sell them was entered into by the original owner
before 6 November 1996.
115   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
sections 601 and 602) there is a repo in respect of the securities.
5
      (2)
Section 569 has effect as if for subsection (4) there were substituted—
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
related agreement, or
10
(b)
exercises an option to buy back the securities which was
acquired under the agreement or a related agreement.”
116   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether section 602 applies.
      (2)
Section 601 applies with these modifications.
15
      (3)
It applies as if in subsection (1)(c) for “the first or second set of relevant
conditions” there were substituted “subsection (2)”.
      (4)
It applies as if in subsection (2) for “This is the first set of relevant conditions”
there were substituted “These are the conditions”.
      (5)
It applies as if subsection (3) were omitted.
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117   (1)
This paragraph applies if—
(a)
an agreement to sell securities was made before 27 June 2006,
(b)
the person from whom the securities are to be repurchased (“A”) is
not the person to whom the original owner agreed to sell the
securities, and
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(c)
A did not become the person from whom the securities are to be
repurchased in consequence of an agreement made on or after 27
June 2006.
      (2)
Section 602 has effect with the omission of subsections (3) and (4).
118   (1)
This paragraph applies if an agreement to sell securities was made before 9
30
April 2003.
      (2)
Section 605 has effect with the omission—
(a)
in subsection (1), of the words “or B”, and
(b)
of subsection (3).
Price differences under repos
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119
Section 607 does not apply if the agreement to sell the securities was entered
into before 1 May 1995.
120   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
section 607) there is a repo in respect of the securities.
40

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 12 — Manufactured payments and repos
646

      (2)
Section 569 has effect as if for subsection (4) there were substituted—
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
related agreement, or
5
(b)
is required to buy back the securities under an obligation
imposed as a result of the exercise of an option acquired
under the agreement or a related agreement.”
121   (1)
This paragraph applies if section 607 applies and the agreement to sell the
securities was made before 9 April 2003.
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      (2)
That section has effect with the omission of subsections (6) and (7).
122   (1)
This paragraph applies if the agreement to sell the securities to the interim
holder was made before 9 April 2003.
      (2)
Section 608(3) has effect as if for “benefits and risks” there were substituted
“benefits or risks”.
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123   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003.
      (2)
Section 611 applies with these modifications.
      (3)
It applies as if in subsection (1) after “modifications” there were inserted “in
a case where there is a sale and repurchase arrangement in respect of
20
securities”.
      (4)
It applies as if after subsection (1) there were inserted—
“(1A)
For the purposes of subsection (1) there is a sale and repurchase
arrangement in respect of securities if—
(a)
a person (“the original owner”) has sold the securities to
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another person under an agreement,
(b)
the securities are UK shares, UK securities or overseas
securities, and
(c)
the original owner or a person connected with the original
owner—
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(i)
is required to buy back the securities by the
agreement or a related agreement, or
(ii)
acquires, under the agreement or a related agreement,
an option to buy back the securities.
(1B)
Section 570 (meaning of “buying back” securities etc) applies in the
35
context of subsection (1A) as it applies in the context of a repo.”
Powers to modify repo provisions
124   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
section 612) there is a repo in respect of the securities.
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      (2)
This paragraph also applies if arrangements are made before 9 April 2003,
for the purpose of determining whether (for the purposes of section 613) the
case involves redemption arrangements.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
647

      (3)
Section 569 applies with these modifications.
      (4)
It applies as if for subsection (2) there were substituted—
“(2)
Condition A is that a person (“the original owner”) has sold the
securities to another person (“the interim owner”) under an
agreement.”
5
      (5)
It applies as if for subsection (4) there were substituted—
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
related agreement, or
10
(b)
acquires, under the agreement or a related agreement, an
option to buy back the securities.”
Part 13
Tax avoidance
Transactions in securities: general
15
125   (1)
Despite anything in this Act, Chapter 1 of Part 17 of ICTA (cancellation of tax
advantages from certain transactions in securities) continues to apply so far
as required for the purposes of notices under section 703(3) of that Act
requiring adjustments to be made affecting tax years before the tax year
2007-08; and a counteraction notice under Chapter 1 of Part 12 (transactions
20
in securities) may not require such an adjustment to be made.
      (2)
Subject to that, Chapter 1 of Part 12 applies—
(a)
whether or not the transaction or transactions, in consequence of
which, or of the combined effect of which, the tax advantage has been
or will be obtained, occur on or after 6 April 2007, and
25
(b)
whether or not the tax year to which that advantage relates (“the tax
advantage year”) is a year before the tax year 2007-08,

but see section 631(5) (under which no assessments may be made as a result
of a counteraction notice later than 6 years after the tax advantage year).
      (3)
This paragraph is to be interpreted as if it were part of Chapter 1 of Part 12.
30
Transactions in securities: meaning of relevant companies for the purposes of sections 622 and
623
126   (1)
In its application to a transaction in securities that took place before 29 April
1996 or two or more transactions in securities the first of which took place
before that date, section 624(1)(b)(i) (meaning of “relevant company”)
35
applies with the substitution for the words “listed in the Official List of” of
the words “authorised to be dealt in on”.
      (2)
In its application to a transaction in securities that took place before 1
January 1997 or two or more transactions in securities the first of which took
place before that date, section 624(1) applies as if the companies referred to
40
in paragraph (b) included companies none of whose shares or stocks are
dealt in on the Unlisted Securities Market regularly or from time to time.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
648

      (3)
In this paragraph “companies” and “transaction in securities” have the same
meaning as in Chapter 1 of Part 12 (see section 646).
Transactions in securities: statement of case by tribunal for opinion of High Court or Court of
Session
127
If a tribunal has made a determination under section 705(3) of ICTA
5
(determination on rehearing of appeal against notice under section 703 of
ICTA) within 30 days before 6 April 2007, the appellant or an officer of
Revenue and Customs may require the tribunal to state and sign a case
under section 640(2) of this Act, despite not having declared dissatisfaction
with the determination.
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Transactions in securities: appeals to House of Lords
128   (1)
This paragraph applies until paragraph 47 of Schedule 9 to the
Constitutional Reform Act 2005 (c. 4) comes into force.
      (2)
Section 643 has effect until that time as if—
(a)
references in subsections (1), (2) and (4) to the Supreme Court were
15
references to the House of Lords, and
(b)
in subsection (3) the words “unless leave has been given under and
in accordance with section 1 of the Administration of Justice
(Appeals) Act 1934” were substituted for the words “except with the
leave of the Court of Appeal or the Supreme Court”.
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      (3)
Section 644(4) has effect until that time as if the reference to the Supreme
Court were a reference to the House of Lords.
Transfers of assets abroad: non-transferors receiving benefit- exclusion of income arising before
10 March 1981
129   (1)
Section 665 (non-transferors receiving a benefit as a result of relevant
25
transactions) applies whenever the relevant transfer referred to in that
section took place.
      (2)
But the relevant income referred to in section 666(1) (by reference to which
the amount of income treated as arising under section 665 is determined)
does not include income that arose before 10 March 1981.
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Transfers of assets abroad: whether trustees are “persons abroad”
130   (1)
This paragraph deals with whether section 475 (residence of trustees)
applies in determining if the single person mentioned in section 474 is a
person abroad (as defined in section 651) for the purposes of sections 660 to
663 (charge where individuals receive capital sums as a result of transfers of
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assets abroad etc) (and accordingly whether section 651(2)(b) applies for
those purposes).
      (2)
Section 475 does not apply for the purposes of sections 660 to 663 in relation
to income payable before 15 June 1989.
      (3)
Section 475 does not apply for the purposes of sections 660 to 663 in relation
40
to income payable on or after 15 June 1989 if—
(a)
the individual received or became entitled to receive the capital sum
mentioned in section 662(1) before that date, and