Income Tax Bill

House of Commons

Session 2006 - 07
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Income Tax Bill

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
649

(b)
the capital sum was wholly repaid or the right to it waived before 1
October 1989.
      (4)
In sub-paragraph (3) “capital sum” has the meaning given in section 662, and
subsection (4) of that section applies for the purposes of that sub-paragraph
as it applies for the purposes of section 662(1).
5
131   (1)
Sub-paragraph (2) deals with whether section 474 (trustees of settlement to
be treated as a single and distinct person) and section 475 (residence of
trustees) apply for the purposes of sections 664 to 668 (charge where benefit
received) (and accordingly whether section 651(2)(b) applies for those
purposes).
10
      (2)
Sections 474 and 475 do not apply for the purposes of sections 664 to 668 in
relation to benefits received before 15 June 1989.
      (3)
Sub-paragraphs (4) and (5) apply for the purposes of section 666 (income
charged under section 664) in finding the amount of income treated as
arising under section 665(2) in respect of benefits received on or after 15 June
15
1989.
      (4)
In determining the relevant income of an earlier tax year for the purposes of
section 666(1) (see Step 4), income that arose to the trustees of a settlement
before 6 April 1989 is treated as arising to persons abroad if one or more of
the trustees were resident outside the United Kingdom, even though one or
20
more were not so resident.
      (5)
But sub-paragraph (4) does not apply if the trustees have been charged to tax
on that income.
Transfers of assets abroad: whether personal representatives are “persons abroad”
132   (1)
This paragraph deals with whether section 767 (residence of personal
25
representatives) applies in determining if personal representatives are
persons 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
assets abroad etc) (and accordingly whether section 651(2)(c) applies for
those purposes).
30
      (2)
Section 767 does not apply for the purposes of sections 660 to 663 in relation
to income payable before 15 June 1989.
      (3)
Section 767 does not apply for the purposes of sections 660 to 663 in relation
to income payable on or after 15 June 1989 if—
(a)
the individual received or became entitled to receive the capital sum
35
mentioned in section 662(1) before that date, and
(b)
the capital sum was wholly repaid or the right to it waived before 1
October 1989.
      (4)
In sub-paragraph (3) “capital sum” has the meaning given in section 662, and
subsection (4) of that section applies for the purposes of that sub-paragraph
40
as it applies for the purposes of section 662(1).
133   (1)
Sub-paragraph (2) deals with whether section 767 (residence of personal
representatives) applies for the purposes of sections 664 to 668 (charge
where individuals receive a benefit as a result of transfers of assets abroad
etc) (and accordingly whether section 651(2)(c) applies for those purposes).
45

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
650

      (2)
Section 767 does not apply for the purposes of sections 664 to 668 in relation
to benefits received before 15 June 1989.
      (3)
Sub-paragraphs (4) and (5) apply for the purposes of section 666 (income
charged under section 664) in finding the amount of income treated as
arising under section 665(2) in respect of benefits received on or after 15 June
5
1989.
      (4)
In determining the relevant income of an earlier tax year for the purposes of
section 666(1) (see Step 4), income that arose to personal representatives
before 6 April 1989 is treated as arising to persons abroad if one or more of
them were resident outside the United Kingdom, even though one or more
10
were not so resident.
      (5)
But sub-paragraph (4) does not apply if the personal representatives have
been charged to tax on that income.
Transfers of assets abroad: company residence for transfers between 20 March 1990 and 29
November 1993
15
134   (1)
In relation to transfers and associated operations on or after 20 March 1990
and before 30 November 1993, a body corporate regarded as resident in a
territory outside the United Kingdom for the purposes of any double
taxation arrangements is treated as if it were resident outside the United
Kingdom for the purposes of Chapter 2 of Part 12 (transfer of assets abroad).
20
      (2)
In this paragraph “transfers” and “associated operations” have the same
meaning as in Chapter 2 of Part 12 (see sections 649 and 652 respectively).
Transfers of assets abroad: information powers concerning transfers between 20 March 1990
and 29 November 1993 involving companies
135   (1)
So far as section 682(6) (restrictions on information to be provided under
25
section 681) applies for the purposes of section 682(2) or (3), it applies in
relation to transfers and associated operations on or after 20 March 1990 and
before 30 November 1993 with the modification specified in sub-paragraph
(2).
      (2)
The modification is that the reference to bodies corporate resident outside
30
the United Kingdom includes a reference to bodies corporate regarded as
resident in a territory outside the United Kingdom for the purposes of any
double taxation arrangements.
Transfers of assets abroad: income arising before 26 November 1996
136
Sections 654(5)(b) and (c) and 661(3)(b) and (c) do not apply if the income
35
arose before 26 November 1996.
Transfers of assets abroad: meaning of “associated operation” and consideration of associated
operations alone
137   (1)
In relation to any time before 5 December 2005, the reference in section
649(1)(b) (meaning of “relevant transfer”) to income which becomes payable
40
to a person abroad does not include income that becomes so payable just as
a result of one or more associated operations.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
651

      (2)
In relation to any time before 5 December 2005, section 652 (meaning of
“associated operation”) applies as if subsection (2) were omitted.
      (3)
In relation to any time before 5 December 2005, the reference in section
654(2) (individuals with power to enjoy income as a result of relevant
transactions) to income which an individual has power to enjoy does not
5
include income which the individual has power to enjoy just as a result of
one or more associated operations.
      (4)
In relation to any time before 5 December 2005, the reference in section
661(1)(a) (individuals receiving capital sums as a result of relevant
transactions) to income which has become the income of a person abroad
10
does not include income that has become such income just as a result of one
or more associated operations.
      (5)
In this paragraph—
(a)
“associated operation” has the meaning given in section 652, and
(b)
references to power to enjoy income are to be read in accordance
15
with section 655 (when an individual has power to enjoy income of a
person abroad).
Individuals in partnership: recovery of excess relief
138
In section 725(1)—
(a)
the reference to the claiming of relief includes a reference to the
20
claiming of relief as mentioned in section 74(1)(a) and (b) of FA 2005,
and
(b)
the reference to sections 104, 107 and 110 includes a reference to
section 117 of ICTA (including as applied by section 118ZB of that
Act) and section 118ZE of that Act.
25
139   (1)
The losses covered by section 727(1) and (2) in relation to a trade include
losses within section 74(5) of FA 2005 made in the trade.
      (2)
The income covered by section 727(3) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
      (3)
Sub-paragraph (4) applies for the purposes of section 727(5) if, as a result of
30
paragraph 138(b), the relevant restriction provision would be section 117 of
ICTA (including as applied by section 118ZB of that Act) or section 118ZE of
that Act.
      (4)
The relevant restriction provision is instead taken to be—
(a)
in the case of section 117 of ICTA (other than as applied by section
35
118ZB of that Act), section 104,
(b)
in the case of section 117 of ICTA (as applied by section 118ZB of that
Act), section 107, and
(c)
in the case of section 118ZE of ICTA, section 110.
      (5)
In section 727(6) the reference to subsection (2)(b) includes a reference to
40
section 74(11)(b) of FA 2005.
Individuals claiming relief for film-related trading losses
140   (1)
The claims covered by section 730(1)(a) include claims within section
119(1)(a) of FA 2004.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Tax avoidance
652

      (2)
For the purposes of section 730—
(a)
a “relevant disposal” does not include a disposal which was made
before 10 December 2003, and
(b)
an event occurring before the tax year 2007-08 is an “exit event” if
(and only if) it is an “exit event” for the purposes of section 119 of FA
5
2004.
141   (1)
The losses covered by section 733(3)(a) include losses in relation to which a
claim is made as mentioned in section 121(1)(a) or (b) of FA 2004.
      (2)
The income covered by section 733(5) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
10
      (3)
The losses covered by section 733(6) in relation to a trade include losses
within section 121(1A)(b) of FA 2004 made in the trade.
      (4)
In section 733(9) the reference to the making of a claim includes a reference
to the making of a claim as mentioned in section 122A(1) of FA 2004.
142
In section 734(3) the reference to the making of a claim includes a reference
15
to the making of a claim as mentioned in section 122A(1) of FA 2004.
143   (1)
In section 735(1) the reference to the making of a claim includes a reference
to the making of a claim as mentioned in section 122A(1) of FA 2004.
      (2)
The repeal by this Act of section 122A of FA 2004 (or any provision inserting
or amending, or affecting the application of, that section) does not affect the
20
power of the Commissioners for Her Majesty’s Revenue and Customs to
make regulations under that section having effect before the tax year 2007-
08.
144   (1)
After the commencement of section 735, the Partnership (Restrictions on
Contributions to a Trade) Regulations 2006 (S.I. 2006/1639) have effect as if
25
made under that section.
      (2)
The Regulations so have effect subject to the following modifications.
      (3)
They have effect as if in regulation 2—
(a)
for the definition of “ICTA” there were substituted—
““ITA 2007” means the Income Tax Act 2007;”, and
30
(b)
for the definition of “relevant individual” there were substituted—
““relevant individual” means—
(a)
a limited partner (within the meaning given
by section 106 of ITA 2007),
(b)
a member of a limited liability partnership, or
35
(c)
a non-active partner (within the meaning
given by section 112 of ITA 2007),
where the partnership carries on a trade in which the
individual makes a film-related loss (as defined in
section 733(2) of ITA 2007) for which the individual
40
makes a claim as mentioned in section 735(1) of that
Act;”.
      (4)
They have effect as if in regulation 3(a) for “section 120 of the Finance Act
2004” there were substituted “section 732 of ITA 2007”.
      (5)
They have effect as if in regulation 4—
45

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Deduction of income tax at source
653

(a)
for “contribution to the trade”, wherever occurring, there were
substituted “capital contribution”,
(b)
for “section 119(2)(b) or (c) of the Finance Act 2004”, wherever
occurring, there were substituted “section 730(2)(b) of ITA 2007”, and
(c)
for paragraph (c)(ii) there were substituted—
5
“(ii)
the amount of income treated as received in
accordance with section 730(5) of that Act.”
      (6)
See paragraph 35 of this Schedule for provision about the effect of the
Partnership (Restrictions on Contributions to a Trade) Regulations 2005 (S.I.
2005/2017) after the commencement of section 735.
10
145   (1)
In section 736 references to chargeable events include events that are
chargeable events for the purposes of section 119 of FA 2004.
      (2)
Accordingly, the total amount of income mentioned in section 736(3) is to
include any income treated as received as a result of section 119(5)(b) of FA
2004.
15
Individuals in partnership: exit charge
146   (1)
The losses covered by section 738(1)(b) include losses in relation to which a
claim is made as mentioned in section 126(1)(c) of FA 2004.
      (2)
The disposals covered by section 738(2)(a) and (b) do not include disposals
made before 10 February 2004.
20
147   (1)
In section 739 at Step 4 non-taxable consideration received before 10
February 2004 is excluded.
      (2)
In section 739 at Step 5—
(a)
the reference to section 738 includes a reference to section 127 of FA
2004, and
25
(b)
the reference to chargeable events includes a reference to chargeable
events for the purposes of section 127 of FA 2004.
148   (1)
This paragraph applies for the purposes of sections 738 to 740 if the
individual carried on the trade at any time before 26 March 2004.
      (2)
Any reference to expenditure incurred in the trade in exploiting the licence
30
does not include expenditure incurred before 10 February 2004.
149
The losses covered by section 740(4) include losses in relation to which a
claim has been made as mentioned in section 128(2)(a) or (b) of FA 2004.
Part 14
Deduction of income tax at source
35
Deduction by deposit-takers: discretionary or accumulation settlements
150   (1)
A deposit with a deposit-taker which meets the settlement condition in
section 789(6) is not a relevant investment for the purposes of Chapter 2 of
Part 14 if conditions A and B are met in relation to the deposit.
      (2)
Condition A is that the deposit was made before 6 April 1995.
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Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Deduction of income tax at source
654

      (3)
Condition B is that neither an officer of Revenue and Customs nor any
trustee of the settlement has notified the deposit-taker that the deposit meets
the settlement condition in section 789(6).
151   (1)
A notification under paragraph 150(3) given by a trustee must be in the form
provided by the Commissioners for Her Majesty’s Revenue and Customs.
5
      (2)
A deposit-taker is entitled not to deduct a sum representing income tax
under section 784 from a payment of interest on a deposit covered by a
notification under paragraph 150(3) if sub-paragraph (3) applies to the
payment.
      (3)
This sub-paragraph applies to a payment if—
10
(a)
it is made within 30 days after the date when the deposit-taker
receives the notification, and
(b)
at the time it is made, it is not reasonably practicable for the deposit-
taker to deduct a sum representing income tax from the payment.
      (4)
If an officer of Revenue and Customs is satisfied that a deposit covered by a
15
notification under paragraph 150(3) does not meet the settlement condition
in section 789(6), the officer must—
(a)
cancel the notification, and
(b)
give notice of the cancellation to the deposit-taker concerned.
      (5)
An officer of Revenue and Customs may give notice to a trustee of a
20
settlement requiring the trustees to provide—
(a)
information about any notification given by a trustee under
paragraph 150(3), and
(b)
such information as the officer may reasonably require for the
purposes of giving a notification under that paragraph about interest
25
to which the trustees are entitled.
      (6)
For the purposes of this paragraph crediting interest counts as paying it.
Deduction by deposit-takers and building societies: declarations of non-UK residence
152   (1)
Section 791(2)(c) (which requires a declaration of non-UK residence in
respect of an individual or individuals beneficially entitled to interest to
30
contain the name and address of the individual or individuals concerned)
does not apply to a declaration made before 6 April 2001.
      (2)
Section 792(2)(c) (which requires a declaration of non-UK residence in
respect of a Scottish partnership beneficially entitled to interest to contain
the name and address of the partners) does not apply to a declaration made
35
before 6 April 2001.
Deduction by deposit-takers: qualifying certificates of deposit
153   (1)
This paragraph applies to a certificate of deposit which was issued by a
deposit-taker before 13 March 1984 on terms which provide for interest to be
payable on the deposit at any time after 5 April 1985 (whether or not interest
40
is payable on it before that date).
      (2)
The certificate of deposit is to be treated as a qualifying certificate of deposit
for the purposes of section 798.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Deduction of income tax at source
655

Deduction by deposit-takers: qualifying time deposits
154   (1)
This paragraph applies to a deposit with a deposit-taker which—
(a)
was made before 6 July 1984, and
(b)
meets the condition in sub-paragraph (2).
      (2)
The condition is that the deposit is made on terms which—
5
(a)
do not make provision for the transfer of the right to repayment,
(b)
prevent partial withdrawals of, or additions to, the deposit, and
(c)
require the deposit-taker—
(i)
to repay the sum at the end of a specified period ending after
5 April 1985, or
10
(ii)
if interest is payable only when the deposit is repaid, to repay
the sum on demand or on notice.
      (3)
The deposit is to be treated as a qualifying time deposit for the purposes of
section 799.
Deduction by deposit-takers and building societies: saving for regulations
15
155   (1)
This paragraph applies to regulations which—
(a)
were made under section 477A(1) to (2A) of ICTA (building societies:
regulations for deduction of tax),
(b)
were in force immediately before the commencement of the repeal of
those provisions by this Act, and
20
(c)
could have been made under section 17 of TMA 1970 as amended by
this Act, if those amendments had been in force at the time the
regulations were made.
      (2)
The regulations have effect after the commencement of the repeal of section
477A(1) to (2A) of ICTA as if made under section 17 of TMA 1970 as
25
amended by this Act.
156   (1)
This paragraph applies to regulations about the making of declarations to
building societies which—
(a)
were made under section 477A(1) to (2A) of ICTA,
(b)
were in force immediately before the commencement of the repeal of
30
those provisions by this Act, and
(c)
could have been made under section 132 or 133 of FA 1999 (electronic
communications), if provision about the making of declarations to
building societies had precluded to any extent the use of electronic
communications for that purpose at the time that the regulations
35
were made.
      (2)
The regulations have effect after the commencement of the repeal of section
477A(1) to (2A) of ICTA as if made under section 132 and 133 of FA 1999.
      (3)
Regulations under sections 132 and 133 of FA 1999 may make any provision
in relation to Chapter 2 of Part 14 of this Act which they could have made if
40
that Chapter had come into force before those sections.
Deduction by deposit-takers, building societies etc: collection of tax
157
Chapter 15 of Part 14 has effect for return periods which—
(a)
fall within accounting periods ending on or after 6 April 2007, and