Clause 883: Payments otherwise than in an accounting period

2678.     This clause contains the main provisions regarding section 879 payments made otherwise than in an accounting period. It is based on paragraphs 3 and 9 of Schedule 16 to ICTA.

2679.     Subsection (3) specifies the information required to be included in such a return, bringing this requirement into line with the position for returns where a section 879 payment is made in an accounting period. See Change 137 in Annex 1.

Clause 884: Collection and payment of income tax

2680.     This clause sets out when income tax is due and that the amount is payable without the making of an assessment. It is based on paragraphs 4(1) and 9 of Schedule 16 to ICTA.

Clause 885: Conditions for a set-off claim

2681.     This clause sets out the conditions for a claim to be made to set off income tax suffered by deduction at source against income tax payable under this Chapter. It is based on paragraph 5 of Schedule 16 to ICTA and paragraph 4 of Schedule 11 to FA 1991.

2682.     Subsection (2) clarifies that in order for a set-off claim to be made at the end of a return period, the payer must have either made a section 879 payment or received a payment on which it has suffered deduction of income tax during the return period. Under the source legislation it is unclear whether a set-off claim can only be made when a section 879 payment has been made in the return period concerned. See Change 136 in Annex 1 and the commentary on clause 882.

2683.     Further, at the end of the return period, there must be both a net amount of income tax suffered and a net amount of income tax payable in order for a set-off claim to be made.

2684.     There is a net amount of income tax suffered or payable if, on a cumulative basis running from the beginning of the accounting period to the end of the return period in question, there is an excess amount of one over the other. Subsections (4) and (5) explain how to calculate the net amounts.

Clause 886: How a set-off claim works

2685.     This clause sets out the effects of a claim to set off income tax suffered against income tax payable. It is based on section 480A(3) and (4) of, and paragraphs 5 and 7 of Schedule 16 to, ICTA, and paragraph 4 of Schedule 11 to FA 1991.

2686.     Subsection (2) confirms that, to the extent of the set-off, income tax which has been suffered is treated as repaid. This ensures that the amount of income tax suffered and used in the set-off claim cannot be used again in another claim. Further, to the extent of the set-off, income tax payable is treated as paid.

2687.     Subsection (3) sets out further results of any set-off claim. Where a claim is allowed, the liability to pay income tax treated as paid is discharged. Where income tax has already been paid and the set-off is allowed, the amount will be repaid.

2688.     Subsections (4) and (5) require the claim to be made on a return for the return period under clause 882 whether or not a section 879 payment has been made in the return period in question. See Change 136 in Annex 1 and the commentary on clause 882.

2689.     Subsection (7) confirms that a claim for set-off by a deposit-taker can be made only where the claimant is subject to corporation tax. So set-off claims cannot be made by deposit-takers who are not companies.

Clause 887: Proceedings begun after a set-off claim is made

2690.     This clause makes provision about what happens when proceedings for collection of income tax are brought after a set-off claim is made. It is based on paragraph 6 of Schedule 16 to ICTA.

Clause 888: Proceedings begun before a set-off claim is made

2691.     This clause makes provision about what happens when proceedings for collection of income tax or interest are brought before a set-off claim is made. It is based on paragraph 6 of Schedule 16 to ICTA.

Clause 889: Assessments where section 879 payment included in return

2692.     This clause allows assessments to be made where income tax has not been paid by the date by which the return must be delivered. It is based on paragraph 4(1) of Schedule 16 to ICTA.

2693.     Subsection (3) confirms that an assessment may be made whether or not the tax due has been paid by the time the assessment is made.

Clause 890: Assessments in other cases

2694.     This clause deals with assessments made because of incomplete or incorrect returns. It is based on paragraph 4(2) of Schedule 16 to ICTA.

2695.     Subsection (1) makes it clear that an assessment may be made in relation to any returns made under the Chapter (including returns made only in order to make a set-off claim). See Change 136 in Annex 1 and the commentary on clause 882.

Clause 891: Payer's duty to deliver amended return

2696.     This clause sets out the payer's duty to deliver an amended return when an error is discovered. It is based on paragraph 7A of Schedule 16 to ICTA.

2697.     Subsection (1) clarifies the point that the payer is under a duty to correct all returns made under the Chapter for a return period, including those made only in order to make a set-off claim. See Change 136 in Annex 1 and the commentary on clause 882.

2698.     Subsection (1)(c) goes further than paragraph 7A of Schedule 16 to ICTA, so that it applies to any return made under the Chapter, rather than just those relating to return periods. See Change 138 in Annex 1.

Clause 892: Application of Income Tax Acts provisions about time limits for assessments

2699.     This clause confirms that, for the purposes of the time limits set out in the Income Tax Acts applying to assessments, assessments made under Chapter 15 should be treated as made for the tax year in which the return period ends or, in the case of payments made outside an accounting period, the date on which the payment is made. It is based on paragraphs 10(1) and 11 of Schedule 16 to ICTA.

2700.     Paragraph 10(1) of Schedule 16 to ICTA contained a specific reference to section 36 of TMA. But this clause makes no such reference. This is because the reference has been unnecessary since the time limit in section 36 of TMA was amended, and section 37 of TMA repealed, by FA 1989.

Clause 893: Further provisions about assessments

2701.     This clause sets out further provisions about assessments, in particular that income tax assessed is due on the date it was due under clause 884. It is based on paragraph 10 of Schedule 16 to ICTA.

Clause 894: Relationship between Chapter and Income Tax Acts powers

2702.     This clause confirms that nothing in the Chapter affects any powers in the Income Tax Acts about the recovery of income tax. It is based on paragraph 11 of Schedule 16 to ICTA.

2703.     This clause applies both to the payer and the recipient. This point was confirmed in Grosvenor Place Estates Ltd v Roberts (1960), 39 TC 433 CA where it was held that the recipient could be assessed to tax where the payer failed to deduct tax, notwithstanding the express rights of Her Majesty's Revenue and Customs to assess the payer (Donovan LJ at page 453).

Clause 895: Power to make regulations modifying Chapter

2704.     This clause allows the Commissioners for Her Majesty's Revenue and Customs to make regulations for the collection of income tax in respect of section 879 payments. It is based on sections 350 and 477A of ICTA.

2705.     The clause also confirms that this power applies to payments made by deposit-takers and building societies. See Change 139 in Annex 1.

2706.     Subsection (4) has been aligned to the wording of similar provisions. In particular it now includes a reference to incidental and consequential amendments.

Chapter 16: Collection: certain payments by other persons

Overview

2707.     This Chapter provides the main collection procedure for income tax deducted at source by persons other than those catered for by Chapter 15.

Clause 896: Collection of income tax on certain payments by other persons

2708.     This clause is based on section 350 of ICTA.

2709.     The source legislation makes payers "assessable and chargeable". But charging a payment is a step that many other collection mechanisms for income tax deducted at source, such as PAYE, do not use. This charge to tax has been removed to bring this provision into line with parallel collection mechanisms. See Change 140 in Annex 1.

2710.     Subsection (2) requires the payer to give details of the payment to an officer of Revenue and Customs. There is no authorised return form on which the details are to be supplied. The subsection also requires the account of the payment to be delivered "without delay". This corresponds to "forthwith" in the source legislation.

2711.     Section 350(2) of ICTA has not been rewritten. That subsection makes provision about the cases in which a payment is, or is not, made out of taxed income, in order to impose a duty on the Crown to deduct income tax in appropriate cases. It was introduced by section 39 of FA 1960 to deal with a lacuna which came to light in CIR v Whitworth Coal Co Ltd (1959), 38 TC 531 HL. Under the approach adopted in relation to the provisions about charges on income (see Change 81 in Annex 1), it is no longer necessary.

Chapter 17: Collection through self-assessment return

Overview

2712.     This Chapter provides for collection of income tax, in certain cases, through the self-assessment return of the person making the payment concerned.

Clause 897: Collection through self-assessment return

2713.     This clause is based on sections 348 and 350 of ICTA.

2714.     The clause arises as a direct result of Change 81 in Annex 1. See the commentary on Chapter 6 of this Part.

2715.     See also Change 140 in Annex 1 and the commentary on clause 896.

2716.     The amount to be collected is equal to the sums required to be deducted under the provisions referred to in subsections (1)(b) and (2).

2717.     Subsections (3) to (5) make related provision to ensure that TMA provisions apply as necessary to support this.

2718.     The liability does not arise in respect of a person's own income tax affairs, but in relation to sums representing income tax deducted from payments a person makes. That is why, as indicated in subsection (4), it does not form part of the calculation of a person's own liability to income tax as such.

Chapter 18: Other regimes involving the deduction of income tax at source

Overview

2719.     This Chapter deals with three further deduction of income tax at source regimes.

2720.     The first provides for a duty to deduct and account for "sums representing income tax" from certain prescribed payments and transfers to non-resident entertainers, sportsmen and sportswomen. It is based on sections 555 and 558 of ICTA. The Income Tax (Entertainers and Sportsmen) Regulations 1987 in SI 1987/530 have been made under these sections.

2721.     The second enables the Commissioners for Her Majesty's Revenue and Customs to make regulations providing for the collection, assessment and recovery of "prescribed amounts of income tax" in respect of Schedule A and UK property business income of persons whose usual place of abode is outside the United Kingdom. It is based on section 42A of ICTA. The Taxation of Income from Land (Non-residents) Regulations 1995 (SI 1995/2902) have been made under this section.

2722.     The third enables the Treasury to make regulations providing for the assessment, collection and recovery of "income tax" from distributions made by a Real Estate Investment Trust in respect of a property rental business. It is based on sections 105, 122, 134 and 144 of, and paragraphs 3, 19 and 32 of Schedule 17 to, FA 2006. The Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (SI 2006/2867) were made on 1 November 2006 and are due to be effective for accounting periods beginning after 1 January 2007.

Clause 898: Overview of sections 899 to 903

2723.     This clause gives an overview of clauses 899 to 903, which provide for the payment of sums representing income tax to the Commissioners for Her Majesty's Revenue and Customs where certain payments and transfers are made in connection with United Kingdom performances by non-resident entertainers, sportsmen and sportswomen (visiting performers).

2724.     Following the House of Lords decision in Agassi v Robinson ¹⁴ [2006 UKHL 23], Schedule 1 to this Bill amends section 556 of ICTA and section 13 of ITTOIA to make explicit that these sections will have effect regardless of whether there is a duty to deduct income tax under section 555 of ICTA. See Change 149 in Annex 1.

¹⁴ [2006] STC 1056

2725.     Section 48(2)(b) of ITEPA has been amended by Schedule 1 to this Bill to make it explicit that a "transfer" which is subject to deduction under the rules about visiting performers, is not also subject to the rules about the provision of services through intermediaries in Chapter 8 of Part 2 of ITEPA. See Change 154 in Annex 1.

Clause 899: Duty to deduct and account for sums representing income tax

2726.     This clause sets the general duty to deduct and account for sums representing income tax where a payment or transfer is made in connection with a "relevant activity" carried out by a prescribed visiting performer. It is based on section 555(1), (2), (3) and (6) of ICTA.

Clause 900: Calculation of sums representing income tax

2727.     This clause sets out how to calculate the sums which are required to be deducted and or accounted for under clause 899. It is based on sections 555(4) and 558(2) and (3) of ICTA.

2728.     Subsection (2) provides that the sums cannot exceed a maximum proportion equivalent to basic rate income tax.

2729.     Subsections (3) and (4) allow the Treasury to make regulations in order to calculate the value of a transfer to which clause 899 applies. In particular, the regulations may provide for that amount to be treated as a net amount corresponding to a gross amount from which income tax at the basic rate has been deducted.

Clause 901: Treatment of sums representing income tax

2730.     This clause sets out the income tax treatment of any sums paid to the Commissioners for Her Majesty's Revenue and Customs under clause 899(3) or (4). It is based on section 555(8) to (11) of ICTA.

2731.     Subsections (2) and (3) confirm that any payment made to the Commissioners is treated as made on account of the liability of "another person" to income tax or corporation tax and that the liability and the other person are to be found in accordance with prescribed rules.

2732.     The regulations (regulation 12(1) of SI 1987/530) provide that the "other person" is the recipient of the payment or transfer. But where the recipient is of a "prescribed description" (for example the recipient is connected with the performer, see regulation 7 of SI 1987/530) then, under section 13(5) of ITTOIA, the other person will be the performer.

2733.     Subsection (4) confirms that if the sum paid to the Commissioners exceeds the liability of the "other person", then the Commissioners will repay so much of the amount as is appropriate to the "other person". Again, the regulations provide that the "other person" is the recipient of the payment or transfer or, if the recipient is connected with the performer, the other person is the performer.

2734.     Subsections (5) and (6) confirm that if there is no liability to make a payment under clause 899 then the Commissioners will repay the sum to the recipient of the payment or transfer.

Clause 902: Regulations

2735.     This clause provides that the Treasury may make various regulations regarding the sums to be paid, in particular provision for information, collection, assessment and recovery. It is based on sections 555(7) and 558(5) of ICTA.

Clause 903: Supplementary

2736.     This clause sets out various supplementary provisions and is based on sections 555(5) and 558(1), (4), and (6) of ICTA.

2737.     Subsections (2) and (3) state that an officer of Revenue and Customs may disclose certain information to others, without being precluded from doing so by any obligation as to secrecy.

2738.     Under the source legislation (section 558(4) of ICTA) it is "the Board" who must decide whether to make any disclosure. But in practice it is an officer of Revenue and Customs who takes the decision. The references in section 558(4) of ICTA to "the Board" (and to "authorised" officer) have therefore been omitted. See Change 5 in Annex 1.

Clause 904: Income tax due in respect of income of non-resident landlords

2739.     This clause enables regulations to be made about the collection of "prescribed amounts of income tax" in relation to "non-resident landlord income". It is based on section 42A(1) to (3) of ICTA.

2740.     Subsection (1) allows the Commissioners for Her Majesty's Revenue and Customs to make regulations for the collection, assessment and recovery of "prescribed amounts of income tax" from "non-resident landlord representatives" in respect of "non-resident landlord income". Regulation 8 of SI 1995/2902 provides that the amount is to be calculated at the basic rate of tax.

2741.     Subsection (2) defines "non-resident landlord income" as income of a person whose his usual place of abode is outside the United Kingdom, which is or may be chargeable to corporation tax under Schedule A or to income tax as profits of a UK property business under Chapter 3 of Part 3 of ITTOIA. This clause applies regardless of whether any payment is actually made to the non-resident landlord.

2742.     As the tax deducted will, in all cases, be income tax, all these regulation-making powers have been rewritten together, in this Bill.

2743.     Currently the regulations in SI 1995/2902 do not provide for payments to be made to the Commissioners in respect of Schedule A income (see regulations 8(3) and 9(3)). If in the future regulations were to be made, requiring amounts to be paid to the Commissioners in respect of Schedule A income, the amount paid would be a "prescribed amount of income tax" and would be capable of being set off against the non-resident landlord's corporation tax liability by virtue of section 11(3) of ICTA.

2744.     The source legislation makes reference to the "charging" of prescribed amounts. This reference to charging is removed to bring the rewritten version of section 42A of ICTA into line with other collection mechanisms. See Change 140 in Annex 1 and the Commentary on clause 896.

2745.     For discussion of "usual place of abode", see the commentary on clause 807.

Clause 905: Regulations under section 904

2746.     This clause makes further provisions about the regulations which can be made. It is based on section 42A(4) to (7) of ICTA.

2747.     Subsection (3)(b) has been aligned to the wording of similar provisions. In particular it now includes a reference to savings.

Clause 906: Income tax due in respect of distributions

2748.     This clause enables the Treasury to make regulations about the assessment, collection and recovery of income tax where a distribution is made by Real Estate Investment Trusts in respect of property rental business. It is based on sections 105, 122 and 134 of, and paragraphs 2, 3, 19 and 32(8) of Schedule 17 to, FA 2006.

Clause 907: Regulations under section 906

2749.     This clause makes further provision about the regulations which can be made under clause 906. It is based on sections 122 and 144 of, and paragraph 19 of Schedule 17 to, FA 2006.

2750.     Subsection (1)(a) provides that regulations may be made requiring Real Estate Investment Trusts to deduct sums representing income tax at the basic rate.

2751.     Paragraph 19(2) of Schedule 17 to FA 2006 has not been rewritten as it is unnecessary. Paragraph 19(2) modifies section 122(2) of FA 2006. Since this section is purely illustrative of the extent of the powers provided by clause 906 (based on section 122(1) of FA 2006) it is not necessary to expand the provisions in this clause.

2752.     Previously, the power to make regulations in respect of a principal company was in Schedule 17 to FA 2006 (not in section 122). But as all the regulation making powers have been rewritten in one place (in clause 906) it is not necessary to have a specific reference to a principal company of a group in this clause. By not including a specific reference to the principal company (in this clause), the power to make regulations in respect of such principal companies (under clause 906) will not be limited.

Chapter 19: General

Overview

2753.     This Chapter brings together a number of supplementary provisions relating to deduction at source, and gives definitions of certain terms used in this Part.

Clause 908: Statements about deduction of income tax

2754.     This clause imposes a duty on certain persons who are required to make payments under deduction of income tax to provide, on request, a statement of the gross amount of the payment, the sum deducted and the net amount paid. It is based on section 352 of, and paragraph 3(8) and (9) of Schedule 23A to, ICTA.

2755.     The clause brings the rules for statements about manufactured interest on UK securities into line with the rules for statements about actual interest on UK securities. See Change 141 in Annex 1.

2756.     The clause also contains specific provisions of a similar nature relating to unauthorised unit trusts.

2757.     Subsection (5) requires that the statement be in writing. Electronic statements are provided for by regulations 3 and 4 of the Income and Corporation Taxes (Electronic Certificates of Deduction of Tax and Tax Credit) Regulations 2003 (SI 2003/3143).

2758.     Section 352 of ICTA is theoretically capable of applying to MODs within paragraph 4(2) of Schedule 23A to ICTA, as they are treated as annual payments within section 349 of ICTA. But specific rules for statements about MODs are given by regulation 15 of the Income Tax (Manufactured Overseas Dividends) Regulations 1993 (SI 1993/2004). So this clause has not been extended to cover payments within clause 855, which rewrites paragraph 4(2). See the commentary on that clause.

Clause 909: Arrangements for payments of interest less tax or at specified net rate

2759.     This clause clarifies how a provision for the payment of interest "less tax" is to be interpreted if there is no duty to deduct a sum representing income tax. It is based on section 818 of ICTA.

2760.     In this clause the word "provision" relates to arrangements for the payment of interest as well as to any other context. It applies very widely to primary and secondary legislation, contracts, wills, deeds and any other arrangements, whether in writing or not.

2761.     If any such provision is for the payment of interest "less tax", the words "less tax" are to be ignored.

2762.     If the provision is for payment of interest chargeable as mentioned in subsection (6), any provision that purports to require grossing up from a prescribed net rate of interest is to be interpreted as requiring payment at the "gross rate".

Clause 910: Payments to companies

2763.     This clause provides that, even if the payment is not chargeable to income tax in a company's hands, this does not affect whether a payment to a company should be subject to deduction of a sum representing income tax. It is based on section 7(1) and (4) of ICTA.

2764.     Subsection (2) clarifies that receipt by another person on behalf of, or in trust for, the company is to be treated as receipt by the company. Conversely, if a company receives a payment on behalf of, or in trust for another person, that does not require that the payment be treated as received by that company. If company A receives a payment on behalf of company B, the payment is treated as received by company B.