Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 14 — Income tax liability: miscellaneous rules
Chapter 4 — Other miscellaneous rules
423

(3)
If the contract does not provide for this, the member’s share is determined by
reference to the share of the profits of the grouping to which the member is
entitled under the contract.
(4)
If the contract does not provide for this either, the members are treated as
having equal shares of the property, rights and liabilities of the grouping.
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(5)
“European Economic Interest Grouping” means a European Economic Interest
Grouping formed under Council Regulation (EEC) No 2137/85 of 25 July 1985,
whether registered in Great Britain, Northern Ireland or elsewhere.
843
Restriction of deductions for annual payments
In calculating a person’s income from any source, no deduction is allowed for
10
an annual payment to which section 904 applies (annual payments for
dividends or non-taxable consideration).
844
Letters patent etc: exempting provisions
(1)
No provision in letters patent granted by the Crown is to be construed as
conferring exemption from income tax.
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(2)
Subsection (1) applies whether the letters patent are granted before or after the
date on which this Act is passed.
(3)
Any provision of the letters patent purporting to override the effect of
subsection (1) is void.
845
Extra return to be treated as interest etc
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(1)
This section applies if—
(a)
securities (“old securities”) of a particular kind are issued by way of an
original issue of securities of that kind,
(b)
on a later occasion securities (“new securities”) of the same kind are
issued,
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(c)
a sum (“the extra return”) is payable in respect of the new securities by
the issuer of them to reflect the fact that interest is accruing on the old
securities,
(d)
the issue price of the new securities includes an element (whether or not
separately identified) representing payment for the extra return, and
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(e)
the extra return is equal to the amount of interest mentioned in
subsection (2).
(2)
The amount of interest referred to in subsection (1)(e) is—
(a)
the amount of interest payable for the relevant period on so many old
securities as there are new, or
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(b)
if there are more new securities than old, the amount of interest which
would be so payable if there were as many old securities as new.
(3)
A sum paid or payable by way of the extra return is treated for income tax
purposes as if it were paid or payable as interest (so far as it would not be
treated in that way apart from this subsection).
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(4)
No relief for the extra return is to be given to the issuer of the new securities.

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 1 — Introduction
424

846
Interpretation of section 845
(1)
This section applies for the purposes of section 845.
(2)
Securities are of the same kind if they—
(a)
are treated as being of the same kind by the practice of a recognised
stock exchange, or
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(b)
would be so treated if dealt in on a recognised stock exchange.
(3)
“The relevant period” is the period—
(a)
beginning with the day mentioned in subsection (4), and
(b)
ending with the day (“the new issue day”) on which the new securities
are issued.
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(4)
The day referred to in subsection (3)(a) is the day after—
(a)
the last (or only) interest payment day before the new issue day, or
(b)
if there is no interest payment day before the new issue day, the day on
which the old securities are issued.
(5)
In subsection (4) “interest payment day” means a day on which interest is
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payable under the old securities.
(6)
“Relief” means relief by way of deduction in calculating amounts of income
charged to income tax or in calculating net income.
Part 15
Deduction of income tax at source
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Chapter 1
Introduction
847
Overview of Part
(1)
This Part deals with deduction of income tax at source.
(2)
The following Chapters contain duties to deduct sums representing income tax
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from certain payments—
(a)
Chapter 2 (deposit-takers and building societies),
(b)
Chapter 3 (certain payments of yearly interest),
(c)
Chapter 4 (payments in respect of building society securities),
(d)
Chapter 5 (payments of UK public revenue dividends),
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(e)
Chapter 6 (annual payments and patent royalties),
(f)
Chapter 7 (other payments connected with intellectual property),
(g)
Chapter 9 (manufactured payments), and
(h)
Chapter 10 (non-commercial payments by companies).
(3)
Chapters 6 and 7 are subject to Chapter 8 which makes special provision in
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relation to the deduction of sums representing income tax from royalty
payments.
(4)
Chapter 11 contains provision disapplying some of the duties to deduct where
payments are made between companies etc.

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 1 — Introduction
425

(5)
The following Chapters contain further provision in connection with the
deduction (or deemed deduction) of sums representing income tax from
certain payments (or deemed payments)—
(a)
Chapter 12 (funding bonds),
(b)
Chapter 13 (unauthorised unit trusts), and
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(c)
Chapter 14 (tax avoidance: directions for deductions from payments to
non-UK residents).
(6)
Chapters 15 to 17 contain provision about the collection of income tax in
respect of payments from which sums are required to be deducted (or from
which sums are treated as deducted) under the preceding Chapters.
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(7)
Chapter 18 deals with regimes involving the deduction of income tax at source
which apply in the case of—
(a)
visiting performers,
(b)
non-resident landlords, and
(c)
Real Estate Investment Trusts.
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(8)
Chapter 19 makes general provision for this Part including—
(a)
provision about the giving of statements about deduction of income
tax,
(b)
provision about payments where the recipient is a company or where
the payer is a public department, and
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(c)
exceptions from duties to deduct for payments made by designated
international organisations, some payments under derivative contracts
and for some payments of interest on foreign currency securities.
(9)
The following provisions also deal with deduction of income tax at source—
(a)
Part 11 of ITEPA 2003 (Pay As You Earn), and
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(b)
Chapter 3 of Part 3 of FA 2004 (construction industry scheme).
848
Income tax deducted at source treated as income tax paid by recipient
(1)
A sum representing income tax which is deducted (or treated as deducted)
under this Part from a payment is treated as income tax paid by the recipient.
(2)
The sum is accordingly taken into account under sections 59B and 59D of TMA
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1970 (see also paragraph 8 of Schedule 18 to FA 1998) in determining the
income tax or corporation tax payable by, or repayable to, the recipient.
(3)
But this section does not apply to income tax deducted at source under section
966 (visiting performers) or 971 (non-resident landlords).
849
Interaction with other Income Tax Acts provisions
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(1)
Regulations made under section 791 of ICTA (double taxation relief: power to
make regulations for carrying out section 788) make provision disapplying or
otherwise affecting duties to deduct under this Part in circumstances where
relief is available under double taxation arrangements.
(2)
Sections 821 and 822 of ICTA make provision in relation to under-deductions
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and over-deductions from some payments which are made before the passing
of the relevant annual Act imposing income tax and corporation tax.
(3)
In accordance with section 783 of ITTOIA 2005 (general disregard of exempt
income for income tax purposes), any payment (or part of a payment) which is

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
426

exempt from income tax as a result of Part 6 of ITTOIA 2005 is ignored for the
purposes of the duties under this Part.

This is subject to any express or implied provision to the contrary.
(4)
Paragraphs 11 to 13 of Schedule 2 to FA 2005 (alternative finance
arrangements: further provisions) make provision for Chapters 2 to 5, 12 and
5
19 to have effect in relation to alternative finance arrangements.
(5)
For exceptions from the duties to deduct under Chapters 3, 6, 7, 10 and 14 in
connection with the London Olympic Games and Paralympic Games see—
(a)
Chapter 6 of Part 3 of FA 2006, and
(b)
regulations made under that Chapter.
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Chapter 2
Deduction by deposit-takers and building societies
Introduction
850
Overview of Chapter
(1)
This Chapter deals with the deduction of sums representing income tax by
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deposit-takers and building societies from payments of interest on relevant
investments.
(2)
Section 851 contains a general duty to deduct sums representing income tax
from such payments and section 852 confers power on the Commissioners for
Her Majesty’s Revenue and Customs to disapply section 851 by regulations.
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(3)
Sections 853 to 856 set out some basic concepts, so that—
(a)
section 853 defines “deposit-taker” (and section 854 allows the Treasury
by order to prescribe persons as deposit-takers),
(b)
section 855 defines “investment” and “deposit”, and
(c)
section 856 explains which investments are relevant investments.
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(4)
Section 856 is subject to—
(a)
section 857 (which sets out when investments must be treated as
relevant and when they may be treated as not relevant), and
(b)
sections 858 to 870 (which describe various kinds of investment which
are not relevant investments).
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(5)
Sections 871 to 873 contain supplementary provisions.
(6)
For the purposes of this Chapter—
(a)
any reference to interest paid by a building society on a relevant
investment includes a reference to a dividend paid by the society in
respect of the investment,
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(b)
“dividend” includes any distribution (whether or not described as a
dividend), and
(c)
crediting interest counts as paying it.