Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 9 — Manufactured payments
456

section 585 (manufactured payments: power to deal with special cases),
and
section 924 (power to reduce liability under this section).
(6)
Provision about the collection of income tax required to be accounted for and
paid under this section may be included in regulations under section 586.
5
924
Power to reduce section 923 liability
(1)
The Treasury may by regulations provide for a reduction in the amount of tax
to be accounted for and paid as a result of section 923.
(2)
The reduction must be a reduction, to such extent and for such purposes as
may be determined under the regulations, by reference to amounts of overseas
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tax charged on, or in respect of—
(a)
the making of the manufactured overseas dividend, or
(b)
the overseas dividend of which the manufactured overseas dividend is
representative.
925
Power to provide set-off entitlement
15
(1)
The Treasury may by regulations provide for a person who, in any prescribed
period, pays a manufactured overseas dividend as mentioned in section 581(1)
to be entitled—
(a)
to set off relevant amounts of tax suffered against relevant tax
liabilities, and
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(b)
to account to the Commissioners for Her Majesty’s Revenue and
Customs for the balance or claim credit in respect of it.
(2)
Regulations under this section may—
(a)
prescribe the circumstances in which relevant amounts of tax suffered
may be set off against relevant tax liabilities, and
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(b)
provide for relevant amounts of tax suffered to be set off against
relevant tax liabilities in accordance with the regulations and so far as
prescribed.
(3)
“Relevant amounts of tax suffered” are—
(a)
amounts of overseas tax in respect of overseas dividends received by
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the person in the prescribed period,
(b)
amounts of overseas tax charged on, or in respect of, the making of
manufactured overseas dividends received by the person in the
prescribed period, and
(c)
amounts—
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(i)
deducted as a result of section 922, or
(ii)
accounted for and paid as a result of section 923,

from any manufactured overseas dividends received by the person in
the prescribed period.
(4)
“Relevant tax liabilities” are sums due from the person on account of the
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amounts deducted by the person as a result of section 922 from the
manufactured overseas dividends paid by the person in the prescribed period.
(5)
In this section—
“credit” includes credit against corporation tax, and

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 11 — Payments between companies etc: exception from duties to deduct
457

“prescribed” means prescribed in regulations under this section.
Supplementary
926
Interpretation of Chapter
(1)
Expressions (except “prescribed”) used in this Chapter and in Chapter 2 of Part
11 (manufactured payments) have the same meaning in this Chapter as in that
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Chapter.
(2)
References in this Chapter to a trade carried on through a branch or agency are
to be read, in relation to a company, as references to a trade carried on through
a permanent establishment.
927
Regulation-making powers: general
10
Regulations under this Chapter may make different provision for different
cases.
Chapter 10
Deduction from non-commercial payments by companies
928
Chargeable payments connected with exempt distributions
15
(1)
This section applies to any payment chargeable to tax under section 214(1) of
ICTA (chargeable payments made within 5 years of an exempt distribution).
(2)
The person by or through whom the payment is made must, on making the
payment, deduct from it a sum representing income tax on it at the basic rate
in force for the tax year in which it is made.
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(3)
See Chapter 11 (payments between companies etc) for an exception from the
duty to deduct sums representing income tax under this section.
(4)
For provision about the collection of income tax in respect of a payment from
which a sum must be deducted under this section—
(a)
see Chapter 15 if the person making the payment is a UK resident
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company, and
(b)
otherwise see Chapter 16.
(5)
In this section “payment” does not include a transfer of money’s worth that is
treated as a payment for the purposes of section 214 of ICTA.
Chapter 11
30
Payments between companies etc: exception from duties to deduct
Introduction
929
Overview of Chapter
(1)
This Chapter makes provision allowing some payments made by companies,
local authorities and qualifying partnerships to be paid gross where they
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Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 11 — Payments between companies etc: exception from duties to deduct
458

would otherwise be subject to specified duties to deduct sums representing
income tax under this Part.
(2)
Section 930 disapplies specified duties to deduct where a payment is made by
a company, local authority or qualifying partnership which reasonably
believes that the payment is an excepted payment.
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(3)
Section 931 confers power on an officer of Revenue and Customs to disapply
section 930 by direction.
(4)
Section 932 defines “qualifying partnership”.
(5)
Sections 933 to 937 make provision as to when a payment is an excepted
payment.
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(6)
Section 938 deals with what happens when a company, local authority or
qualifying partnership makes a payment without deducting a sum
representing income tax under a reasonable but incorrect belief that the
payment is an excepted payment.
Exception from duties to deduct for excepted payments
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930
Exception from duties to deduct sums representing income tax
(1)
The duties to deduct sums representing income tax mentioned in subsection (2)
do not apply to a payment if—
(a)
it is made by a company, local authority or qualifying partnership, and
(b)
at the time the payment is made, the company, authority or partnership
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reasonably believes that it is an excepted payment.
(2)
The duties to deduct are those under—
(a)
section 874(2) (certain payments of yearly interest),
(b)
section 889(4) (payments in respect of building society securities),
(c)
section 901(4) (annual payments made by persons other than
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individuals),
(d)
section 903(7) (patent royalties),
(e)
section 906(5) (certain royalty payments etc where the owner lives
abroad),
(f)
section 910(2) (proceeds of a sale of patent rights paid to non-UK
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residents),
(g)
section 919(2) (manufactured interest on UK securities: payments by
UK residents etc), and
(h)
section 928(2) (chargeable payments connected with exempt
distributions).
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(3)
Subsection (1) has effect subject to any directions under section 931.
(4)
Subsection (1) does not apply to a payment made by a company, or qualifying
partnership, acting as trustee or agent for another person.
931
Power to make directions disapplying section 930
(1)
An officer of Revenue and Customs may give a direction to a company, local
40
authority or qualifying partnership directing that section 930 is not to apply in
relation to any payment that—

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 11 — Payments between companies etc: exception from duties to deduct
459

(a)
is made by the company, authority or partnership after the giving of the
direction, and
(b)
is specified in the direction or is of a description so specified.
(2)
A direction under this section may be given only if the officer has reasonable
grounds for believing, as respects each payment to which the direction relates,
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that the payment will not be an excepted payment at the time it is made.
(3)
A direction under this section may be varied or revoked by a later direction.
(4)
A variation or revocation of a direction under this section has effect only in
relation to payments made after the date of the variation or revocation.
932
Meaning of “qualifying partnership”
10
For the purposes of this Chapter a partnership is a “qualifying partnership” if
any partner in the partnership is a company or a local authority.
Excepted payments
933
UK resident companies
A payment is an excepted payment if the person beneficially entitled to the
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income in respect of which the payment is made is a UK resident company.
934
Non-UK resident companies
(1)
A payment is an excepted payment if each of the following conditions is met in
relation to the payment.
(2)
The person beneficially entitled to the income in respect of which the payment
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is made must be a non-UK resident company.
(3)
The non-UK resident company must carry on a trade in the United Kingdom
through a permanent establishment.
(4)
The payment must be one that is required to be brought into account in
calculating the chargeable profits (within the meaning given by section 11(2) of
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ICTA) of the non-UK resident company.
935
PEP and ISA managers
(1)
A payment is an excepted payment if each of the following conditions is met in
relation to the payment.
(2)
The person to whom the payment is made must be, or must be the nominee of,
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the plan manager of a plan of a kind to which regulations under Chapter 3 of
Part 6 of ITTOIA 2005 (income from individual investment plans) apply.
(3)
The plan manager must receive the payment in respect of investments under
the plan.