Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 18 — Other regimes involving the deduction of income tax at source
478

regulations made by the Commissioners for Her Majesty’s Revenue and
Customs under section 971.
(6)
See section 121(2)(c) of FA 2006 which prevents certain distributions of Real
Estate Investment Trusts being non-resident landlord income for the purposes
of regulations under section 971.
5
Real Estate Investment Trusts
973
Income tax due in respect of distributions
(1)
The Treasury may make regulations providing for the assessment, collection
and recovery of income tax where—
(a)
a distribution to which subsection (2) or (3) applies is made, and
10
(b)
tax is or may become chargeable in respect of the distribution (whether
by virtue of section 121(1) of FA 2006 (distributions: liability to tax) or
otherwise).
(2)
This subsection applies to a distribution if—
(a)
it is made by a company to which Part 4 of FA 2006 applies (Real Estate
15
Investment Trusts), and
(b)
it is a distribution of profits or gains (or of both) of C (tax-exempt).
(3)
This subsection applies to a distribution if—
(a)
it is made by the principal company of a group to which Part 4 of FA
2006 applies, and
20
(b)
it is a distribution of amounts shown in the financial statements of G
(property rental business) as—
(i)
profits and gains of UK resident members of the group, or
(ii)
profits and gains of the property rental business in the United
Kingdom of non-UK resident members of the group.
25
(4)
In this section—
“C (tax-exempt)” has the meaning given by section 105(3)(b) of FA 2006,
“G (property rental business)” has the meaning given by paragraph 2 of
Schedule 17 to that Act,
“group” and “principal company” have the meanings given by section 134
30
of that Act,
“property rental business” has the meaning given by section 104 of that
Act (read with paragraph 32(2) of Schedule 17 to that Act).
(5)
References in this section to a UK resident company have the same meaning as
in Schedule 17 to FA 2006 (see paragraph 3(1) of that Schedule).
35
(6)
In this section “gains” includes chargeable gains.
974
Regulations under section 973
(1)
Regulations under section 973 may, in particular—
(a)
require a company to deduct sums representing income tax at the basic
rate before payment of distributions,
40
(b)
specify classes of shareholder to whom distributions may be made
without deduction of such sums,

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 18 — Other regimes involving the deduction of income tax at source
479

(c)
make provision about the calculation of the sums to be deducted by a
company,
(d)
require a company to account for income tax equal to the sums
deducted,
(e)
apply an enactment (with or without modification) in respect of cases
5
where a sum representing income tax is deducted or treated as
deducted from income,
(f)
specify the time at which a distribution is to be treated as made by a
company,
(g)
specify periods in respect of which payments of income tax are to be
10
made,
(h)
specify times at which payments of income tax are to be made,
(i)
make provision about the making of claims and determinations in
respect of over-payment or under-payment (which may include
provision for appeals),
15
(j)
include provision requiring the payment of interest in respect of late
payments of income tax (which may—
(i)
provide for payment without deduction of sums representing
income tax,
(ii)
allow interest paid as a deduction from profits of the company’s
20
tax-exempt business),
(k)
require a company to provide a shareholder with a statement in writing
containing specified information,
(l)
make provision about the repayment to a shareholder of sums
deducted and paid to the Commissioners for Her Majesty’s Revenue
25
and Customs in respect of income tax,
(m)
make provision for the payment of interest in respect of repayments
under paragraph (l),
(n)
require notices to be given by or to a company,
(o)
require a company to make returns, and
30
(p)
require a company to make records available to the Commissioners for
Her Majesty’s Revenue and Customs for inspection.
(2)
A reference in subsection (1) to a distribution in respect of profits of tax-exempt
business includes a distribution made after Part 4 of FA 2006 has ceased to
apply to a company.
35
(3)
A distribution which is treated as having been made by virtue of section
107(9)(b) of FA 2006 is also to be treated as having been made for the purposes
of regulations under section 973.
(4)
Regulations under section 973—
(a)
may make provision which applies generally or only in specified cases
40
or circumstances,
(b)
may make different provision for different cases or circumstances, and
(c)
may contain incidental, supplemental, consequential and transitional
provision and savings.
(5)
In subsections (1) and (2), so far as they apply to cases within section 973(1)(a),
45
“profits” includes gains (including chargeable gains).
(6)
In this section “tax-exempt business” has same meaning as in Part 4 of FA 2006
(see section 107(2) of that Act).

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 19 — General
480

Chapter 19
General
Supplementary
975
Statements about deduction of income tax
(1)
Subsection (2) applies if a person makes a payment from which a sum
5
representing income tax must be deducted under any provision of Chapters 2
to 7 or under section 919 or 928.
(2)
If the recipient requests it in writing, the person must provide the recipient
with a statement showing—
(a)
the gross amount of the payment,
10
(b)
the amount of the sum deducted, and
(c)
the actual amount paid.
(3)
Subsection (4) applies if the trustees of an unauthorised unit trust are treated
as making a deemed payment to a unit holder (“U”).
(4)
If U requests it in writing, the trustees must provide U with a statement
15
showing—
(a)
the gross amount of the payment,
(b)
the amount of the deemed deduction from the payment, and
(c)
the amount of the payment after the deemed deduction.
(5)
A statement under this section must be in writing.
20
(6)
The duty to comply with a request under subsection (2) or (4) is enforceable by
the recipient or U (as the case may be).
(7)
In this section “deemed deduction”, “deemed payment” and “the gross
amount” have the same meanings as in Chapter 13 (see section 941(6)).
976
Arrangements for payments of interest less tax or at specified net rate
25
(1)
This section applies if—
(a)
provision is made for the payment of interest, and
(b)
the interest is payable without deduction of a sum representing income
tax.
(2)
It applies—
30
(a)
whenever the provision was made, and
(b)
whether it was made orally or in writing.
(3)
If the provision is for the payment of interest “less tax” (or uses words to similar
effect) it is to be read as if the words “less tax” (or the equivalent words) were
not included.
35
(4)
Subsection (5) applies if the provision is (however worded)—
(a)
for the payment of interest to which subsection (6) applies, and
(b)
for that interest to be paid at such a rate (“the gross rate”) that the
amount of interest payable at that rate is, after deduction of a sum

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 19 — General
481

representing income tax, equal to the amount of interest payable at a
specified rate (“the net rate”).
(5)
In that case the provision is to be read as if it were for the payment of interest
at the gross rate.
(6)
This subsection applies to—
5
(a)
interest on which the recipient is chargeable to income tax, which falls
within Chapter 2 of Part 4 of ITTOIA 2005 but which is not relevant
foreign income, or
(b)
interest on which the recipient is chargeable to corporation tax under
Case III of Schedule D.
10
977
Payments to companies
(1)
The provisions of this Part relating to the deduction from payments of sums
representing income tax are not affected by the fact that the recipient is a
company not chargeable to income tax on the payment.
(2)
References in subsection (1) to payments received by a company—
15
(a)
include payments received by another person on behalf of or in trust for
the company, but
(b)
do not include payments received by the company on behalf of or in
trust for another person.
(3)
For further provision about payments received by companies, see—
20
(a)
sections 7(2) and 11(3) of ICTA (set-off of income tax deducted at source
against liability to corporation tax), and
(b)
section 952 (set-off of income tax suffered against income tax payable
under Chapter 15).
978
Application to public departments
25
(1)
This Part applies in relation to payments made by public offices and
departments of the Crown except as mentioned in subsection (2).
(2)
This Part does not apply to payments made by public offices and departments
of—
(a)
any country mentioned in Schedule 3 to the British Nationality Act 1981
30
(c. 61) (which contains a list of Commonwealth countries) or the
Republic of Ireland, or
(b)
any state or province of a country within paragraph (a).
979
Designated international organisations: exceptions from duties to deduct
(1)
The Treasury may by order designate for the purposes of this section any
35
international organisation of which the United Kingdom is a member.
(2)
The duty to deduct under section 874 (duty to deduct from certain payments
of yearly interest) does not apply to a payment of interest made by—
(a)
an organisation designated under subsection (1), or
(b)
a partnership of which an organisation so designated is a member.
40
(3)
None of the duties to deduct under Chapters 6, 7 (deduction from annual
payments, patent royalties and other payments connected with intellectual

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 19 — General
482

property) and 14 (directions for duty to deduct to apply in tax avoidance cases)
apply to a payment made by an organisation designated under subsection (1).
(4)
The duties to deduct under sections 919(2) and 922(2) do not apply in a case
where the payer of the manufactured interest or (as the case may be) the
manufactured overseas dividend is an organisation designated under
5
subsection (1).
980
Derivative contracts: exception from duties to deduct
(1)
Despite the provisions of this Part, a company is not required to deduct a sum
representing income tax from a payment made under a derivative contract to
which this section applies.
10
(2)
This section applies to a derivative contract if profits and losses arising from it
are calculated in accordance with Schedule 26 to FA 2002.
981
Foreign currency securities etc: exception from duties to deduct
Despite the provisions of this Part there is no duty to deduct a sum
representing income tax from a payment of interest within section 755(1) of
15
ITTOIA 2005 (interest on foreign currency securities etc owned by non-UK
residents).
982
Income tax is calculated by reference to gross amounts
If any provision of this Part requires the deduction from a payment of a sum
representing income tax at a specified rate, the rate is to be applied to the gross
20
payment, that is to the payment before deduction of a sum representing
income tax under this Part.
Interpretation
983
Meaning of “deposit”
In this Chapter “deposit” means a sum of money paid on terms which mean
25
that it will be repaid (with or without interest)—
(a)
on demand, or
(b)
at a time or in circumstances agreed by or on behalf of the person who
pays it and the person who receives it.
984
Meaning of “financial instrument”
30
(1)
In this Part “financial instrument” includes—
(a)
any money,
(b)
any shares or securities,
(c)
an option, future or contract for differences if its underlying subject-
matter is (or is primarily) one or more financial instruments, and
35
(d)
an instrument the underlying subject-matter of which is (or is
primarily) creditworthiness.
(2)
For the purposes of subsection (1) if the effect of an instrument depends on an
index or factor, the “underlying” subject-matter of the instrument is the matter
by reference to which the index or factor is determined.
40