Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
572

“Share loss relief
125A
Effect of share loss relief
(1)
If loss relief under section 573 of the Taxes Act or Chapter 6 of Part 4
of ITA 2007 (“share loss relief”) is obtained in respect of a loss or any
part of a loss, no deduction is to be made in respect of the loss or (as
5
the case may be) the part under this Act.
(2)
If a claim is made for share loss relief in respect of a loss accruing on
the disposal of shares, section 30 has effect in relation to the disposal
as if for the references in subsections (1)(b) and (5) to a tax-free
benefit there were substituted references to any benefit whether tax-
10
free or not.
(3)
All such adjustments of corporation tax on chargeable gains or
capital gains tax are to be made, whether by way of assessment or by
way of discharge or repayment of tax, as may be required in
consequence of—
15
(a)
share loss relief being obtained in respect of an allowable loss,
or
(b)
such relief not being obtained in respect of the whole or part
of such a loss in respect of which a claim is made.”
310
In section 148C(1) (deemed disposals at a loss under section 564(4) of
20
ITTOIA 2005) for “section 392 of ICTA” substitute “section 152 of ITA 2007”.
311   (1)
Amend section 150A (enterprise investment schemes) as follows.
      (2)
In subsection (2) after “section 312 (1A)(a) of the Taxes Act” insert “or section
159(2) of ITA 2007”.
      (3)
In subsection (3) for paragraphs (a), (aa) and (b) substitute—
25
“(a)
an individual’s liability to income tax has been reduced (or
treated by virtue of section 304 of the Taxes Act or section 245
of ITA 2007 (spouses and civil partners) as reduced) for any
year of assessment under section 289A of the Taxes Act or
section 158 of ITA 2007 in respect of any issue of shares,
30
(b)
the amount of the reduction (“A”) is less than the amount
(“B”) which is equal to tax at the savings rate for that year on
the amount subscribed for the issue, and
(c)
A is not found under section 289A(2)(b) of the Taxes Act or
(as the case may require) is not within paragraph (b) solely by
35
virtue of section 29(2) and (3) of ITA 2007,”.
      (4)
In subsection (4) after “the Taxes Act” insert “or as provided by section 246
of ITA 2007”.
      (5)
In subsection (8B) for the words from “subsection (2)” to the end substitute
“section 306(2) of the Taxes Act or section 203(1) of ITA 2007 and in
40
accordance with section 306 of the Taxes Act or sections 204 and 205 of ITA
2007”.
      (6)
In subsection (8C) after “Taxes Act” insert “or section 159(2) of ITA 2007”.
      (7)
In subsection (8D)—
(a)
after “section 304A of the Taxes Act” insert “or section 247 of ITA
45
2007”, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
573

(b)
for paragraph (b) substitute—
“(b)
the following—
(i)
subsections (2)(b), (3) and (4) of section 304A
of the Taxes Act and subsection (5) of that
section so far as relating to section 306(2) of
5
that Act, or
(ii)
sections 247(3)(b), 248(2)(a) and 249 of ITA
2007,

shall apply for the purposes of this section as they
apply for the purposes of Chapter 3 of Part 7 of the
10
Taxes Act or Part 5 of ITA 2007.”
      (8)
In subsection (10A) for “the same meaning as in the Taxes Act” substitute
“the meaning given in section 989 of ITA 2007”.
      (9)
In subsection (11)—
(a)
after “Taxes Act” insert “or Part 5 of ITA 2007”, and
15
(b)
after “that Chapter” insert “or means shares that meet the
requirements of section 173(2) of ITA 2007”.
     (10)
After subsection (12) insert—
“(13)
References in this section to Part 5 of ITA 2007 or any provision of
that Part are to a Part or provision that applies only in relation to
20
shares issued after 5 April 2007.”
312   (1)
Amend section 150B (enterprise investment scheme: reduction of relief) as
follows.
      (2)
In subsection (1)—
(a)
after “section 300(1A)(a) of the Taxes Act” insert “or section 213(2)(a)
25
of ITA 2007”, and
(b)
for “that Act” substitute “the Taxes Act or section 224(2)(a) of ITA
2007”.
      (3)
In subsection (6) for “Subsections (11) and (12)” substitute “Subsections (11)
to (13)”.
30
313
In section 150D (enterprise investment scheme: application of taper relief)
after “or” insert “relief under” and after “Taxes Act” insert “or Part 5 of ITA
2007,”.
314
In section 151A(7) (venture capital trusts: reliefs) for “the meaning of the
Taxes Act” substitute “the meaning given in section 989 of ITA 2007”.
35
315   (1)
Amend section 151B (VCTs: supplementary) as follows.
      (2)
In subsection (3)—
(a)
in paragraph (a) for “been given” substitute “obtained” and for “Part
1 of Schedule 15B to the Taxes Act” substitute “Chapter 2 of Part 6 of
ITA 2007”, and
40
(b)
in paragraphs (b) and (c) for “been given” substitute “obtained” and
for “that Part of that Schedule” substitute “that Chapter of that Part”.
      (3)
In subsection (6)(b) for “section 842AA(8) of the Taxes Act” substitute
“section 281(3) of ITA 2007”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
574

      (4)
In subsection (8)(b) for “given” substitute “obtained” and for “Part 1 of
Schedule 15B to the Taxes Act” substitute “Chapter 2 of Part 6 of ITA 2007”.
316
After section 151B insert—
“151BA
CITR: identification of securities or shares on a disposal
(1)
This section applies for the purpose of identifying the securities or
5
shares disposed of in any case where—
(a)
an individual or company (“the investor”) disposes of part of
a holding of securities or shares (“the holding”), and
(b)
the holding includes securities or shares to which CITR is
attributable in respect of one or more years of assessment or
10
accounting periods that have been held by the investor
continuously from the time they were issued until the
disposal.
(2)
Any disposal by the investor of securities or shares included in the
holding which have been acquired by the investor on different days
15
is treated as relating to those acquired on an earlier day rather than
to those acquired on a later day.
(3)
If there is a disposal by the investor of securities or shares included
in the holding which have been acquired by the investor on the same
day, any of those securities or shares—
20
(a)
to which CITR is attributable, and
(b)
which have been held by the investor continuously from the
time they were issued until the time of disposal,

are treated as disposed of after any other securities or shares
included in the holding which were acquired by the investor on that
25
day.
(4)
For the purposes of this section a holding of securities is any number
of securities of a company which—
(a)
carry the same rights,
(b)
were issued under the same terms, and
30
(c)
are held by the investor in the same capacity.

It does not matter for this purpose that the number of the securities
grows or diminishes as securities carrying those rights and issued
under those terms are acquired or disposed of.
(5)
For the purposes of this section a holding of shares is any number of
35
shares in a company which—
(a)
are of the same class, and
(b)
are held by the investor in the same capacity.

It does not matter for this purpose that the number of the shares
grows or diminishes as shares of that class are acquired or disposed
40
of.
(6)
Chapter 1 of Part 4 (share pooling, etc) has effect subject to this
section.
(7)
Sections 104 to 107 (which make provision for the identification of
securities and shares on a disposal) do not apply to securities or
45
shares to which CITR is attributable.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
575

(8)
In a case to which section 127 (equation of original shares and new
holding) applies, shares included in the new holding are treated for
the purposes of subsections (2) and (3) as acquired when the original
shares were acquired.
(9)
In subsection (8)—
5
(a)
the reference to section 127 includes a reference to that
section as it is applied by virtue of any enactment relating to
chargeable gains, and
(b)
“original shares” and “new holding” have the same meaning
as in section 127, or (as the case may be) that section as
10
applied by virtue of the enactment in question.
(10)
In this section and sections 151BB and 151BC—
(a)
if the investor is an individual—
(i)
“CITR” has the meaning given by section 333 of ITA
2007,
15
(ii)
references to CITR being attributable to securities,
shares or debentures are to be read in accordance with
section 357 of that Act, and
(iii)
references to securities, shares or debentures having
been held by the investor continuously are to be read
20
in accordance with section 380 of that Act,
(b)
if the investor is a company—
(i)
“CITR” means relief under Part 5 of Schedule 16 to
the Finance Act 2002,
(ii)
references to CITR being so attributable are to be read
25
in accordance with paragraph 26 of that Schedule,
and
(iii)
references to securities, shares or debentures having
been held by the investor continuously are to be read
in accordance with paragraph 49 of that Schedule.
30
317
After section 151BA insert—
“151BB
CITR: rights issues etc
(1)
If—
(a)
an individual or company (“the investor”) holds shares in the
CDFI which are of the same class and held in the same
35
capacity (“the existing holding”),
(b)
there is a reorganisation affecting the existing holding as a
result of an allotment which—
(i)
falls within section 126(2)(a) (an allotment of shares or
debentures in respect of and in proportion to an
40
original holding), and
(ii)
is not an allotment of corresponding bonus shares,
(c)
immediately after the reorganisation, CITR is attributable to
the shares included in the existing holding or the shares or
debentures allotted in respect of those shares, in respect of
45
one or more years of assessment or accounting periods, and
(d)
if CITR is attributable to the shares included in the existing
holding at that time, those shares have been held by the

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
576

investor continuously from the time they were issued until
the reorganisation,

sections 127 to 130 (treatment of share capital following a
reorganisation) do not apply in relation to the existing holding.
(2)
Section 116(10) (reorganisations, conversions and reconstructions)
5
does not apply in any case where the old asset consists of shares held
(in the same capacity) by the investor—
(a)
that have been held by the investor continuously from the
time they were issued until the relevant transaction, and
(b)
to which CITR is attributable immediately before that
10
transaction.

In this subsection “old asset” and “the relevant transaction” have the
meaning given by section 116.
(3)
For the purposes of subsection (1)—
“corresponding bonus shares” means bonus shares that—
15
(a)
are issued in respect of shares included in the existing
holding, and
(b)
are in the same company, are of the same class, and
carry the same rights as, those shares,
“reorganisation” has the meaning given in section 126.
20
(4)
The following provisions of this Act have effect subject to this
section—
section 116 (reorganisations, conversions and reconstructions);
Chapter 2 of Part 4 (reorganisation of share capital, conversion
of securities etc).
25
(5)
In this section “the CDFI” is to be read—
(a)
if the investor is an individual, in accordance with section
334(2) of ITA 2007,
(b)
if the investor is a company, in accordance with paragraph
1(2) of Schedule 16 to the Finance Act 2002.”
30
318
After section 151BB insert—
“151BC
CITR: company reconstructions etc
(1)
If—
(a)
an individual or company (“the investor”) holds shares in or
debentures of a company (“company A”),
35
(b)
there is a reconstruction or amalgamation affecting that
holding (“the existing holding”),
(c)
immediately before the reconstruction or amalgamation,
CITR is attributable to the shares or debentures included in
the existing holding in respect of one or more years of
40
assessment or accounting periods, and
(d)
the shares or debentures included in the existing holding
have been held by the investor continuously from the time
they were issued until the reconstruction or amalgamation,

sections 135 and 136 (share exchanges and company reconstructions)
45
do not apply in respect of the existing holding.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
577

(2)
Subsection (1)(a) applies only if the shares or debentures are held by
the investor in the same capacity.
(3)
For the purposes of subsection (1) a “reconstruction or
amalgamation” means an issue by a company of shares in or
debentures of that company in exchange for or in respect of shares in
5
or debentures of company A.
(4)
The following provisions of this Act have effect subject to this
section—
section 116 (reorganisations, conversions and reconstructions),
Chapter 2 of Part 4 (reorganisation of share capital, conversion
10
of securities etc).
(5)
The investor is treated as disposing of any securities or shares which
but for subsection (1) the investor—
(a)
would be treated as exchanging for other securities or shares
by virtue of section 136, or
15
(b)
would be so treated but for section 137(1) (which restricts
section 136 to genuine reconstructions).”
319
In section 151C(5) (strips: manipulation of price: associated payment giving
rise to loss) for “section 709(1)” substitute “section 840ZA”.
320
In section 151D(5) (corporate strips: manipulation of price: associated
20
payment giving rise to loss) for “section 709(1)” substitute “section 840ZA”.
321
In section 161 (stock in trade: appropriations to and from stock) after
subsection (4) insert—
“(5)
If—
(a)
any person is charged to income tax under section 755 of ITA
25
2007 (charge to tax from transactions in land) on the
realisation of a gain because the condition in section 756(3)(d)
is met, and
(b)
the gain is calculated on the basis that any property was
appropriated as trading stock,
30

the property shall be treated on that basis also for the purposes of this
section.”
322
In section 169D(1) (gifts to settlor-interested settlements: exceptions) for
“691(2) of the Taxes Act (certain income of maintenance funds for historic
buildings not to be income of settlor etc)” substitute “508 of ITA 2007
35
(trustees’ election in respect of income arising from heritage maintenance
property)”.
323
In section 226B(1) (private residence relief: special cases) for “691(2) of the
Taxes Act (certain income of maintenance funds for historic buildings not to
be income of settlor etc)” substitute “508 of ITA 2007 (trustees’ election in
40
respect of income arising from heritage maintenance property)”.
324
In section 231(1) and (3) (shares: special provision) after “Taxes Act” insert
“or Part 5 of ITA 2007”.
325
In section 241(3)(a) (furnished holiday lettings) for the words from “the
Taxes Act)” to “that Act)” substitute “the Income Tax Acts), or any Schedule
45
A business (within the meaning of the Taxes Act)”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
578

326   (1)
Amend section 256 (charities) as follows.
      (2)
In subsection (1) for the words “subsection (2) below” substitute “the
following provisions of this section”.
      (3)
After subsection (2) insert—
“(3)
Subsection (4) below applies if a charitable trust has a non-exempt
5
amount under section 540 of ITA 2007 for a year of assessment.
(4)
Gains accruing to the charitable trust in the year of assessment are
treated as being, and always having been, chargeable gains so far as
they are attributed under section 256A to the non-exempt amount.
(5)
For restrictions on exemptions under Part 10 of ITA 2007 (special
10
rules about charitable trusts etc) see section 539 of that Act.”
327
After section 256 insert—
“256A
Attributing gains to the non-exempt amount
(1)
This section applies if a charitable trust has a non-exempt amount
under section 540 of ITA 2007 for a year of assessment.
15
(2)
Attributable gains of the charitable trust for the year of assessment
may be attributed to the non-exempt amount but only so far as the
non-exempt amount has not been used up.
(3)
The non-exempt amount can be used up (in whole or in part) by—
(a)
attributable gains being attributed to it under this section, or
20
(b)
attributable income being attributed to it under section 541 of
ITA 2007.
(4)
The whole of the non-exempt amount must be used up by—
(a)
attributable gains being attributed to the whole of it under
this section,
25
(b)
attributable income being attributed to the whole of it under
section 541 of ITA 2007, or
(c)
a combination of attributable gains being attributed to some
of it under this section and attributable income being
attributed to the rest of it under section 541 of ITA 2007.
30
(5)
See section 256B for the way in which gains are to be attributed to the
non-exempt amount under this section.
(6)
In this section and section 256B a charitable trust’s “attributable
income”, and “attributable gains”, for a tax year have the same
meaning as in Part 10 of ITA 2007 (see section 540 of that Act).
35
256B
How gains are attributed to the non-exempt amount
(1)
This section is about the ways in which attributable gains can be
attributed to a non-exempt amount under section 256A.
(2)
The trustees of the charitable trust may specify the attributable gains
that are to be attributed to the non-exempt amount.
40
(3)
A specification under subsection (2) is made by notice to an officer of
Revenue and Customs.