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
583

“261H
Power to modify section 261G in non-arm’s length case
(1)
The Treasury may by regulations provide for section 261G to apply
with modifications if the exception in section 608(2) of ITA 2007
(agreement not at arm’s length) would otherwise prevent it from
applying.
5
(2)
Regulations under this section may make different provision for
different cases.
(3)
Regulations under this section may contain incidental,
supplemental, consequential and transitional provision and savings.
(4)
The incidental, supplemental, and consequential provision may
10
include modifications of section 261F (deemed manufactured
payments: effect on repurchase price).
(5)
In this section “modifications” includes exceptions and omissions.
(6)
Accordingly, the power in subsection (1) includes power to provide
for any provision of section 261G not to apply in relation to the case
15
mentioned in that subsection.”
333   (1)
Amend section 263ZA (former employees: employment-related liabilities)
as follows.
      (2)
In subsection (1)(a)—
(a)
for “from total income” substitute “in calculating net income”, and
20
(b)
for “when computing a former employee’s total income” substitute
“in calculating a former employee’s net income”.
      (3)
In subsection (1)(b) for “the total income” substitute “the remaining total
income”.
      (4)
In subsection (2)(b) for “the total income” substitute “the remaining total
25
income”.
      (5)
After subsection (2) insert—
“(2A)
In this section “the remaining total income”, in relation to a tax year,
means the former employee’s total income for the tax year less reliefs
already deducted for the tax year at Step 2 of the calculation in
30
section 23 of ITA 2007 for the purpose of calculating the former
employee’s income tax liability.”
      (6)
In subsection (5)—
(a)
in paragraph (d) for “against capital gains tax under section 72 of the
Finance Act 1991” substitute “under section 261B”, and
35
(b)
in paragraph (e) for “against capital gains tax under section 90(4) of
the Finance Act 1995” substitute “under section 261D”.
334   (1)
Amend section 263A (agreements for sale and repurchase of securities) as
follows.
      (2)
In subsection (1)—
40
(a)
after “Taxes Act” insert “or section 607(1) of ITA 2007”, and
(b)
for “that subsection” substitute “section 730A(1) of the Taxes Act”.
      (3)
In subsection (5) at the beginning insert “For corporation tax purposes,”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
584

      (4)
After subsection (5) insert—
“(6)
For capital gains tax purposes, expressions used in this section and
section 607 of ITA 2007 have the same meanings in this section as in
that section.”
335   (1)
Amend section 263D (gains accruing to persons paying manufactured
5
dividends) as follows.
      (2)
In subsection (2)(b) and (d) for “United Kingdom equities” substitute “UK
shares”.
      (3)
In subsection (3)(b) and (d) for “United Kingdom equities” substitute “UK
shares”.
10
      (4)
In subsection (4)(a), (b) and (d) for “United Kingdom equities” substitute
“UK shares”.
      (5)
In subsection (7) for “paragraph 2A of Schedule 23A to the Taxes Act”
substitute “sections 574 and 575 of ITA 2007 (manufactured dividends:
allowable deductions)”.
15
      (6)
In subsection (9)—
(a)
for “paragraph 2 of Schedule 23A to the Taxes Act” substitute
“Chapter 2 of Part 11 of ITA 2007 (manufactured payments)”,
(b)
in paragraph (a)—
(i)
for “section 737A(5) of that Act” substitute “section 602(1) of
20
that Act (deemed manufactured payments: repos)”, and
(ii)
for “Schedule 23A” substitute “that Chapter of that Part of
that Act”, and
(c)
in paragraph (b)—
(i)
for “section 736B(2) of that Act” substitute “section 596(2) of
25
that Act (deemed manufactured payments: stock lending
arrangements)”, and
(ii)
for “that Schedule” substitute “that Chapter of that Part of
that Act”.
      (7)
In subsection (10) for the words from “the following” to “and, in any such
30
case,” substitute “those in which there is a repo for the purposes of Part 11 of
ITA 2007 (see section 569 of that Act); and, in any such case,”.
      (8)
In subsection (12)—
(a)
for “United Kingdom equities” substitute “UK shares”, and
(b)
for “paragraph 1(1) of Schedule 23A to the Taxes Act” substitute
35
“section 566(2) of ITA 2007”.
336
After section 263E insert—
“263F
Power to modify repo provisions: non-standard repo cases
(1)
The Treasury may by regulations provide for—
(a)
section 261F (deemed manufactured payments: effect on
40
repurchase price),
(b)
section 261G (price differences under repos: effect on
repurchase price),
(c)
section 263A (agreements for sale and repurchase of
securities),
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
585

(d)
section 263D (gains accruing to persons paying
manufactured dividends), or
(e)
any of those sections,

to apply with modifications in relation to non-standard repo cases.
(2)
The power in subsection (1) to make provision for section 263A or
5
263D to apply with modifications is exercisable only so far as the
section applies to cases falling within section 607 of ITA 2007
(treatment of price differences under repos).
(3)
A case is a non-standard repo case if—
(a)
there is a repo in respect of securities,
10
(b)
under the repo there has been a sale (“the original sale”) of the
securities by the original owner to the interim holder, and
(c)
any of conditions A to E is met in relation to the repo.
(4)
Condition A is that—
(a)
the obligation to buy back the securities is not performed, or
15
(b)
the option to buy them back is not exercised.
(5)
Condition B is that provision is made by or under an agreement for
different or additional UK shares, UK securities or overseas
securities to be treated as (or as included with) representative
securities.
20
(6)
Condition C is that provision is made by or under an agreement for
any UK shares, UK securities or overseas securities to be treated as
not included with representative securities.
(7)
Condition D is that provision is made by or under an agreement for
the sale price or repurchase price to be decided or varied wholly or
25
partly by reference to post-agreement fluctuations.
(8)
Condition E is that provision is made by or under an agreement for
a person to be required, in a case where there are post-agreement
fluctuations, to make a payment in the period—
(a)
beginning immediately after the making of the agreement for
30
the original sale, and
(b)
ending when the repurchase price becomes due.
(9)
Expressions used in this section and in section 612 of ITA 2007
(powers to modify repo provisions: non-standard repo cases) have
the same meanings in this section as in that section.”
35
337
After section 263F insert—
“263G
Power to modify repo provisions: redemption arrangements
(1)
The Treasury may by regulations provide for—
(a)
section 261F (deemed manufactured payments: effect on
repurchase price),
40
(b)
section 261G (price differences under repos: effect on
repurchase price),
(c)
section 263A (agreements for sale and repurchase of
securities),
(d)
section 263D (gains accruing to persons paying
45
manufactured dividends), or

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
586

(e)
any of those sections,

to apply with modifications in relation to cases involving
redemption arrangements.
(2)
The power in subsection (1) to make provision for section 263A or
263D to apply with modifications is exercisable only so far as the
5
section applies to cases falling within section 607 of ITA 2007
(treatment of price differences under repos).
(3)
A case involves redemption arrangements if—
(a)
arrangements, corresponding to those made in cases where
there is a repo, are made by an agreement, or one or more
10
related agreements, in relation to securities that are to be
redeemed in the period after their sale,
(b)
the securities are UK shares, UK securities or overseas
securities, and
(c)
the arrangements are such that the seller or a person
15
connected with the seller (instead of being required to
repurchase the securities or acquiring an option to do so) is
granted rights in respect of the benefits that will result from
the redemption.
(4)
Expressions used in this section and in section 613 of ITA 2007
20
(powers to modify repo provisions: redemption arrangements) have
the same meanings in this section as in that section.”
338
After section 263G insert—
“263H
Sections 263F and 263G: supplementary provisions
(1)
Regulations under section 263F or 263G may make different
25
provision for different cases.
(2)
Regulations under either section may contain incidental,
supplemental, consequential and transitional provision and savings.
(3)
The incidental, supplemental and consequential provision may
include—
30
(a)
in the case of regulations about section 261G, modifications of
section 261F, and
(b)
in the case of regulations about section 263A or 263D,
modifications of the operation of this Act in relation to cases
where, by virtue of the regulations, any acquisition or
35
disposal is excluded from those which are to be ignored for
the purposes of capital gains tax.
(4)
In this section and sections 263F and 263G “modifications” includes
exceptions and omissions.
(5)
Accordingly, a power in sections 263F and 263G to provide for a
40
provision to apply with modifications in relation to a particular case
includes power to provide for the provision not to apply in relation
to that case.”
339
After section 263H insert—