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
587

“263I
Powers about manufactured overseas dividends
(1)
The Treasury may by regulations make provision as mentioned in
subsection (2) about prescribed cases where a person—
(a)
pays or receives a manufactured overseas dividend as
mentioned in section 581(1) of ITA 2007 (manufactured
5
overseas dividends), or
(b)
is treated as doing so for any purposes of Chapter 2 of Part 11
of that Act or regulations made under it (manufactured
payments).
(2)
The regulations may provide for adjusting a relevant amount by
10
reference to a provision which has effect under the law of a territory
outside the United Kingdom.
(3)
A “relevant amount” is an amount which is treated for prescribed
capital gains tax purposes as the amount paid or payable to a person
in respect of a relevant transaction.
15
(4)
A “relevant transaction” is a sale, repurchase or other transfer of the
overseas securities to which the manufactured overseas dividend
relates.
(5)
In this section “prescribed” means prescribed in regulations under
this section.
20
(6)
Subject to that, expressions used in this section and in section 582 of
ITA 2007 (manufactured payments: powers about manufactured
overseas dividends) have the same meanings in this section as in that
section.”
340   (1)
Amend section 271 (miscellaneous exemptions) as follows.
25
      (2)
In subsection (3) for the words from “In this subsection” to the end
substitute—

“In this subsection—
“health service body” has the meaning given by section 519A of
the Taxes Act, and
30
“local authority association” has the meaning given by section
1000 of ITA 2007.”
      (3)
After subsection (7) insert—
“(7A)
Chargeable gains are exempt from tax if they accrue to a bank, or
issue department of a bank, to which this subsection applies for the
35
time being.
(7B)
Her Majesty may by Order in Council direct that subsection (7A)
applies to a bank or its issue department if it appears to Her Majesty
that the bank—
(a)
is not resident in the United Kingdom, and
40
(b)
is entrusted by the government of a territory outside the
United Kingdom with the custody of the territory’s principal
foreign exchange reserves.
(7C)
No recommendation may be made to Her Majesty in Council to
make an order under subsection (7B) unless a draft of the order has
45

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
588

been laid before and approved by a resolution of the House of
Commons.”
341
After section 285 insert—
“285A
European Economic Interest Groupings
(1)
The following rules about European Economic Interest Groupings
5
apply for the purposes of charging tax in respect of chargeable
gains—

Rule 1

A grouping is treated as acting as the agent of its members.

Rule 2
10

The activities of a grouping are treated as those of its members acting
jointly.

Rule 3

Each member of a grouping is treated as having a share of the
grouping’s property, rights and liabilities.
15

Rule 4

Any trade or profession carried on by the grouping is treated as
carried on in partnership by members of the grouping.

Rule 5

A person is to be regarded as acquiring or disposing of a share of the
20
assets of the grouping not only where there is an acquisition or
disposal of assets by the grouping while he is a member of it, but also
where he becomes or ceases to be a member of a grouping or there is
a change in his share of the property of the grouping.
(2)
For the purposes of Rule 3, a member’s share of any property, rights
25
or liabilities of a grouping is determined according to the contract
under which the grouping is established.
(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.
30
(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.
(5)
“European Economic Interest Grouping” means a European
Economic Interest Grouping formed under Council Regulation
35
(EEC) No 2137/85 of 25th July 1985, whether registered in Great
Britain, Northern Ireland or elsewhere.”
342   (1)
Amend section 288 (interpretation) as follows.
      (2)
In subsection (1)—
(a)
in the definition of “allowable loss” after “16” insert “, 261B, 261D”,
40
(b)
after the definition of “ITTOIA 2005” insert—
““ITA 2007” means the Income Tax Act 2007;”,
(c)
in the definition of “local authority” for “section 842A of the Taxes
Act” substitute “section 999 of ITA 2007”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
589

(d)
after the definition of “the Management Act” insert—
““net income” has the same meaning as in the Income
Tax Acts (see section 989 of ITA 2007);”,
(e)
in the definition of “period of account” for “section 832(1) of the
Taxes Act” substitute “section 989 of ITA 2007”,
5
(f)
in the definition of “property investment LLP” for “section 842B of
the Taxes Act” substitute “section 1004 of ITA 2007”,
(g)
in the definition of “recognised stock exchange” for “section 841 of
the Taxes Act” substitute “section 1005 of ITA 2007”,
(h)
in the definition of “venture capital trust” for “the meaning given by
10
section 842AA of the Taxes Act” substitute “the same meaning as in
Part 6 of ITA 2007”, and
(i)
in the definition of “year of assessment” for the words from ““1992-
93”” to the end substitute ““year of assessment 1992-93” means the
year of assessment beginning on 6th April 1992 (and any
15
corresponding expression in which two years are similarly
mentioned is to be read in the same way)”.
      (3)
In subsection (2) for “section 833(2) of the Taxes Act” substitute “section 989
of ITA 2007”.
      (4)
In subsection (3) for “section 282 of the Taxes Act” substitute “section 1011 of
20
ITA 2007”.
343
In paragraph 22(1) of Schedule A1 (application of taper relief) in the
definition of “ordinary share capital” for “section 832(1) of the Taxes Act”
substitute “section 989 of ITA 2007”.
344
In paragraph 14 of Schedule 4A (deemed disposal of underlying assets
25
where disposal of interest in settled property: exception) 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
respect of income arising from heritage maintenance property)”.
345   (1)
Amend Schedule 5B (enterprise investment scheme: re-investment) as
30
follows.
      (2)
In paragraph 1(2) (application of Schedule)—
(a)
in paragraph (e) after “that Act)” insert “, or the requirements of
section 183 of ITA 2007,”, and
(b)
in paragraph (g) after “Taxes Act” insert “or section 175(3) of ITA
35
2007”.
      (3)
In paragraph 1A (failure of conditions of application)—
(a)
in sub-paragraph (4A) after “Taxes Act” insert “or section 175(3) of
ITA 2007”,
(b)
in sub-paragraph (5) for “or section 310(2) of the Taxes Act”
40
substitute “, section 310(2) of the Taxes Act or section 241(3) of ITA
2007”, and
(c)
in sub-paragraph (7) after “Taxes Act” insert “or section 236(1) of ITA
2007”.
      (4)
In paragraph 4 (gains accruing on chargeable event)—
45
(a)
in sub-paragraph (4) after “Taxes Act” insert “or Part 5 of ITA 2007”
and after “that Chapter”, in each place where it occurs, insert “or that
Part”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
590

(b)
in sub-paragraph (4A) after “Taxes Act” insert “or Part 5 of ITA
2007”, after “that Chapter” insert “or that Part” and for “that Act”
substitute “the Taxes Act or section 245 of ITA 2007”, and
(c)
in sub-paragraph (4C) after “Taxes Act” insert “or Part 5 of ITA
2007”.
5
      (5)
In paragraph 6 (claims)—
(a)
in sub-paragraph (1) after “Taxes Act” insert “or sections 202(1),
203(1) and 204 to 207 of ITA 2007” and for “that Act in respect of
eligible shares” substitute “the Taxes Act or Part 5 of ITA 2007 in
respect of eligible or relevant shares”,
10
(b)
in sub-paragraph (2) for “That section” substitute “Section 306”, and
(c)
after that sub-paragraph insert—
    “(3)
Sections 202(1), 203(1) and 204 to 207 of ITA 2007, as they
so apply, shall have effect as if any reference to the
requirements for the relief were a reference to the
15
conditions for the application of this Schedule.”
      (6)
In paragraph 7(1) (reorganisations)—
(a)
after “the Taxes Act” insert “or Part 5 of ITA 2007”, and
(b)
after “that Chapter” insert “or that Part”.
      (7)
In paragraph 8 (acquisition of share capital by new company)—
20
(a)
in sub-paragraph (1)(e)(ii) for “subsection (2) of section 306 of the
Taxes Act” substitute “section 306(2) of the Taxes Act or section
203(1) of ITA 2007” and for “that section” substitute “section 306 of
the Taxes Act or sections 204 and 205 of ITA 2007”,
(b)
in sub-paragraph (5)(a) after “Taxes Act” insert “or section 203(1) of
25
ITA 2007”, and
(c)
in sub-paragraph (7) after “Taxes Act” insert “or section 185 of ITA
2007”.
      (8)
In paragraph 9 (other reconstructions and amalgamations)—
(a)
in sub-paragraph (1) after “Taxes Act” insert “or Part 5 of ITA 2007”,
30
(b)
in sub-paragraph (3) after “Taxes Act” insert “or Part 5 of ITA 2007”,
and
(c)
in sub-paragraph (4)(b) for “subsection (2) of section 306 of the Taxes
Act” substitute “section 306(2) of the Taxes Act or section 203(1) of
ITA 2007” and for “that section” substitute “section 306 of the Taxes
35
Act or sections 204 and 205 of ITA 2007”.
      (9)
In paragraph 11(5) (pre-arranged exits)—
(a)
after “trading group” insert “(a)”, and
(b)
at the end insert “, or
(b)
is a reference to a company that meets the trading
40
requirement in section 181(2)(b) of ITA 2007.”
     (10)
In paragraph 13(5) (value received by investor) after “Taxes Act” insert “or
Chapter 2 of Part 5 of ITA 2007”.
     (11)
In paragraph 13C (provision supplemental to paragraph 13B)—
(a)
in sub-paragraph (3) for “Sub-paragraph (4) below” substitute “This
45
sub-paragraph”, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
591

(b)
for sub-paragraph (4) substitute—
    “(4)
Where either of the following applies—
(a)
sub-paragraph (3) above, and
(b)
section 223(3) of ITA 2007 (which makes
corresponding provision in relation to EIS relief
5
under Part 5 of that Act),

the person who subscribes for the shares shall not by virtue
of his subscription for those shares or any other shares in
the same issue be treated as making a qualifying
investment for the purposes of this Schedule.”
10
     (12)
In paragraph 14(3) (value received by other persons)—
(a)
after “Taxes Act”, in the first place where it occurs, insert “or Part 5
of ITA 2007”,
(b)
for “that Act” substitute “the Taxes Act or section 209 or 216(2)(a) of
ITA 2007”, and
15
(c)
after “section 300 of the Taxes Act” insert “or 214 of ITA 2007”.
     (13)
In paragraph 16 (information)—
(a)
in sub-paragraph (4)—
(i)
after “Taxes Act”, in the first place where it occurs, insert “or
section 203(1) of ITA 2007”, and
20
(ii)
after “Taxes Act”, in the second place where it occurs, insert
“or section 175(3) of ITA 2007”,
(b)
in sub-paragraph (4A) after “Taxes Act” insert “or section 175(3) of
ITA 2007”,
(c)
in sub-paragraph (6) after “Taxes Act” insert “or section 176(4)(b) or
25
(5)(b), 182(2) or (4), 183(6), 185(1), 190(1)(e) or 191(2)(c), (3), (4) or (5)
of ITA 2007”,
(d)
in sub-paragraph (7)—
(i)
in paragraph (a) after “Taxes Act” insert “or section 182(2) or
(4) of ITA 2007”,
30
(ii)
in paragraph (aa) after “Taxes Act” insert “or section 176(4)(b)
or (5)(b), 183(6) or 191(3), (4) or (5) of ITA 2007”, and
(iii)
in paragraph (c) after “Taxes Act” insert “or section 185(1),
190(1)(e) or 191(2)(c) of ITA 2007”, and
(e)
in sub-paragraph (7A)—
35
(i)
after “Taxes Act” insert “and subsections (3), (4) and (5) of
section 191 of ITA 2007”, and
(ii)
for “that Act” substitute “the Taxes Act or section 190(2) of
ITA 2007”.
     (14)
In paragraph 19(1) (interpretation)—
40
(a)
in the definition of “eligible shares” for “that Act” substitute “the
Taxes Act or means shares that meet the requirement in section 173
(2) of ITA 2007”,
(b)
in the definition of “ordinary share capital” for “the same meaning as
in the Taxes Act” substitute “the meaning given by section 989 of ITA
45
2007”,
(c)
in the definition of “qualifying business activity” after “Taxes Act”
insert “or section 179 of ITA 2007”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
592

(d)
for the definition of “qualifying company” substitute—
““qualifying company”, in relation to any eligible
shares, means a company which, in relation to those
shares, is—
(a)
a qualifying company for the purposes of
5
Chapter 3 of Part 7 of the Taxes Act (except
that for the purposes of this Schedule the
reference in section 293(1B)(b)(i) of that Act to
section 304A of that Act shall be read as a
reference to paragraph 8 above), or
10
(b)
a qualifying company for the purposes of Part
5 of ITA 2007 (except that for the purposes of
this Schedule the reference in section
184(1)(c)(i) of that Act to section 247 of that Act
shall be read as a reference to paragraph 8
15
above).”
(e)
in the definition of “the relevant period” for “that Act” insert “the
Taxes Act or section 159(2) of ITA 2007”, and
(f)
in the definition of “termination date” after “Taxes Act” insert “or
section 256 of ITA 2007”.
20
     (15)
In paragraph 19(3) omit the “and” immediately before paragraph (c) and
after that paragraph insert “; and
(d)
references to Part 5 of ITA 2007 or any provision of that
Part are to a Part or provision that applies only in relation
to shares issued on or after 6th April 2007”.
25
346
In paragraph 1(1)(a) of Schedule 5BA (enterprise investment scheme:
application of taper relief) after “Taxes Act” insert “or Part 5 of ITA 2007”.
347
In paragraph 3(1)(f) of Schedule 5C (VCTs: deferred charge on re-
investment) for “section 842AA(8) of the Taxes Act” substitute “section
281(3) of ITA 2007”.
30
348   (1)
Amend Schedule 7C (reliefs for transfers to approved share plans) as
follows.
      (2)
In paragraph 2(6) (conditions relating to the disposal), in the definition of
“ordinary share capital” for “section 832(1) of the Taxes Act” substitute
“section 989 of ITA 2007”.
35
      (3)
In paragraph 7(1) and (3) (shares: special provision) after “Taxes Act” insert
“or Part 5 of ITA 2007”.
349
In Schedule 8 (leases), in paragraph 5(6) for “any amount chargeable to tax
under section 348 or 349 of the Taxes Act” substitute “any amount from
which a sum representing income tax is required to be deducted under Part
40
15 of ITA 2007”.
Finance (No. 2) Act 1992 (c. 48)
350
In section 28(1)(a) of the Finance (No. 2) Act 1992 (powers of inspection) after
“1988” insert “or under Part 10 of the Income Tax Act 2007”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
593

Tribunals and Inquiries Act 1992 (c. 53)
351
In paragraph 39(c) of Part 1 of Schedule 1 to the Tribunals and Inquiries Act
1992 (tribunals under direct supervision of Council) at the end insert “or
Chapter 1 of Part 13 of the Income Tax Act 2007”.
Judicial Pensions and Retirement Act 1993 (c. 8)
5
352
In section 3(6) of the Judicial Pensions and Retirement Act 1993 (the
appropriate annual rate) for “section 279(1) of the Finance Act 2004”
substitute “section 4 of the Income Tax Act 2007”.
Charities Act 1993 (c. 10)
353
In section 25A(1) and (2) of the Charities Act 1993 (meaning of terms relating
10
to Scotland and Northern Ireland) after “1988” insert “or Part 10 of the
Income Tax Act 2007”.
Finance Act 1993 (c. 34)
354
The Finance Act 1993 is amended as follows.
355
Omit section 80 (transitional relief for charities etc).
15
356
Omit section 118 (Scottish trusts).
357   (1)
Amend section 176 (ancillary trust funds) as follows.
      (2)
In subsection (3) for paragraph (a) substitute—
“(a)
section 636 of ITA 2007 (exception where there is a transfer to
a legatee);”.
20
      (3)
In subsection (4) for “sections 710 to” substitute “Part 12 of ITA 2007 and
section”.
358   (1)
Amend section 180 (underwriting profits to be earned income) as follows.
      (2)
In subsection (1) for paragraph (b) substitute—
“(b)
accordingly, shall constitute—
25
(i)
for the purposes of Part 4 of the Finance Act 2004,
relevant UK earnings within section 189(2)(b) of that
Act, and
(ii)
income in relation to which the treatment in section
836(2) of ITA 2007 does not apply.”
30
      (3)
In the sidenote for “earned income” substitute “relevant UK earnings etc”.
359
In section 182(1)(ca)(ii) (Lloyd’s underwriters: regulations) for the words
from “section 737E(2) and (8)” to the end substitute “section 569 (repos) or
613 (redemption arrangements) of ITA 2007;”.
360
In section 212 (interpretation) at the end insert “, and “ITA 2007” means the
35
Income Tax Act 2007”.
361   (1)
Amend Schedule 20A (Lloyd’s underwriters: conversion to limited liability
underwriting) as follows.
      (2)
In paragraph 2—