Income Tax Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
594

(a)
in sub-paragraph (2) for “The carry-forward provision” substitute
“Section 83 of ITA 2007”, and
(b)
omit sub-paragraphs (3) and (4).
      (3)
In paragraph 5(1), in the definition of “ordinary share capital”, for “section
832(1) of the Taxes Act 1988” substitute “section 989 of ITA 2007”.
5
      (4)
In paragraph 7(2) for “Section 385 of the Taxes Act 1988” substitute “Section
83 of ITA 2007”.
Agriculture Act 1993 (c. 37)
362
In paragraph 22(2) of Schedule 2 to the Agriculture Act 1993 (tax provisions
relating to the carrying out of approved scheme of reorganisation) for
10
“section 469 of the Income and Corporation Taxes Act 1988” substitute “the
Tax Acts”.
Finance Act 1994 (c. 9)
363   (1)
Amend paragraph 11 of Schedule 20 to the Finance Act 1994 (changes for
facilitating self-assessment etc) as follows.
15
      (2)
In sub-paragraph (3) for the words from “be treated” to “excess” substitute
“be chargeable for that year to an amount of income tax equal to the excess”.
      (3)
Omit sub-paragraph (7).
Finance Act 1995 (c.4)
364
The Finance Act 1995 is amended as follows.
20
365
Omit section 73 (venture capital trusts: regulations).
366
Omit section 90 (relief for post-cessation expenditure).
367   (1)
Amend section 127 (persons not treated as UK representatives) as follows.
      (2)
In subsection (5)(b) for the words from “section 128” to “excluded income”
substitute “Chapter 1 of Part 14 of the Income Tax Act 2007 (limits on liability
25
to income tax of non-UK residents) would fall (apart from the requirements
of section 819 of that Act) to be treated as disregarded income (see section
813 of that Act)”.
      (3)
In subsection (17) for “section 839 of the Taxes Act 1988” substitute “section
993 of the Income Tax Act 2007”.
30
368
Omit section 128 (limit on income chargeable on non-residents: income tax).
369   (1)
Amend section 154 (short rotation coppice) as follows.
      (2)
In subsection (1)—
(a)
omit “Subject to subsection (1A),”, and
(b)
for “Tax Acts” substitute “Corporation Tax Acts”.
35
      (3)
Omit subsection (1A).
370   (1)
Amend Schedule 22 (prevention of exploitation of Schedule 2 to ITTOIA
2005 (so far as relating to overlap profit)) as follows.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
595

      (2)
In paragraph 5(1)(b) for the words from “section 353” to “provision)”
substitute “section 383 of the Income Tax Act 2007 (relief for interest
payments)”.
      (3)
In paragraph 17—
(a)
in sub-paragraph (2) for “section 839” to the end substitute “section
5
993 of the Income Tax Act 2007 (but as if, in subsection (4) of that
section, the words from “But this subsection” to the end were
omitted).”, and
(b)
in sub-paragraph (6)(a), in paragraph (ii) of the definition of
“control”, for “section 840 of that Act” substitute “section 995 of the
10
Income Tax Act 2007”.
Finance Act 1996 (c.8)
371
The Finance Act 1996 is amended as follows.
372
In section 88A(1) (loan relationships: accounting method where rate of
interest is reset) for “of Chapter 1 of Part 17” substitute “given by section
15
840ZA”.
373
In section 91D(11) (loan relationships: condition 2 for section 91B(6)(b)) for
“section 709(1)” substitute “section 840ZA”.
374   (1)
Amend section 97 (manufactured interest) as follows.
      (2)
For subsection (4) substitute—
20
“(4)
See sections 736B(2) and 737A(5) of the Taxes Act 1988 for cases in
which there is deemed to be a payment of an amount representative
of interest for the purposes of this section.”
      (3)
In subsection (4A) for “subsection (4) above” substitute “subsection (2) of
that section”.
25
375   (1)
Amend section 103 (interpretation of Chapter 2 of Part 4: loan relationships)
as follows.
      (2)
In subsection (1), in the definition of “retail prices index”, for “section 833(2)
of the Taxes Act 1988” substitute “section 989 of the Income Tax Act 2007”.
      (3)
In subsection (3B) for “section 709(1)” substitute “section 840ZA”.
30
376
In paragraph 13 of Schedule 9 (loan relationships for unallowable purposes)
for sub-paragraph (6) substitute—
“(6)
In this paragraph “tax advantage” has the meaning given by section
840ZA of the Taxes Act 1988.”
Finance (No.2) Act 1997 (c. 58)
35
377
The Finance (No.2) Act 1997 is amended as follows.
378
Omit section 29 (unauthorised unit trusts).
379
In section 35(3)(a) (transitional relief for charities etc) for “charity” substitute
“charitable company”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
596

Finance Act 1998 (c. 36)
380
The Finance Act 1998 is amended as follows.
381
In section 56(4) (transitional provision in connection with section 55
(construction workers supplied by agencies)) for “section 385 of the Taxes
Act 1988” substitute “section 83 of the Income Tax Act 2007”.
5
382
In section 134(5) (transfer of company’s assets to VCT) for “section 842AA of
the Taxes Act 1988” substitute “Part 6 of the Income Tax Act 2007”.
383
In section 135(5) (transfer within group to VCT) for “section 842AA of the
Taxes Act 1988” substitute “Part 6 of the Income Tax Act 2007”.
384
In section 161(2)(a) (non-FOTRA securities) for the words from “sections
10
711” to “receiving” substitute “Chapter 2 of Part 12 of the Income Tax Act
2007 (accrued income profits) in relation only to accrued income profits
which a person is treated as making under section 628(5) or 630(2) of that
Act”.
385   (1)
Amend Schedule 18 (company tax returns, assessments and related matters)
15
as follows.
      (2)
In paragraph 3 after sub-paragraph (4) insert—
    “(5)
Sub-paragraph (1)(b) has effect as if the reference to the
Corporation Tax Acts included a reference to sections 911, 912, 914
and 915 of the Income Tax Act 2007.”
20
      (3)
In paragraph 20 after sub-paragraph (3) insert—
    “(4)
In the application of this paragraph to an error relating to
information required in a return by virtue of paragraph 3(5), this
paragraph has effect as if—
(a)
the reference in sub-paragraph (1) to a tax-related penalty
25
were a reference to an amount not exceeding £3,000, and
(b)
sub-paragraphs (2) and (3) were omitted.”
      (4)
In paragraphs 22(3)(a) and 23(3)(a) for sub-paragraph (ii) substitute—
“(ii)
section 495(1) or 975(2) or (4) of the Income Tax Act
2007 (statements about deduction of income tax),”.
30
Greater London Authority Act 1999 (c.29)
386
The Greater London Authority Act 1999 is amended as follows.
387
In section 157(4) (restriction on exercise of certain powers except through a
company)—
(a)
in paragraph (a) omit “income tax and” and “and” at the end, and
35
(b)
after that paragraph insert—
“(aa)
section 838 of the Income Tax Act 2007 (exemption of
local authorities from income tax); and”.
388
In section 419(2) (taxation: certain bodies treated as a local authority)—
(a)
in paragraph (a) for “income and corporation taxes” substitute
40
“corporation tax”, and omit “and” at the end, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
597

(b)
after that paragraph insert—
“(aa)
section 838 of the Income Tax Act 2007 (exemption of
local authorities from income tax); and”.
Finance Act 2000 (c.17)
389
The Finance Act 2000 is amended as follows.
5
390
In section 38(4) (payroll deduction scheme) in the definition of “charity” for
“that Act” in the first place where it occurs substitute “the Taxes Act 1988”.
391
In section 44 (which makes provision about expenses of trustees) for
subsections (4) and (5) substitute—
“(5A)
This section applies if—
10
(a)
in a year of assessment qualifying income arises under a UK
settlement,
(b)
the qualifying income consists of charitable income and non-
charitable income, and
(c)
expenses of the trustees are to be used to reduce the
15
charitable income for the purpose of calculating a
beneficiary’s liability to corporation tax.
(5B)
The amount of those expenses which can used for that purpose is
limited to the amount allocated to the charitable income.
(5C)
The amount of the expenses allocated to the charitable income is
20
determined by apportioning them rateably between the charitable
income and the non-charitable income.
(5D)
In this section—
“charitable income” means income within section 628(1) or
630(1) of ITTOIA 2005,
25
“non-charitable income” means income which is not charitable
income, and
“qualifying income” and “UK settlement” have the same
meaning as in section 628 of ITTOIA 2005.”
392   (1)
Amend section 46 (exemption for small trades etc) as follows.
30
      (2)
In subsection (1)—
(a)
omit paragraph (a) and the “or” at the end of that paragraph, and
(b)
for “charity” substitute “charitable company”.
      (3)
In subsection (2) omit paragraph (a) and the “or” at the end of that
paragraph.
35
      (4)
In subsection (2A)—
(a)
in paragraph (a) for “, 790 or 804” substitute “or 790”,
(b)
at the end of paragraph (b) insert “and”, and
(c)
omit paragraph (c) and the “and” at the end of that paragraph.
      (5)
In subsection (3)—
40
(a)
for “a chargeable” substitute “an accounting”,
(b)
for “charity”, in both places where it occurs, substitute “charitable
company”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
598

(c)
in paragraph (a) for “charity’s” substitute “charitable company’s”,
and
(d)
in that paragraph for “chargeable” substitute “accounting”.
      (6)
In subsection (4)(b)—
(a)
for “charity’s” substitute “charitable company’s”, and
5
(b)
for “chargeable” substitute “accounting”.
      (7)
In subsection (5) for “a chargeable” substitute “an accounting”.
      (8)
In subsection (6)—
(a)
in the appropriate place insert—
““charitable company” means any body of persons
10
established for charitable purposes only;”,
(b)
omit the definition of “charity”,
(c)
in the definition of “gross income”, for “charity” substitute
“charitable company”, and
(d)
in the definition of “income”—
15
(i)
for “charity” substitute “charitable company”, and
(ii)
omit paragraph (a) and the “or” at the end of that paragraph.
      (9)
In subsection (7) omit the words from “for the year” to “companies,”.
393
In section 155 (interpretation) at the end insert “and “ITA 2007” means the
Income Tax Act 2007”.
20
394   (1)
Amend Schedule 15 (the corporate venturing scheme) as follows.
      (2)
In paragraph 16(4) (the unquoted status requirement) after “Taxes Act 1988”
insert “or section 184(3) of ITA 2007”.
      (3)
In paragraph 55(4) (provision supplementary to paragraph 54) after “Taxes
Act 1988” insert “or Part 5 of ITA 2007”.
25
      (4)
In paragraph 56(3) (value received by other persons)—
(a)
after “Taxes Act 1988”, in the first place where it occurs, insert “or
Part 5 of ITA 2007”,
(b)
for “section 299 of that Act” substitute “section 299 of the Taxes Act
1988 or section 209 of ITA 2007”,
30
(c)
for “section 300(2)(a) of that Act” substitute “section 300(2)(a) of the
Taxes Act 1988 or section 216(2)(a) of ITA 2007”, and
(d)
after “section 300 of the Taxes Act 1988” insert “, section 214 of ITA
2007”.
      (5)
In paragraph 102 (minor definitions etc) after sub-paragraph (8) insert—
35
    “(9)
References in this Schedule 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 after 5 April 2007.”
395
In paragraph 41 of Schedule 22 (tonnage tax: the requirement not to enter
into tax avoidance arrangements) for sub-paragraph (3) substitute—
40
“(3)
In this paragraph “tax advantage” has the meaning given by section
840ZA of the Taxes Act 1988.”

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
599

Capital Allowances Act 2001 (c.2)
396
The Capital Allowances Act 2001 is amended as follows.
397   (1)
Amend section 4 (capital expenditure) as follows.
      (2)
In subsection (4) for “section 348 or 349(1) of ICTA (annual payments)”
substitute “Chapter 6 of Part 15 of ITA 2007 (deduction from annual
5
payments or patent royalties) or under section 906 of that Act (certain
royalties etc where usual place of abode of owner is abroad)”.
      (3)
Omit subsection (5).
398
In section 70V(4) (tax avoidance involving international leasing) for
“Chapter 1” to the end substitute “section 840ZA of ICTA”.
10
399
Omit section 70YI(4) (application of section 839 of ICTA).
400
In section 138(2)(b) (limit on amount deferred) for “section 385 or” substitute
“section 83 of ITA 2007 or section”.
401
In section 156(1)(a) and (c) (connected persons) for “section 839 of ICTA”
substitute “section 575”.
15
402
In section 220(8)(a) (allocation of expenditure to a chargeable period) omit “,
within the meaning of section 840 of ICTA”.
403
In section 232(1)(a) (meaning of connected person) for “section 839 of ICTA”
substitute “section 575”.
404
In section 258 (special leasing: income tax) after subsection (3) insert—
20
“(3A)
The allowance or (as the case may be) the proportionate part of the
allowance is given effect at Step 2 of the calculation in section 23 of
ITA 2007.”
405
In section 266(5)(a) (election where predecessor and successor are connected
persons) for “section 839 of ICTA” substitute “section 575”.
25
406
In section 355 (buildings for miners etc: carry-back of allowances) after
subsection (2) insert—
“(2A)
For income tax purposes the allowance is given effect at Step 2 of the
calculation in section 23 of ITA 2007.”
407
In section 437 (research and development allowances) for subsection (2)
30
substitute—
“(2)
In this Part “research and development”—
(a)
means activities that fall to be treated as research and
development in accordance with generally accepted
accounting practice, and
35
(b)
includes oil and gas exploration and appraisal.
(3)
But—
(a)
activities that, as a result of regulations made under section
1006 of ITA 2007, are “research and development” for the
purposes of that section are also “research and development”
40
for the purposes of this Part, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
600

(b)
activities that, as a result of any such regulations, are not
“research and development” for the purposes of that section
are also not “research and development” for the purposes of
this Part.”
408
In section 479 (persons having qualifying non-trade expenditure: income
5
tax) after subsection (2) insert—
“(2A)
The allowance is given effect at Step 2 of the calculation in section 23
of ITA 2007.”
409
At the beginning of Chapter 6 of Part 12 insert—
“Orders and regulations
10
570B
Orders and regulations made by Treasury or Commissioners
(1)
Any orders or regulations made by the Treasury or the
Commissioners for Her Majesty’s Revenue and Customs under this
Act must be made by statutory instrument.
(2)
Any orders or regulations made by the Treasury or the
15
Commissioners under this Act are subject to annulment in
pursuance of a resolution of the House of Commons.
(3)
Subsection (2) does not apply to any regulations made under section
70YJ or any order made under section 82(4)(d).”
410
In section 574(1) at the end insert “(but, for the purposes of section 575, this
20
definition applies only where expressly indicated)”.
411
For section 575 (connected persons) substitute—
“575
Meaning of “connected” persons
(1)
For the purposes of this Act whether a person is connected with
another is determined in accordance with this section unless
25
otherwise indicated.
(2)
An individual (“A”) is connected with another individual (“B”) if—
(a)
A is B’s spouse or civil partner,
(b)
A is a relative of B,
(c)
A is the spouse or civil partner of a relative of B,
30
(d)
A is a relative of B’s spouse or civil partner, or
(e)
A is the spouse or civil partner of a relative of B’s spouse or
civil partner.
(3)
A person, in the capacity as trustee of a settlement, is connected
with—
35
(a)
any individual who is a settlor in relation to the settlement,
(b)
any person connected with such an individual,
(c)
any close company whose participators include the trustees
of the settlement,
(d)
any non-UK resident company which, if it were UK resident,
40
would be a close company whose participators include the
trustees of the settlement,