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
601

(e)
any body corporate controlled (within the meaning of section
574) by a company within paragraph (c) or (d),
(f)
if the settlement is the principal settlement in relation to one
or more sub-fund settlements, a person in the capacity as
trustee of such a sub-fund settlement, and
5
(g)
if the settlement is a sub-fund settlement in relation to a
principal settlement, a person in the capacity as trustee of any
other sub-fund settlements in relation to the principal
settlement.
(4)
A person who is a partner in a partnership is connected with—
10
(a)
any partner in the partnership,
(b)
the spouse or civil partner of any individual who is a partner
in the partnership, and
(c)
a relative of any individual who is a partner in the
partnership.
15

But this subsection does not apply in relation to acquisitions or
disposals of assets of the partnership pursuant to genuine
commercial arrangements.
(5)
A company is connected with another company if—
(a)
the same person has control of both companies,
20
(b)
a person (“A”) has control of one company and persons
connected with A have control of the other company,
(c)
A has control of one company and A together with persons
connected with A have control of the other company, or
(d)
a group of two or more persons has control of both
25
companies and the groups either consist of the same persons
or could be so regarded if (in one or more cases) a member of
either group were replaced by a person with whom the
member is connected.
(6)
A company is connected with another person (“A”) if—
30
(a)
A has control of the company, or
(b)
A together with persons connected with A have control of the
company.
(7)
In relation to a company, any two or more persons acting together to
secure or exercise control of the company are connected with—
35
(a)
one another, and
(b)
any person acting on the directions of any of them to secure
or exercise control of the company.
575A
Section 575: supplementary
(1)
In section 575 and this section—
40
“company” includes any body corporate or unincorporated
association, but does not include a partnership (and see also
subsection (2)),
“control” is to be read in accordance with section 416 of ICTA
(except where otherwise indicated),
45
“principal settlement” has the meaning given by paragraph 1 of
Schedule 4ZA to TCGA 1992,
“relative” means brother, sister, ancestor or lineal descendant,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
602

“settlement” has the same meaning as in Chapter 5 of Part 5 of
ITTOIA 2005 (see section 620 of that Act), and
“sub-fund settlement” has the meaning given by paragraph 1 of
Schedule 4ZA to TCGA 1992.
(2)
For the purposes of section 575—
5
(a)
a unit trust scheme is treated as if it were a company, and
(b)
the rights of the unit holders are treated as if they were shares
in the company.
(3)
For the purposes of section 575 “trustee”, in the case of a settlement
in relation to which there would be no trustees apart from this
10
subsection, means any person—
(a)
in whom the property comprised in the settlement is for the
time being vested, or
(b)
in whom the management of that property is for the time
being vested.
15

Section 466(4) of ITA 2007 does not apply for the purposes of this
subsection.
(4)
If any provision of section 575 provides that a person (“A”) is
connected with another person (“B”), it also follows that B is
connected with A.”
20
412
In section 577(1) (other definitions)—
(a)
omit the definition of “tax year”, and
(b)
omit the definition of “the tax year 2001-02”.
413   (1)
Amend Schedule 1 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 in the appropriate place insert—
25

“ITA 2007
The Income Tax Act 2007”.

      (3)
In Part 2—
(a)
in the entry for “body of persons”, in the second column, before
“section 832(1) of ICTA” insert “section 989 of ITA 2007 and”,
(b)
in the entry for “connected persons (general meaning)”, in the second
30
column, for “section 575(1)” substitute “section 575”,
(c)
in the entry for “offshore installation”, in the second column, before
“section 837C of ICTA” insert “sections 1001 and 1002 of ITA 2007
and”,
(d)
in the entry for “overseas property business”, in the second column,
35
at the end insert “(as applied by section 989 of ITA 2007)”,
(e)
in the entry for “research and development”, in the second column,
for “437(2) and section 837A of ICTA” substitute “437(2) and (3)”,
(f)
in the entry for “Schedule A business”, in the second column, before
“section 832(1) of ICTA” insert “section 989 of ITA 2007 and”,
40
(g)
in the entry for “tax year”, in the second column, for “section 577(1)”
substitute “section 4(2) of ITA 2007 (as applied by section 989 of that
Act)”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
603

(h)
in the entry for “UK property business”, in the second column, omit
“section 832(1) of ICTA and” and at the end insert “(as applied by
section 989 of ITA 2007)”,
(i)
in the entry for “United Kingdom”, in the second column, for
“section 830 of ICTA and section 41 of ITEPA 2003” substitute
5
“section 1013 of ITA 2007 and section 830(1) of ICTA”, and
(j)
in the entry for “within the charge to tax”, in the second column,
before “section 832(1) of ICTA” insert “section 1009 of ITA 2007 and”.
Finance Act 2002 (c.23)
414
The Finance Act 2002 is amended as follows.
10
415
Omit section 98.
416
In section 142 (interpretation) at the end insert “, and “ITA 2007” means the
Income Tax Act 2007”.
417
In paragraph 19 of Schedule 12 (tax relief for expenditure on research and
development) for sub-paragraph (2) substitute—
15
    “(2)
For the purposes of this Schedule whether a person is connected
with another is determined in accordance with section 839 of the
Taxes Act 1988.”
418
In paragraph 27 of Schedule 13 (tax relief for expenditure on vaccine
research etc) for sub-paragraph (2) substitute—
20
    “(2)
For the purposes of this Schedule whether a person is connected
with another is determined in accordance with section 839 of the
Taxes Act 1988.”
419   (1)
Amend Schedule 16 (community investment tax relief) as follows.
      (2)
In paragraph 1(1), for “An individual or company” substitute “A company”.
25
      (3)
In paragraph 2—
(a)
in sub-paragraph (1), for “person” substitute “company” and for
“he”, in both places where it occurs, and “him” substitute “it”, and
(b)
in sub-paragraph (2), for “person”, in each place where it occurs,
substitute “company”.
30
      (4)
For paragraphs 4 to 7 substitute—
“Application of Chapter 2 of Part 7 of ITA 2007
4     (1)
Chapter 2 of Part 7 of ITA 2007 applies for the purposes of this
Schedule as it applies for the purposes of that Part.
      (2)
Chapter 2 of Part 7 of that Act makes provision with respect to—
35
(a)
applications and criteria for accreditation as community
development finance institutions (see section 340),
(b)
the terms and conditions of accreditation (see section 341),
(c)
the period of accreditation (see section 342), and
(d)
the delegation of the Secretary of State’s functions under
40
that Chapter (see section 343).

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
604

      (3)
In this Schedule “accreditation period” has the meaning given by
section 342(1) of ITA 2007.”
      (5)
In paragraph 9(5), for “person” substitute “company”.
      (6)
For paragraph 12(2) substitute—
    “(2)
The CDFI must not issue tax relief certificates in respect of
5
investments made in the CDFI in an accreditation period if the
aggregate value of—
(a)
those investments, and
(b)
any investments to which sub-paragraph (2A) applies,

will exceed the limit for that period.
10
    (2A)
This sub-paragraph applies to investments which—
(a)
have been made in the CDFI in the accreditation period,
and
(b)
in respect of which the CDFI has issued tax relief
certificates under section 348 of ITA 2007 (which makes in
15
relation to income tax provision corresponding to that
made by this paragraph).
     (2B)
The limit for an accreditation period is—
(a)
£10 million if the CDFI is accredited for the period as a
retail community development finance institution (see
20
section 340(8) of ITA 2007 as applied by paragraph 4), and
(b)
£20 million in any other case.”
      (7)
In paragraph 14—
(a)
in sub-paragraph (4), for “he” substitute “it” and for “his” substitute
“its”, and
25
(b)
in sub-paragraph (6), for “his” substitute “its”.
      (8)
Omit paragraph 19.
      (9)
In paragraph 20(1), omit paragraph (a).
     (10)
In paragraph 21—
(a)
in sub-paragraph (2), omit “tax year or”, in each place where it
30
occurs, and
(b)
in sub-paragraph (3), for “a tax year or” substitute “an”.
     (11)
In paragraph 22(1) and (2), for “a tax year or” substitute “an” and for “that
year or period” substitute “that period”.
     (12)
In paragraph 23—
35
(a)
in sub-paragraph (1), for “a tax year or” substitute “an” and, in
paragraph (b), omit “tax year or”,
(b)
in sub-paragraph (2), for “a tax year or” substitute “an” and for “that
year or period” substitute “that period”, and
(c)
in sub-paragraph (3), for “a tax year or” substitute “an” and for “that
40
year or period” substitute “that period”.
     (13)
In paragraph 24—
(a)
in sub-paragraph (1), omit “tax year or” in both places where it
occurs, and

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
605

(b)
in sub-paragraph (2)—
(i)
omit “tax year or” in both places where it occurs, and
(ii)
in paragraph (b), omit “year or” in both places where it
occurs.
     (14)
In paragraph 25(1), omit “is a company and”.
5
     (15)
In paragraph 26—
(a)
in sub-paragraph (1), omit paragraph (a),
(b)
in sub-paragraph (2), omit “income or”, for “a tax year or” substitute
“an” and, in paragraph (b)(i), omit “year or”,
(c)
in sub-paragraphs (3) and (4), omit “income tax or”, and
10
(d)
in sub-paragraph (5), for “a tax year or” substitute “an” and for “that
year or period” substitute “that period”.
     (16)
In paragraph 27—
(a)
omit sub-paragraphs (2) and (3), and
(b)
in sub-paragraph (4), omit “Where the investor is a company,”.
15
     (17)
In paragraph 28(1), omit “tax year or”.
     (18)
In paragraph 29—
(a)
in sub-paragraph (2), omit “tax year or”,
(b)
in sub-paragraph (3), for “a tax year or” substitute “an”,
(c)
in sub-paragraph (5), omit “tax year or” and for “that year or period”,
20
in both places where it occurs, substitute “that period”, and
(d)
in sub-paragraph (6), for “a tax year or” substitute “an”.
     (19)
In paragraph 30(1), omit “tax year or”.
     (20)
In paragraphs 31(5), 32(1)(b), 32(3) and 34(5)(b)(ii) for “he” and “him”
substitute “the investor”.
25
     (21)
In paragraph 31(8), omit “tax years or”.
     (22)
In paragraph 32—
(a)
in sub-paragraph (1), omit “tax year or”, and
(b)
in sub-paragraph (5), omit “tax years or”.
     (23)
In paragraph 35(1)(d)(ii), omit “if the investor is a company,”.
30
     (24)
In paragraph 35(5)(a) for “his” substitute “the investor’s”.
     (25)
In paragraph 36(d)(ii), for “his” substitute “the investor”.
     (26)
In paragraph 37(6), for “him” substitute “the investor”.
     (27)
In paragraph 38—
(a)
in sub-paragraph (1), for “him” substitute “the investor”.
35
(b)
in sub-paragraph (2), omit “tax year or”,
(c)
in sub-paragraph (3), omit “tax years or” and, in both places where it
occurs, “tax year or”, and
(d)
in sub-paragraph (4), for “he” substitute “the investor”.
     (28)
Omit paragraphs 40 and 41.
40
     (29)
In paragraph 42—

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
606

(a)
in sub-paragraph (1), omit “tax year or”, and
(b)
in sub-paragraph (2), omit paragraph (a) and the “and” immediately
after it and, in paragraph (b), “if the investor is a company,”.
     (30)
In paragraph 43(1), for “Tax Acts” substitute “Corporation Tax Acts”.
     (31)
In paragraph 45, for “person”, in both places where it occurs, substitute
5
“company”.
     (32)
In paragraph 46(2), for “person”, in both places where it occurs, substitute
“company”.
     (33)
In paragraph 47—
(a)
in sub-paragraph (1), omit “tax years or”,
10
(b)
in sub-paragraphs (3) and (4), omit “of capital gains tax or
corporation tax on chargeable gains and”,
(c)
omit sub-paragraphs (5) and (6), and
(d)
in sub-paragraph (7) for “that Act” substitute “the 1992 Act”.
     (34)
In paragraph 48(2)—
15
(a)
omit “, and for the purposes of capital gains tax or corporation tax on
chargeable gains,” and
(b)
for “paragraph 41 he” substitute “section 151BC(1) of the 1992 Act the
investor”.
     (35)
In paragraph 49(2), for “he”, in both places where it occurs, substitute “the
20
investor”.
     (36)
In paragraph 51(1), omit the definition of “tax year”.
     (37)
In paragraph 52 before the entry for “associate” insert—

“Accreditation period
paragraph 4(3)”

420   (1)
Amend Schedule 18 (relief for community amateur sports clubs) as follows.
25
      (2)
In paragraph 5—
(a)
in sub-paragraph (3)(b) omit the words from “as it applies” to the
end, and
(b)
after that sub-paragraph insert—
    “(4)
For the purposes of this paragraph, section 25(10) of the
30
Finance Act 1990 (gift aid) has effect as if a registered club
were a charitable company.”
      (3)
In paragraph 9 for sub-paragraph (1) substitute—
    “(1)
Chapter 2 of Part 8 of ITA 2007 (gift aid) confers relief from income
tax for donors to registered clubs (see section 430 of that Act).”
35
421
In Schedule 25 (loan relationships), omit paragraph 57.
422   (1)
Amend Schedule 26 (derivative contracts) as follows.
      (2)
In paragraph 24 (derivative contracts for unallowable purposes:

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
607

supplementary) for sub-paragraph (5) substitute—
    “(5)
In this paragraph “tax advantage” has the meaning given by
section 840ZA of the Taxes Act 1988.”
      (3)
Omit paragraph 40.
      (4)
In paragraph 45I(3) in the definition of “the retail prices index” for “section
5
833(2) of the Taxes Act 1988” substitute “section 989 of ITA 2007”.
      (5)
In paragraph 45J(10), in paragraph (b) of the definition of “securities house”,
for “section 349(5) and (6) of the Taxes Act 1988” substitute “section 984 of
ITA 2007”.
      (6)
For paragraph 51 substitute—
10
“51
See section 980 of ITA 2007 (derivative contracts: exception from
duties to deduct).”
423
Omit Schedule 33 (venture capital trusts).
Proceeds of Crime Act 2002 (c. 29)
424
In paragraph 4 of Part 2 of Schedule 10 (tax) to the Proceeds of Crime Act
15
2002 for the words from “sections 711” to the end substitute “Chapter 2 of
Part 12 of the Income Tax Act 2007, that Part does not apply to the transfer”.
Income Tax (Earnings and Pensions) Act 2003 (c. 1)
425
The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
426
In section 1 (overview of contents of Act) omit subsection (2).
20
427
In section 11(3) (calculation of “net taxable earnings”) for “section 380(1) of
ICTA” substitute “section 128 of ITA 2007”.
428
In section 24(6)(a) (limit on chargeable overseas earnings where duties of
associated employment performed in UK) for “section 840 of ICTA”
substitute “section 995 of ITA 2007”.
25
429
In section 48(2) (scope of Chapter) for “subject to deduction of tax under
section 555 of ICTA (payments to non-resident entertainers and sportsmen)”
substitute “or transfers to which section 966(3) or (4) of ITA 2007 applies
(visiting performers: duty to deduct and account for sums representing
income tax)”.
30
430
In section 69(1) (extended meaning of “control”) for “section 840 of ICTA”
substitute “section 995 of ITA 2007”.
431
In section 178 (exception for loans where interest qualifies for tax relief)—
(a)
in paragraph (a) for the words from “(general” to “MIRAS)”
substitute “or section 383 of ITA 2007 (relief for interest payments)”,
35
and
(b)
in paragraph (b) for “that section” substitute “section 353 of ICTA”.
432
In section 180(5) (threshold for benefit of loan to be treated as earnings)—
(a)
in paragraph (a) for the words from “(general” to “MIRAS)”
substitute “or section 383 of ITA 2007 (relief for interest payments)”,
40
and