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Income Tax Bill


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

622

 

      (2)  

In subsection (2) omit paragraph (b) and the “or” immediately before it.

      (3)  

In subsection (4) after “ICTA” insert “or section 56(3) of ITA 2007”.

      (4)  

In subsection (6) for the words from “section 231AA” to “umbrella scheme),”

substitute—

“section 504(4) of ITA 2007 (disapplication of certain provisions

5

for income of unauthorised unit trusts),

section 592 of ITA 2007 (no tax credits for borrower under stock

lending arrangement),

section 593 of ITA 2007 (no tax credits for interim holder under

repo),

10

section 594 of ITA 2007 (no tax credits for original owner under

repo),”.

516   (1)  

Amend section 399 (qualifying distributions received by persons not entitled

to tax credits) as follows.

      (2)  

In subsection (4) for the words from “and the distribution” to “treated”

15

substitute “, the amount or value of the distribution is treated for the

purposes of Chapters 3, 4 and 6 of Part 9 of ITA 2007 (special rates for

trustees’ income)”.

      (3)  

In subsection (7) for the words from “section 231AA(1A)” to the end

substitute—

20

“section 504(4) of ITA 2007 (disapplication of certain provisions

for income of unauthorised unit trusts),

section 592 of ITA 2007 (no tax credits for borrower under stock

lending arrangement),

section 593 of ITA 2007 (no tax credits for interim holder under

25

repo), and

section 594 of ITA 2007 (no tax credits for original owner under

repo).”

517   (1)  

Amend section 400 (non-qualifying distributions) as follows.

      (2)  

In subsection (4) for the words from “income to which” to the end substitute

30

“assessed (in whole or in part) at the dividend trust rate by virtue of Chapter

3 of Part 9 of ITA 2007 (trustees’ accumulated or discretionary income to be

charged at special rates), the trustees’ liability for income tax at that rate is

reduced”.

      (3)  

After subsection (6) insert—

35

“(7)   

Subsection (2) is subject to section 504(4) of ITA 2007 (disapplication

of certain provisions for income of unauthorised unit trusts).”

518        

In section 401 (relief: qualifying distribution after linked non-qualifying

distribution) after subsection (6) insert—

“(6A)   

The reduction under this section is given effect at Step 6 of the

40

calculation in section 23 of ITA 2007.”

519        

In section 410(3)(b) (stock dividend income arising to trustees) for the words

from “income” to the end substitute “accumulated or discretionary income

(as defined in section 480 of ITA 2007 but excluding income arising under a

trust established for charitable purposes only or an unauthorised unit trust

45

in relation to which section 504 of that Act applies)”.

 

 

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

623

 

520   (1)  

Amend section 414 (stock dividends from UK resident companies: income

tax to be treated as paid) as follows.

      (2)  

In subsection (1) for “income to which section 686 of ICTA applies”

substitute “accumulated or discretionary income (as defined in section 480

of ITA 2007)”.

5

      (3)  

In subsection (4) after “fall to be made” insert “at Step 2 or 3 of the calculation

in section 23 of ITA 2007 (calculation of income tax liability)”.

521        

In section 418(5) (loans to participator in close company: relief where

borrowers liable as settlors) for “rate applicable to trusts” substitute “trust

rate”.

10

522        

In section 421(4) (loans to participator in close company: income tax treated

as paid) after “fall to be made” insert “at Step 2 or 3 of the calculation in

section 23 of ITA 2007 (calculation of income tax liability)”.

523   (1)  

Amend section 426 (annuity payments received after deduction of tax) as

follows.

15

      (2)  

For “Income tax deducted under either of the following sections” substitute

“In accordance with section 848 of ITA 2007 a sum representing income tax

deducted under section 901 of that Act”.

      (3)  

Omit the words after “recipient”.

524        

In section 446 (strips of government securities: relief for losses) for

20

subsection (2) substitute—

“(2)   

If a person makes a claim under this section, the relief is given by

deducting the loss in calculating the person’s net income for the tax

year in which the disposal occurs (see Step 2 of the calculation in

section 23 of ITA 2007).”

25

525        

In section 454 (listed securities held since 26th March 2003: relief for losses)

for subsection (4) substitute—

“(4)   

If a claim under this section is made by a person other than a trustee,

the relief is given by deducting the loss in calculating the person’s net

income for the tax year in which the disposal occurs (see Step 2 of the

30

calculation in section 23 of ITA 2007).”

526   (1)  

Amend section 457 (disposal of deeply discounted securities by trustees) as

follows.

      (2)  

Omit subsection (3).

      (3)  

For subsection (5) substitute—

35

“(5)   

If the trustees are trustees of a scheme in relation to which section 504

of ITA 2007 applies, subsection (2) does not apply to profits which

are shown in the scheme’s accounts as income available for payment

to unit holders or for investment.”

527        

In section 459(2) (profits from deeply discounted securities: transfer of assets

40

abroad) for “sections 739 and 740 of ICTA (transfer of assets abroad) have”

substitute “Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) has”.

528        

In section 460(2) (profits from deeply discounted securities: minor

definitions) for “section 709(1)” substitute “section 840ZA”.

 

 

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

624

 

529        

After section 465 insert—

“465A   

Amounts for which individuals liable to be treated as highest part of

total income

(1)   

This section applies if—

(a)   

an individual is liable for tax under this Chapter in respect of

5

an amount, and

(b)   

the individual is treated by section 530 as having paid income

tax at the savings rate on the amount.

(2)   

The amount is treated as the highest part of the individual’s total

income.

10

(3)   

Subsection (2) has effect for all income tax purposes except the

purposes of sections 535 to 537 (gains from contracts for life

insurance etc: top slicing relief).

(4)   

See section 1012 of ITA 2007 (relationship between highest part rules)

for the relationship between—

15

(a)   

the rule in subsection (2), and

(b)   

other rules requiring particular income to be treated as the

highest part of a person’s total income.”

530        

In section 466(2) (person liable: personal representatives) for “lower rate”

substitute “savings rate”.

20

531   (1)  

Amend section 467 (liability of trustees for tax on gains from contracts for

life insurance etc) as follows.

      (2)  

After subsection (1) insert—

“(1A)   

If trustees are liable for tax under this Chapter, the gain is treated for

income tax purposes as income of the trustees.”

25

      (3)  

For subsection (7) substitute—

“(7)   

If trustees are liable for tax under this Chapter, it is charged at the

savings rate if—

(a)   

condition A is met, or

(b)   

condition D is met and the trustees are trustees of a charitable

30

trust.”

532        

In section 468 (gains from contracts for life insurance etc: non-UK resident

trustees and foreign institutions)—

(a)   

in subsection (2) for “Sections 739 and 740”, “prevent” and “apply”

substitute “Chapter 2 of Part 13 of ITA 2007”, “prevents” and

35

“applies” respectively, and

(b)   

in subsections (3) and (4) for “sections 739 and 740 apply” substitute

“Chapter 2 of Part 13 of ITA 2007 applies”.

533        

In section 482 (excepted group life policies: conditions about persons

intended to benefit)—

40

(a)   

in subsection (6) omit the definition of “tax advantage”, and

(b)   

after that subsection insert—

“(7)   

In this section “tax advantage” has the meaning given by

section 840ZA of ICTA.”

 

 

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

625

 

534        

In section 520(4) (the property categories) after the definition of “internal

linked fund” insert—

““investment trust” has the meaning given by section 842 of

ICTA,”.

535   (1)  

Amend section 530 (income tax treated as paid) as follows.

5

      (2)  

In subsection (1) for “lower rate” substitute “savings rate”.

      (3)  

In subsection (4) after “fall to be made” insert “at Step 2 or 3 of the calculation

in section 23 of ITA 2007 (calculation of income tax liability)”.

536   (1)  

Amend section 535 (top slicing relief) as follows.

      (2)  

After subsection (2) insert—

10

“(2A)   

If the relief is given by a reduction in income tax, it is given effect at

Step 6 of the calculation in section 23 of ITA 2007.”

      (3)  

In subsection (3)—

(a)   

for “LRL”, in both places where it occurs, substitute “SRL”, and

(b)   

for “lower rate” substitute “savings rate”.

15

      (4)  

After subsection (6) insert—

“(7)   

For the purposes of the calculations mentioned in subsection (1) any

relief under Chapter 2 or 3 of Part 8 of ITA 2007 (which relate to gift

aid and other gifts to charities) is ignored.”

537        

In section 536(1) (top slicing relieved liability: one chargeable event) in

20

paragraph (b) of Step 2 for “lower rate” substitute “savings rate”.

538        

In section 537 (top slicing relieved liability: two or more chargeable events)

in paragraph (b) of Step 2 for “lower rate” substitute “savings rate”.

539        

For section 539 (relief for deficiencies) substitute—

“539    

Relief for deficiencies

25

(1)   

An individual is entitled to a tax reduction for a tax year in which a

deficiency arises from a policy or contract on a chargeable event if—

(a)   

the condition in subsection (2) is met,

(b)   

the individual would (apart from this section) be liable to

income tax at the higher rate or the dividend upper rate (or

30

both) for the tax year, and

(c)   

the individual makes a claim.

(2)   

The condition is that, if a gain had arisen instead on the chargeable

event—

(a)   

the individual would have been liable to income tax on the

35

gain for the year, or

(b)   

the individual would have been so liable apart from the

requirement in section 465(1) that the individual must be UK

resident in the tax year in which the gain arises.

(3)   

The tax reduction is given effect at Step 6 of the calculation in section

40

23 of ITA 2007.

 

 

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

626

 

(4)   

See section 540 for the cases in which a deficiency is treated as arising

from a policy or contract on a chargeable event, section 541 for how

the deficiency is calculated and section 469(5) for the apportionment

of deficiencies in cases where two or more persons are interested in

a policy or contract.

5

(5)   

The amount of the tax reduction is calculated as follows.

   

Step 1

   

Attribute to the amount of the deficiency an amount of the

individual’s income for the tax year which is liable at the dividend

upper rate, so far as is possible.

10

   

Step 2

   

If there is an amount of the deficiency remaining after Step 1,

attribute to the remaining amount of the deficiency an amount of the

individual’s savings income for the tax year which is liable at the

higher rate, so far as is possible.

15

   

Step 3

   

If there is an amount of the deficiency remaining after Step 2,

attribute to the remaining amount of the deficiency an amount of the

individual’s other income for the tax year which is liable at the

higher rate, so far as is possible.

20

   

Step 4

   

Calculate the amount of the individual’s preliminary income tax

liability for the tax year (see subsection (6)).

   

Step 5

   

Calculate the amount of the individual’s preliminary income tax

25

liability for the tax year again, on these assumptions—

   

Assume that any income attributed to the deficiency at Step 1 is liable

at the dividend ordinary rate.

   

Assume that any income attributed to the deficiency at Step 2 is liable

at the savings rate.

30

   

Assume that any income attributed to the deficiency at Step 3 is liable

at the basic rate.

   

Step 6

   

Deduct the amount found at Step 5 from the amount found at Step 4.

   

The result is the amount of the tax reduction.

35

(6)   

The individual’s preliminary income tax liability is the amount

found by calculating the individual’s income tax liability in

accordance with section 23 of ITA 2007, ignoring Steps 6 and 7 of that

calculation.”

540        

In section 546(4) (table of provisions subject to special rules for older policies

40

and contracts), in the first column of the table, for “Section 539(3)” substitute

“Section 539”.

541   (1)  

Amend section 547 (income tax chargeable on income treated as received

from unauthorised unit trust) as follows.

      (2)  

In subsection (1) for the words from “scheme” to the end substitute “unit

45

trust scheme to which this section applies”.

 

 

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

627

 

      (3)  

After subsection (2) insert—

“(3)   

This section applies to a unit trust scheme if—

(a)   

the scheme is an unauthorised unit trust, and

(b)   

the trustees of the scheme are UK resident.”

542        

For section 550 substitute—

5

“550    

Income tax treated as paid

In accordance with section 848 of ITA 2007, a sum representing

income tax treated as deducted from income within this Chapter as

a result of section 941 of that Act (deemed deduction from unit

holder’s income) is treated as income tax paid by the unit holder.”

10

543        

In section 567(2) (disposals of futures and options involving guaranteed

returns: losses) for “section 392 of ICTA” substitute “section 152 of ITA

2007”.

544        

In section 569(2) (disposal of futures and options involving guaranteed

returns: anti-avoidance: transfer of assets abroad) for “sections 739 and 740

15

of ICTA (transfer of assets abroad) have” substitute “Chapter 2 of Part 13 of

ITA 2007 (transfer of assets abroad) has”.

545        

In section 570(5) (charge to tax under Chapter 13: sales of foreign dividend

coupons) for “section 840A of ICTA” substitute “section 991 of ITA 2007”.

546   (1)  

Amend section 595 (deduction of tax from payments to non-UK residents)

20

as follows.

      (2)  

In subsection (2) for the words after “which” substitute “is to be deducted

under section 910 of ITA 2007”.

      (3)  

In subsection (3) for the words after “which” substitute “is to be deducted

under section 910 of ITA 2007”.

25

547        

In section 601 (how relief for patent expenses is given) after subsection (2)

insert—

“(2A)   

The deduction or set-off is given effect at Step 2 of the calculation in

section 23 of ITA 2007.”

548   (1)  

Amend section 602 (payments received after deduction of tax) as follows.

30

      (2)  

For “Income tax deducted under either of the following sections” substitute

“In accordance with section 848 of ITA 2007, a sum representing income tax

deducted under either of the following Chapters”.

      (3)  

For the words after “recipient” substitute “—

Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and

35

patent royalties), and

Chapter 7 of that Part (deduction from other payments connected with

intellectual property).”

549   (1)  

Amend section 618 (payments received after deduction of tax) as follows.

      (2)  

For “Income tax deducted under either of the following sections” substitute

40

“In accordance with section 848 of ITA 2007, a sum representing income tax

deducted under Chapter 6 of Part 15 of that Act”.

 

 

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

628

 

      (3)  

Omit the words after “recipient”.

550        

In section 619(2) (charge to tax on settlor)—

(a)   

for “sections 1 to 1B of ICTA” substitute “Chapter 2 of Part 2 of ITA

2007 (rates at which income tax is charged)”, and

(b)   

for “Tax Acts” substitute “Income Tax Acts”.

5

551        

After section 619 insert—

“619A   

Income treated as highest part of settlor’s total income

(1)   

This section applies to income which is treated as income of a settlor

as a result of section 624 (income where settlor retains an interest) or

629 (income paid to unmarried minor children of settlor).

10

(2)   

The income is treated as the highest part of the settlor’s total income

for the purposes of section 619 (so far as it relates to the income).

(3)   

See section 1012 of ITA 2007 (relationship between highest part rules)

for the relationship between—

(a)   

the rule in subsection (2), and

15

(b)   

other rules requiring particular income to be treated as the

highest part of a person’s total income.”

552        

In section 620(5) (which contains various definitions) in the definition of

“charity” for the words from “each” to the end substitute—

“(a)   

the Trustees of the National Heritage Memorial Fund,

20

(b)   

the Historic Buildings and Monuments Commission

for England, and

(c)   

the National Endowment for Science, Technology

and the Arts”.

553        

In section 624 (income where settlor retains an interest in the settlement)

25

after subsection (1) insert—

“(1A)   

If the settlement is a trust, expenses of the trustees are not to be used

to reduce the income of the settlor.”

554        

In section 627(2) (income where settlor retains an interest: exceptions), in

paragraph (b), for “section 25 of FA 1990 (donations to charity by

30

individuals)” substitute “Chapter 2 of Part 8 of ITA 2007 (gift aid)”.

555   (1)  

Amend section 628 (exception for gifts to charities) as follows.

      (2)  

In subsection (2)—

(a)   

in paragraph (a) for “is to” substitute “must”, and

(b)   

in paragraph (b) omit the words after “person”.

35

      (3)  

After that subsection insert—

“(2A)   

The cases covered by subsection (2)(b) include cases where the

trustees have, or any other person has, any discretion over one or

more of the following matters—

(a)   

whether, or the extent to which, the income is to be

40

accumulated,

(b)   

the persons to whom the income is to be paid, and

(c)   

how much of the income is to be paid to any person.”

 

 

 
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