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
629

      (4)
In subsection (6)—
(a)
in the definition of “charity” for the words from “each” to the end
substitute—
“(a)
the Trustees of the National Heritage
Memorial Fund,
5
(b)
the Historic Buildings and Monuments
Commission for England, and
(c)
the National Endowment for Science,
Technology and the Arts, and”, and
(b)
omit the definition of “resident” and the “and” immediately after it.
10
556
In section 631(7) (retained and accumulated income) for “the total income”
substitute “the child’s total income or net income at Step 2 or 3 of the
calculation in section 23 of ITA 2007”.
557
In section 635(3)(d) (settlements: amounts treated as income of settlor:
amount of available income) for “rate applicable to trusts” substitute “trust
15
rate”.
558   (1)
Amend section 636 (calculation of undistributed income) as follows.
      (2)
In subsection (6) for “section 505 of ICTA (charities: general)” substitute “any
provision to which subsection (7) applies”.
      (3)
After that subsection insert—
20
“(7)
This subsection applies to the following provisions of ITA 2007—
section 521(4) (gifts entitling donor to gift-aid relief),
section 522(5) (gifts of money from companies),
section 523(5) (payments from other charities),
section 524 (profits etc of charitable trades),
25
section 529 (profits from fund-raising events),
section 530 (profits from lotteries),
section 531 (property income etc),
section 532 (savings and investment income),
section 533 (public revenue dividends),
30
section 536 (miscellaneous income), and
section 537 (income from estates in administration).”
559
In section 640(1) and (3)(a) (settlements: amounts treated as income of
settlor: grossing-up of deemed income) for “rate applicable to trusts”
substitute “trust rate”.
35
560
After section 646 insert—
“646A
Trustees’ expenses to be rateably apportioned
(1)
This section applies if—
(a)
in a tax year qualifying income arises under a UK settlement,
and
40
(b)
the qualifying income consists of charitable income and non-
charitable income.
(2)
If expenses of the trustees are to be set against the charitable income
by virtue of section 484 of ITA 2007, the amount of those expenses

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
630

which can used for that purpose is limited to the amount allocated to
the charitable income.
(3)
If—
(a)
Chapter 8 of Part 9 of ITA 2007 applies in relation to the
charitable income, and
5
(b)
expenses of the trustees are to be used to reduce the
charitable income for income tax purposes,

the amount of those expenses which can used for that purpose is
limited to the amount allocated to the charitable income.
(4)
For the purposes of subsections (2) and (3) the amount of the
10
expenses allocated to the charitable income is determined by
apportioning them rateably between the charitable income and the
non-charitable income.
(5)
In this section—
“charitable income” means income within section 628(1) or
15
630(1),
“non-charitable income” means income which is not charitable
income, and
“qualifying income” and “UK settlement” have the same
meaning as in section 628.”
20
561
In section 669(3)(a) (reduction in residuary income: inheritance tax on
accrued income) for sub-paragraph (i) substitute—
“(i)
in the case of savings income, at the savings rate,
and”.
562
In section 677 (relief where UK income tax borne by foreign estate: absolute
25
interests) after subsection (2) insert—
“(3)
The tax reduction under this section is given effect at Step 6 of the
calculation in section 23 of ITA 2007.”
563
In section 678 (relief where UK income tax borne by foreign estate: limited
and discretionary interests) after subsection (2) insert—
30
“(3)
The tax reduction under this section is given effect at Step 6 of the
calculation in section 23 of ITA 2007.”
564
In section 679(3)(b) (income from which basic amounts are treated as paid)
for “lower rate” substitute “savings rate”.
565
In section 680(4) (income treated as bearing income tax) for “lower rate”
35
substitute “savings rate”.
566
After section 680 insert—
“680A
Income treated as savings income or dividend income
(1)
Subsections (2) and (3) apply to income if it—
(a)
is treated under section 656(3) or 657(4) (gross amount of
40
estate income treated as bearing tax at the applicable rate) as
bearing tax at the savings rate or the dividend ordinary rate,
and
(b)
is not paid through a trustee.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
631

(2)
So far as the income is treated as bearing tax at the savings rate, it is
treated as savings income.
(3)
So far as the income is treated as bearing tax at the dividend ordinary
rate, it is treated as dividend income.
(4)
Subsections (5) and (6) apply to income if it—
5
(a)
is treated by section 662, read with section 656(3) or 657(4), as
bearing tax at the savings rate or the dividend ordinary rate,
and
(b)
is paid through a trustee.
(5)
So far as the income is treated as bearing tax at the savings rate, it is
10
treated as savings income of the trustee.
(6)
So far as the income is treated as bearing tax at the dividend ordinary
rate, it is treated as dividend income of the trustee.”
567
In section 682 (assessments, adjustments and claims after the administration
period) after subsection (4) insert—
15
“(4A)
The excess charged under subsection (4)(b) is treated as an amount
of income for income tax purposes, except so far as it represents a tax
reduction given effect at Step 6 of the calculation in section 23 of ITA
2007.”
568
In section 684(3) (Chapter 7 of Part 5 subject to section 687 of ICTA) for
20
“section 687 of ICTA” substitute “section 494 of ITA 2007”.
569   (1)
Amend section 685A (discretionary payments under settlor-interested
settlements) as follows.
      (2)
In subsection (4) omit paragraph (c) and the “and” immediately before it.
      (3)
In subsection (6) for “Section 687 of ICTA” substitute “Sections 494 and 495
25
of ITA 2007”.
570   (1)
Amend section 686 (payments received after deduction of tax) as follows.
      (2)
In subsection (1)—
(a)
for “Income tax deducted under either of the following sections”
substitute “In accordance with section 848 of ITA 2007, a sum
30
representing income tax deducted under Chapter 6 of Part 15 of that
Act”, and
(b)
omit the words after “recipient”.
      (3)
In subsection (2) for “section 687(2) of that Act” substitute “section 494(3) of
ITA 2007”.
35
571
In section 704(4)(a) (types of arrangements and providers) for “section
840A(1)(b) of ICTA” substitute “section 991(2)(b) of ITA 2007”.
572
In section 714(6) (exemption of profits from FOTRA securities) for “Chapter
3 of Part 17 of ICTA” substitute “Chapter 2 of Part 13 of ITA 2007”.
573
In section 724 (regulations) omit subsection (3).
40
574
In section 755(3) (exemption of interest on foreign currency securities etc
owned by non-UK residents) for “Chapter 3 of Part 17 of ICTA” substitute
“Chapter 2 of Part 13 of ITA 2007”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
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575
In section 756A(5) (interest on certain deposits of victims of National-
Socialist persecution) for “meaning given by section 481(3) of ICTA”
substitute “same meaning as in Chapter 19 of Part 15 of ITA 2007 (see section
983 of that Act)”.
576
In section 757 (interest and royalty payments: introduction) at the end
5
insert—
“(4)
See section 914 of ITA 2007 for provision enabling a company to
make a royalty payment gross if it reasonably believes that the
payment is exempt from income tax as a result of section 758 of this
Act.”
10
577
In section 767(2) (power to amend references to the Directive by order)—
(a)
for “section 101 of FA 2004” substitute “sections 914 to 916 of ITA
2007”, and
(b)
for “subsection (9) of that section” substitute “section 917(2) of that
Act”.
15
578
In section 841 (unremittable income: introduction) for subsection (5)
substitute—
“(5)
This Chapter does not apply to accrued income profits which a
person is treated as making under Chapter 2 of Part 12 of ITA 2007,
but see sections 668 and 669 of that Act (which make similar
20
provision).”
579
In section 852(7) (carrying on by partner of notional trade) for “carried
forward under section 385 of ICTA and set against” substitute “deducted
under section 83 of ITA 2007 from”.
580
In section 863(2) (limited liability partnerships)—
25
(a)
in paragraph (a) after “firm” insert “or partnership”, and
(b)
in paragraph (b)—
(i)
after “members”, in the first place where it occurs, insert “or
partners”, and
(ii)
after “firm” insert “or partnership”.
30
581
In section 871 (apportionment etc of miscellaneous profits to tax year)—
(a)
in subsection (1)(a) for “section 836B of ICTA” substitute “section
1016 of ITA 2007”, and
(b)
in subsection (2)—
(i)
for “section 836B of ICTA” substitute “section 1016 of ITA
35
2007”, and
(ii)
for “subsection (4)(a)” substitute “subsection (3)(a)”.
582
In section 872(3)(a) (losses calculated on same basis as miscellaneous
income) for “section 836B of ICTA” substitute “section 1016 of ITA 2007”.
583
Omit section 876 (meaning of “farming” and related expressions).
40
584
Omit section 877 (meaning of “grossing up”).
585   (1)
Amend section 878 (other definitions) as follows.
      (2)
In subsection (1)—
(a)
omit the definition of “charity”,

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
633

(b)
after the definition of “houseboat” insert “and”, and
(c)
omit the words after the definition of “income”.
      (3)
In subsection (5) for “Section 839 of ICTA” substitute “Section 993 of ITA
2007”.
      (4)
In subsection (6) for “Section 840 of ICTA (meaning of control in relation to
5
a body corporate)” substitute “Section 995 of ITA 2007 (meaning of
“control”)”.
586
In section 879 (interpretation: Scotland)—
(a)
in subsection (1) omit the definitions of “assignment” and
“surrender” and the “and” immediately before the definition of
10
“surrender”, and
(b)
omit subsection (2).
587
In section 885(3)(c) (general index in Schedule 4) for “ICTA or ITEPA 2003”
substitute “another Act”.
588
In Schedule 2 (transitionals and savings etc) omit paragraph 50(3).
15
589   (1)
Amend paragraph 82 of Schedule 2 (transitionals and savings etc) as follows.
      (2)
In paragraph (a) for “section 505(1) of ICTA (exemption from income tax for
certain income forming part of the income of a charity)” substitute “any of
sections 521(4), 522(5), 523(5), 524, 529 to 533, 536 and 537 of ITA 2007
(certain exemptions: special rules about charitable trusts)”.
20
      (3)
In paragraph (b) for the words from “505(3)” to the end substitute “541 of
that Act (restrictions on exemptions: attributing items of income to the non-
exempt amount)”.
590
In paragraph 109(4) of Schedule 2 (transitional provision: contracts in
accounting periods beginning before 1st January 1992) for the words from
25
“Section 539(3)” to the end substitute “Section 539 (relief for deficiencies) has
effect as if for subsections (1) to (6) there were substituted—
“(1)
A deficiency from a policy or contract arising on a chargeable event
is allowable as a deduction in calculating an individual’s net income
for a tax year if, had a gain arisen instead on the chargeable event—
30
(a)
the individual would have been liable to income tax on the
gain for that 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.
35
(2)
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.””
40
591
In Part 1 of Schedule 4 (abbreviations) in the appropriate place insert—

“ITA 2007
The Income Tax Act 2007”

592   (1)
Amend Part 2 of Schedule 4 (index of defined expressions) as follows.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
634

      (2)
In the entry for “assignment (in the application of the Act to Scotland)”, in
the second column, for “section 879(1)” substitute “section 1008(1) of ITA
2007”.
      (3)
In the entry for “authorised unit trust”, in the second column, for “section
832(1) of ICTA” substitute “section 989 of ITA 2007”.
5
      (4)
In the entry for “basic rate”, in the second column, for “section 832(1) of
ICTA” substitute “section 6(2) of ITA 2007 (as applied by section 989 of that
Act)”.
      (5)
In the entry for “body of persons”, in the second column, for “section 832(1)
of ICTA” substitute “section 989 of ITA 2007”.
10
      (6)
In the entry for “building society”, in the second column, for “section 832(1)
of ICTA” substitute “section 989 of ITA 2007”.
      (7)
In the entry for “capital allowance”, in the second column, for “section 832(1)
of ICTA” substitute “section 989 of ITA 2007”.
      (8)
Omit the entry for “chargeable period”.
15
      (9)
In the entry for “charity”, in the second column, for “section 878(1)”
substitute “section 989 of ITA 2007”.
     (10)
Omit the entry for “child”.
     (11)
In the entry for “company”, in the second column, for “section 832(1) of
ICTA” substitute “section 992 of ITA 2007”.
20
     (12)
In the entry for “connected”, in the second column, for “section 839 of ICTA”
substitute “section 993 of ITA 2007”.
     (13)
In the entry for “control”—
(a)
in the first column, omit “(in relation to a body corporate)”, and
(b)
in the second column, for “section 840 of ICTA” substitute “section
25
995 of ITA 2007”.
     (14)
In the entry for “distribution”, in the second column, for “section 832(1) of
ICTA” substitute “section 989 of ITA 2007”.
     (15)
In the entry for “the dividend ordinary rate”, in the second column, for
“section 832(1) of ICTA” substitute “section 8(1) of ITA 2007 (as applied by
30
section 989 of that Act)”.
     (16)
In the entry for “the dividend trust rate”, in the second column, for “section
832(1) of ICTA” substitute “section 9(2) of ITA 2007 (as applied by section
989 of that Act)”.
     (17)
In the entry for “the dividend upper rate”, in the second column, for “section
35
832(1) of ICTA” substitute “section 8(2) of ITA 2007 (as applied by section
989 of that Act)”.
     (18)
In the entry for “estate in land (in relation to any land in Scotland)”, in the
second column, for “section 832(1) of ICTA” substitute “section 1008(1) of
ITA 2007”.
40
     (19)
In the entry for “farming”, in the second column, for “section 876” substitute
“section 996 of ITA 2007”.

Income Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
635

     (20)
In the entry for “for accounting purposes”, in the second column, for “section
832(1) of ICTA” substitute “section 997 of ITA 2007”.
     (21)
In the entry for “forestry”, in the second column, for “section 876(3)”
substitute “section 996(3) of ITA 2007”.
     (22)
In the entry for “generally accepted accounting practice”, in the second
5
column, for “section 832(1) of ICTA and section 50 of FA 2004” substitute
“section 997 of ITA 2007”.
     (23)
In the entry for “grossing up”, in the second column, for “section 877”
substitute “section 998 of ITA 2007”.
     (24)
In the entry for “higher rate”, in the second column, for “section 832(1) of
10
ICTA” substitute “section 6(2) of ITA 2007 (as applied by section 989 of that
Act)”.
     (25)
Omit the entry for “interest”.
     (26)
In the entry for “international accounting standards”, in the second column,
for “section 832(1) of ICTA and section 50(2) of FA 2004” substitute “section
15
997 of ITA 2007”.
     (27)
Omit the entry for “investment trust”.
     (28)
In the entry for “local authority”, in the second column, for “section 842A of
ICTA” substitute “section 999 of ITA 2007”.
     (29)
Omit the entry for “lower rate”.
20
     (30)
In the entry for “market gardening”, in the second column, for “section
876(5)” substitute “section 996(5) of ITA 2007”.
     (31)
In the entry for “non-UK resident”, in the second column, for “section 878(1)”
substitute “section 989 of ITA 2007”.
     (32)
In the entry for “normal self-assessment filing date”, in the second column,
25
for “section 878(1)” substitute “section 989 of ITA 2007”.
     (33)
In the entry for “notice”, in the second column, for “section 832(1) of ICTA”
substitute “section 989 of ITA 2007”.
     (34)
In the entry for “oil and gas exploration and appraisal”, in the second
column, for “section 837B of ICTA” substitute “section 1003 of ITA 2007”.
30
     (35)
In the entry for “ordinary share capital”, in the second column, for “section
832(1) of ICTA” substitute “section 989 of ITA 2007”.
     (36)
In the entry for “period of account”, in the second column, for “section 832(1)
of ICTA” substitute “section 989 of ITA 2007”.
     (37)
In the entry for “permanent establishment”, in the second column, for
35
“section 832(1) of ICTA and section 148 of FA 2003” substitute “section 148
of FA 2003 (as applied by section 989 of ITA 2007)”.
     (38)
In the entry for “personal representatives”, in the second column, for
“section 878(1)” substitute “section 989 of ITA 2007”.
     (39)
In the entry for “profits or gains”, in the second column, for “section 833(1)
40
of ICTA” substitute “section 989 of ITA 2007”.