Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 2 — Changes in the law
643

Partnerships involving companies
8     (1)
References in this Act to any person are to be read, in the case of a person
acting in partnership with other persons of whom at least one is a company
chargeable to corporation tax, as references to all the partners so far as is
required for the purposes of preserving the continuity of the law.
5
      (2)
References to a company or other person in any provision amended in its
application for corporation tax purposes by this Act are to be read, in the
case of a company acting in partnership with other persons of whom at least
one is not a company, as references to all the partners so far as is required for
the purposes of preserving the continuity of the law.
10
Interpretation
9     (1)
In this Part—
“enactment” includes subordinate legislation (within the meaning of
the Interpretation Act 1978 (c. 30)),
“relevant tax purposes” means, in relation to a superseded enactment,
15
tax purposes for which the enactment has been rewritten by this Act,
and
“superseded enactment” means an earlier enactment which has been
rewritten by this Act for certain tax purposes (whether it applied
only for those purposes or for those and other tax purposes).
20
      (2)
References in this Part to the repeal of a provision include references to its
revocation and to its express or implied disapplication for income tax
purposes of this Act.
      (3)
References in this Part to tax purposes are not limited to income tax
purposes.
25
Part 2
Changes in the law
10    (1)
This paragraph applies if, in the case of any person—
(a)
a thing is done or an event occurs before 6 April 2007, and
(b)
because of a change in the law made by this Act, the tax
30
consequences of that thing or event for the relevant period are
different from what they would otherwise have been.
      (2)
If that person so elects, this Act applies with such modifications as may be
necessary to secure that the tax consequences for the relevant period are the
same as they would have been if the change in the law had not been made.
35
      (3)
In sub-paragraphs (1) and (2) “the relevant period” means—
(a)
for income tax purposes, any period of account beginning before and
ending on or after 6 April 2007, and
(b)
for corporation tax purposes, any accounting period beginning
before and ending on or after 6 April 2007.
40
      (4)
If this paragraph applies in the case of two or more persons in relation to the
same thing or event, an election made under this paragraph by any one of
those persons is of no effect unless a corresponding election is made by the
other or each of the others.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 4 — Personal reliefs
644

      (5)
An election under this paragraph must be made—
(a)
for income tax purposes, on or before the first anniversary of the
normal self-assessment filing date for the tax year in which the
period of account ends, and
(b)
for corporation tax purposes, not later than two years after the end of
5
the accounting period.
Part 3
Rates at which income tax is charged
11
In relation to a tax year before 2007-08—
(a)
references in this Act, another enactment or an instrument or
10
document to the savings rate are to be read as references to the lower
rate, and
(b)
references in this Act, another enactment or an instrument or
document to the trust rate are to be read as references to the rate
applicable to trusts.
15
12
In relation to the tax year 2007-08 or any subsequent tax year—
(a)
references in an enactment, instrument or document to the lower rate
are to be read as references to the savings rate, and
(b)
references in an enactment, instrument or document to the rate
applicable to trusts are to be read as references to the trust rate.
20
13
In this Part “enactment” includes subordinate legislation (within the
meaning of the Interpretation Act 1978 (c. 30)).
Part 4
Personal reliefs
14
Paragraphs 15 to 17 do not apply after 5 April 2009.
25
15    (1)
Sub-paragraphs (2) and (3) apply in relation to an individual who,
immediately before 6 April 2007, is entitled to a blind person’s allowance
under section 265 of ICTA.
      (2)
Section 39 has effect with the insertion in subsection (1) after “section 38” of
“of this Act or section 265 of ICTA”.
30
      (3)
Section 265 of ICTA (as amended by Schedule 1) has effect—
(a)
with the insertion in subsection (2)(a) after “subsection (1) above” of
“or section 38 of ITA 2007”,
(b)
with the insertion in subsection (5) after “subsection (1)” of “or
section 38 of ITA 2007”.
35
16    (1)
Sub-paragraphs (2) to (5) apply in relation to an individual if, immediately
before 6 April 2007, the individual’s spouse or civil partner is entitled to a
tax reduction under section 257A or 257AB of ICTA.
      (2)
Sections 47 and 48 have effect—
(a)
with the insertion in subsections (1)(a) and (3) after “section 45 or 46”
40
of “of this Act or section 257A or 257AB of ICTA”,

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 4 — Personal reliefs
645

(b)
with the insertion in subsection (4) after paragraph (b) of “, or
(c)
if the individual’s spouse or civil partner is entitled to
a tax reduction under section 257A or 257AB of ICTA,
the amount by reference to which the calculation of
the tax reduction is to be made.”
5
      (3)
Section 51 has effect—
(a)
with the insertion in subsections (1)(a) and (2)(a) after “section 45 or
46” of “of this Act or section 257A or 257AB of ICTA”,
(b)
with the insertion in subsection (2)(b) after “section 49” of “of this Act
or section 257BA(3) of ICTA”.
10
      (4)
Section 257BA of ICTA (as amended by Schedule 1) has effect with the
insertion in subsection (1) after “section 257A or 257AB” of “of this Act or
section 45 or 46 of ITA 2007”.
      (5)
Section 257BB of ICTA (as amended by Schedule 1) has effect with the
insertion in subsection (3) after ““section 257A or 257AB” of “of this Act or
15
section 45 or 46 of ITA 2007”.
17    (1)
Sub-paragraphs (2) to (5) apply in relation to an individual who,
immediately before 6 April 2007, is entitled to a tax reduction under section
257A or 257AB of ICTA.
      (2)
Section 49 has effect with the insertion in subsection (1) after “section 45 or
20
46 of “of this Act or section 257A or 257AB of ICTA”.
      (3)
Section 52 has effect with the insertion in subsection (4) after “section 45, 46
or 49” of “of this Act or section 257A, 257AB or 257BA(3) of ICTA”.
      (4)
Section 53 has effect with the insertion in subsection (3) after “this Chapter”
of “or section 257A, 257AB, 257BA or 257BB of ICTA”.
25
      (5)
Section 257BA of ICTA (as amended by Schedule 1) has effect—
(a)
with the insertion in subsections (2) and (3)(a) after “section 257A or
257AB” of “of this Act or section 45 or 46 of ITA 2007”,
(b)
with the substitution for subsection (3A) of—
“(3A)
In this section “the appropriate amount” means—
30
(a)
if the individual, or the individual’s spouse or civil
partner, is entitled to a tax reduction under section
257A or 257AB, the amount by reference to which the
calculation of the tax reduction is to be made,
(b)
if the individual, or the individual’s spouse, is
35
entitled to a tax reduction under section 45 of ITA
2007, the amount specified in section 45(3)(a) or (b) of
that Act (as applicable), after any reductions under
section 45(4) and 54(2) of that Act, or
(c)
if the individual, or the individual’s spouse or civil
40
partner, is entitled to a tax reduction under section 46
of ITA 2007, the amount specified in section 46(3)(a)
or (b) of that Act (as applicable), after any reductions
under section 46(4) and 54(2) of that Act.”
      (6)
Section 257BB of ICTA (as amended by Schedule 1) has effect—
45
(a)
with the insertion in subsections (1)(a) and (1A)(a) after “section
257A or 257AB” of “of this Act or section 45 or 46 of ITA 2007”,

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 5 — Losses (except losses on disposal of shares)
646

(b)
with the insertion in subsection (1A)(b) after “section 257BA(3)” of
“of this Act or section 49 of ITA 2007”,
(c)
with the insertion in subsection (5C) after “this section” of “, or
Chapter 3 of Part 3 of ITA 2007,”.
Part 5
5
Losses (except losses on disposal of shares)
General: carry forward loss reliefs
18    (1)
The repeal by this Act of the superseded carry forward provisions does not
alter the effect of those provisions so far as they determine—
(a)
whether, and
10
(b)
to what extent,

relief for any loss made (or treated as made) in a tax year before the tax year
2007-08 is to be given for the tax year 2007-08 or any subsequent tax year.
      (2)
But any relief for the loss (or any part of the loss) which is given for the tax
year 2007-08 or any subsequent tax year is to be given in accordance with the
15
relevant provisions of Part 4 of this Act.
      (3)
In this paragraph “the superseded carry forward provisions” means—
(a)
sections 379A and 379B of ICTA (carry forward of loss in Schedule A
business or overseas property business),
(b)
sections 385, 387, 390 and 391 (so far as applying to section 385) of
20
ICTA (carry forward of loss in trade, profession or vocation),
(c)
section 392(2)(b) and (5) of ICTA (carry forward of miscellaneous
loss), and
(d)
any provision inserting or amending, or affecting the application of,
any of the above provisions.
25
Trade loss relief against general income
19    (1)
This paragraph applies for the purposes of section 64 if the loss is made in
the tax year 2007-08.
      (2)
Relief for the loss can be given for the tax year 2006-07.
      (3)
Sub-paragraphs (4) and (5) apply if relief for the loss is claimed for the tax
30
year 2006-07.
      (4)
If relief is to be given, the relief is given in the way it would have been given
had it been given under section 380(1)(b) of ICTA ignoring this Act (and
section 65 of this Act is to be read accordingly).
      (5)
Section 72 of FA 1991 applies as if the relief had been claimed under section
35
380(1)(b) of ICTA.
20    (1)
This paragraph applies if—
(a)
a person makes a loss (“the 2006-07 loss”) in a trade in the tax year
2006-07,
(b)
relief under section 380 of ICTA is not available for the 2006-07 loss
40
because of section 384(1) of that Act,
(c)
the person makes a loss (“the 2007-08 loss”) in the trade in the tax
year 2007-08,

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 5 — Losses (except losses on disposal of shares)
647

(d)
(apart from this paragraph) relief under section 64 of this Act is not
available for the 2007-08 loss because of section 66 of this Act,
(e)
the basis period for the tax year 2007-08 overlaps with the tax year
2006-07, and
(f)
ignoring this Act, section 384(1) of ICTA would not have prevented
5
relief under section 380 of that Act being available for the 2007-08
loss.
      (2)
Section 66 of this Act is not to apply in relation to the 2007-08 loss.
      (3)
This paragraph applies to professions and vocations as it applies to trades.
Early trade losses relief
10
21    (1)
This paragraph applies for the purposes of section 72 if the loss is made in
the tax year 2007-08, 2008-09 or 2009-10.
      (2)
Relief for the loss can be given for one or more of the tax years 2004-05, 2005-
06 and 2006-07 (depending on the tax year in which the loss is made).
      (3)
If relief for the loss is to be given for one or more of those tax years, the relief
15
is given in the way in which it would have been given had it been given
under section 381 of ICTA ignoring this Act (and section 73 of this Act is to
be read accordingly).
22    (1)
This paragraph applies if—
(a)
a person makes a loss (“the 2006-07 loss”) in a trade in the tax year
20
2006-07,
(b)
relief under section 381 of ICTA is not available for the 2006-07 loss
because of subsection (4) of that section,
(c)
the person makes a loss (“the 2007-08 loss”) in the trade in the tax
year 2007-08,
25
(d)
(apart from this paragraph) relief under section 72 of this Act is not
available for the 2007-08 loss because of section 74(1) of this Act,
(e)
the basis period for the tax year 2007-08 overlaps with the tax year
2006-07, and
(f)
ignoring this Act, subsection (4) of section 381 of ICTA would not
30
have prevented relief under that section being available for the 2007-
08 loss.
      (2)
Section 74(1) of this Act is not to apply in relation to the 2007-08 loss.
      (3)
This paragraph applies to professions and vocations as it applies to trades.
Sideways relief: trade leasing allowances given to individuals
35
23    (1)
This paragraph applies if—
(a)
a person makes a loss (“the 2006-07 loss”) in a trade in the tax year
2006-07,
(b)
relief under section 380 or 381 of ICTA is not available for the 2006-
07 loss (or for part of it) because of section 384(6) of that Act,
40
(c)
the person makes a loss (“the 2007-08 loss”) in the trade in the tax
year 2007-08,

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 5 — Losses (except losses on disposal of shares)
648

(d)
(apart from this paragraph) relief under section 64 or 72 of this Act is
not available for the 2007-08 loss (or for part of it) because of section
75 of this Act,
(e)
the basis period for the tax year 2007-08 overlaps with the tax year
2006-07, and
5
(f)
ignoring this Act, section 384(6) of ICTA would not have prevented
relief under section 380 or 381 of that Act being available for the 2007-
08 loss (or for the part).
      (2)
Section 75 of this Act is not to apply in relation to the 2007-08 loss (or to the
part).
10
Sideways relief: dealings in commodity futures
24
Section 81 does not apply if the arrangements mentioned in that section were
made wholly before 6 April 1976.
Terminal trade loss relief
25    (1)
This paragraph applies for the purposes of section 89 if the final tax year is
15
the tax year 2007-08, 2008-09 or 2009-10.
      (2)
Relief for the terminal losses in question can be given for one or more of the
tax years 2004-05, 2005-06 and 2006-07 (depending on which tax year is the
final tax year).
      (3)
If relief for the terminal losses is to be given for one or more of those tax
20
years, the relief is given in the way in which it would have been given had it
been given under section 388 of ICTA ignoring this Act (and section 91 of
this Act is to be read accordingly).
Post-cessation trade loss relief and post-cessation property relief
26
The events covered by section 98(5) (including as applied by section
25
125(6)(b)) include events—
(a)
which occur before the tax year 2007-08, and
(b)
in relation to which no claim is made under section 109A of ICTA.
Reliefs for limited partners not to exceed contribution to the firm
27    (1)
The relief covered by section 104(5) includes—
30
(a)
relief given for a loss as a result of section 380 or 381 of ICTA,
(b)
any amount that, ignoring this Act, would have been included in the
individual’s aggregate amount in relation to the trade for the
purposes of section 117 of ICTA as a result of paragraph 22(3) of
Schedule 2 to CAA 2001, and
35
(c)
the treatment of a loss as an allowable loss by virtue of section 72 of
FA 1991.
      (2)
The income covered by section 104(6) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
Reliefs for members of LLPs not to exceed contribution to the LLP
40
28    (1)
The relief covered by section 107(6) includes—

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 5 — Losses (except losses on disposal of shares)
649

(a)
relief given for a loss as a result of section 380 or 381 of ICTA, and
(b)
the treatment of a loss as an allowable loss by virtue of section 72 of
FA 1991.
      (2)
The income covered by section 107(7) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
5
Members of LLPs: carry-forward of losses
29    (1)
The amounts of loss covered by section 109(1)(b) include amounts of loss
which, as a result of section 117 of ICTA (as applied by section 118ZB of that
Act), are not—
(a)
relieved under section 380 or 381 of ICTA, or
10
(b)
treated as an allowable loss by virtue of section 72 of FA 1991.
      (2)
In section 109(3)—
(a)
references to section 109 include references to section 118ZD of
ICTA,
(b)
references to sideways relief include references to relief under
15
section 380 or 381 of ICTA, and
(c)
references to capital gains relief include references to the treatment
of a loss as an allowable loss by virtue of section 72 of FA 1991.
Reliefs for non-active partners not to exceed contribution to the firm
30    (1)
The relief covered by section 110(5) includes—
20
(a)
relief given for a loss as a result of section 380 or 381 of ICTA, and
(b)
the treatment of a loss as an allowable loss by virtue of section 72 of
FA 1991.
      (2)
Sub-paragraph (1) is subject to paragraph 33.
      (3)
The income covered by section 110(6) includes amounts treated as received
25
as a result of the application of section 74 of FA 2005.
Non-active partners: carry-forward of losses
31    (1)
The amounts of loss covered by section 113(1)(b) include amounts of loss
which, as a result of section 118ZE of ICTA, are not—
(a)
relieved under section 380 or 381 of ICTA, or
30
(b)
treated as an allowable loss by virtue of section 72 of FA 1991.
      (2)
In section 113(4)—
(a)
references to section 113 include references to section 118ZI of ICTA,
(b)
references to sideways relief include references to relief under
section 380 or 381 of ICTA, and
35
(c)
references to capital gains relief include references to the treatment
of a loss as an allowable loss by virtue of section 72 of FA 1991.
      (3)
In section 113(8) the reference to section 109 includes a reference to section
118ZD of ICTA.