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 12 — Manufactured payments and repos
678

(b)
on or after that date the lender under the stock lending arrangement
transfers securities (“the substituted securities”) in substitution for
some or all of the original securities,

section 597 has effect as if that arrangement were made on the date of the
substitution (and the substituted securities were the relevant securities).
5
113
Sections 596(5) and 599 do not apply in relation to any arrangement made
before 22 March 2006.
Deemed manufactured payments: repos
114   (1)
Section 602 does not apply if—
(a)
the securities are UK shares or UK securities, and
10
(b)
the agreement to sell them was entered into by the original owner
before 1 May 1995.
      (2)
Section 602 does not apply if—
(a)
the securities are overseas securities, and
(b)
the agreement to sell them was entered into by the original owner
15
before 6 November 1996.
115   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
sections 601 and 602) there is a repo in respect of the securities.
      (2)
Section 569 has effect as if for subsection (4) there were substituted—
20
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
related agreement, or
(b)
exercises an option to buy back the securities which was
25
acquired under the agreement or a related agreement.”
116   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether section 602 applies.
      (2)
Section 601 applies with these modifications.
      (3)
It applies as if in subsection (1)(c) for “the first or second set of relevant
30
conditions” there were substituted “subsection (2)”.
      (4)
It applies as if in subsection (2) for “This is the first set of relevant conditions”
there were substituted “These are the conditions”.
      (5)
It applies as if subsection (3) were omitted.
117   (1)
This paragraph applies if—
35
(a)
an agreement to sell securities was made before 27 June 2006,
(b)
the person from whom the securities are to be repurchased (“A”) is
not the person to whom the original owner agreed to sell the
securities, and
(c)
A did not become the person from whom the securities are to be
40
repurchased in consequence of an agreement made on or after 27
June 2006.
      (2)
Section 602 has effect with the omission of subsections (3) and (4).

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 12 — Manufactured payments and repos
679

118   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003.
      (2)
Section 605 has effect with the omission—
(a)
in subsection (1), of the words “or B”, and
(b)
of subsection (3).
5
Price differences under repos
119
Section 607 does not apply if the agreement to sell the securities was entered
into before 1 May 1995.
120   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
10
section 607) there is a repo in respect of the securities.
      (2)
Section 569 has effect as if for subsection (4) there were substituted—
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
15
related agreement, or
(b)
is required to buy back the securities under an obligation
imposed as a result of the exercise of an option acquired
under the agreement or a related agreement.”
121   (1)
This paragraph applies if section 607 applies and the agreement to sell the
20
securities was made before 9 April 2003.
      (2)
That section has effect with the omission of subsections (6) and (7).
122   (1)
This paragraph applies if the agreement to sell the securities to the interim
holder was made before 9 April 2003.
      (2)
Section 608(3) has effect as if for “benefits and risks” there were substituted
25
“benefits or risks”.
123   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003.
      (2)
Section 611 applies with these modifications.
      (3)
It applies as if in subsection (1) after “modifications” there were inserted “in
30
a case where there is a sale and repurchase arrangement in respect of
securities”.
      (4)
It applies as if after subsection (1) there were inserted—
“(1A)
For the purposes of subsection (1) there is a sale and repurchase
arrangement in respect of securities if—
35
(a)
a person (“the original owner”) has sold the securities to
another person under an agreement,
(b)
the securities are UK shares, UK securities or overseas
securities, and
(c)
the original owner or a person connected with the original
40
owner—
(i)
is required to buy back the securities by the
agreement or a related agreement, or

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 13 — Accrued income profits
680

(ii)
acquires, under the agreement or a related agreement,
an option to buy back the securities.
(1B)
Section 570 (meaning of “buying back” securities etc) applies in the
context of subsection (1A) as it applies in the context of a repo.”
Powers to modify repo provisions
5
124   (1)
This paragraph applies if an agreement to sell securities was made before 9
April 2003, for the purpose of determining whether (for the purposes of
section 612) there is a repo in respect of the securities.
      (2)
This paragraph also applies if an agreement to sell securities was made
before 9 April 2003, for the purpose of determining whether (for the
10
purposes of section 613) the case involves redemption arrangements.
      (3)
Section 569 applies with these modifications.
      (4)
It applies as if for subsection (2) there were substituted—
“(2)
Condition A is that a person (“the original owner”) has sold the
securities to another person (“the interim owner”) under an
15
agreement.”
      (5)
It applies as if for subsection (4) there were substituted—
“(4)
Condition C is that the original owner or a person connected with the
original owner—
(a)
is required to buy back the securities by the agreement or a
20
related agreement, or
(b)
acquires, under the agreement or a related agreement, an
option to buy back the securities.”
Part 13
Accrued income profits
25
Sale and repurchase arrangements
125   (1)
Section 655 applies only if—
(a)
in the case of overseas securities, the agreement to sell the securities
mentioned in section 654(2) is entered into after 5 November 1996,
and
30
(b)
in any other case, the agreement to sell the securities so mentioned is
entered into after 30 April 1995.
      (2)
In sub-paragraph (1) “overseas securities” has the same meaning as in Part
11 (see section 567).
126   (1)
This paragraph applies if the agreement to sell the securities mentioned in
35
section 654(2) was made before 9 April 2003.
      (2)
Section 655 has effect with the omission of subsection (2).
      (3)
For the purpose of determining whether (for the purposes of section 655)
there is a sale and repurchase arrangement in respect of the securities,
section 654(2) has effect with the omission of paragraph (b).
40

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
681

      (4)
Sub-paragraph (5) applies—
(a)
for the purpose of determining whether (for the purposes of section
656) there is a sale and repurchase arrangement in respect of the
securities, and
(b)
for the purpose of determining whether (for the purposes of section
5
657) the case involves redemption arrangements.
      (5)
Section 654(2) has effect with the substitution for paragraphs (b) and (c) of
“or
(b)
T or a person connected with T acquires, under the
agreement or a related agreement, an option to buy back the
10
securities.”
Successive transfers with unrealised interest in default
127
Section 661 does not apply if the transferor’s acquisition was before 28
February 1986.
Unrealised interest received by transferee after transfer within Chapter 2 of Part 12 [Accrued
15
income profits]
128
If the transfer of securities within section 681(1)(a) occurred before 19 March
1986, section 681(1) has effect with the omission of paragraph (b).
Part 14
Tax avoidance
20
Transactions in securities: general
129   (1)
Despite anything in this Act, Chapter 1 of Part 17 of ICTA (cancellation of tax
advantages from certain transactions in securities) continues to apply so far
as required for the purposes of notices under section 703(3) of that Act
requiring adjustments to be made affecting tax years before the tax year
25
2007-08; and a counteraction notice under Chapter 1 of Part 13 (transactions
in securities) may not require such an adjustment to be made.
      (2)
Subject to that, Chapter 1 of Part 13 applies—
(a)
whether or not the transaction or transactions, in consequence of
which, or of the combined effect of which, the tax advantage has been
30
or will be obtained, occur on or after 6 April 2007, and
(b)
whether or not the tax year to which that advantage relates (“the tax
advantage year”) is a year before the tax year 2007-08,

but see section 698(5) (under which no assessments may be made as a result
of a counteraction notice later than 6 years after the tax advantage year).
35
      (3)
This paragraph is to be interpreted as if it were part of Chapter 1 of Part 13.
Transactions in securities: meaning of relevant companies for the purposes of sections 689 and
690
130   (1)
In its application to a transaction in securities that took place before 29 April
1996 or two or more transactions in securities the first of which took place
40
before that date, section 691(1)(b)(i) (meaning of “relevant company”)

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
682

applies with the substitution for the words “listed in the Official List of” of
the words “authorised to be dealt in on”.
      (2)
In its application to a transaction in securities that took place before 1
January 1997 or two or more transactions in securities the first of which took
place before that date, section 691(1) applies as if the companies referred to
5
in paragraph (b) included companies none of whose shares or stocks are
dealt in on the Unlisted Securities Market regularly or from time to time.
      (3)
In this paragraph “companies” and “transaction in securities” have the same
meaning as in Chapter 1 of Part 13 (see section 713).
Transactions in securities: statement of case by tribunal for opinion of High Court or Court of
10
Session
131
If a tribunal has made a determination under section 705(3) of ICTA
(determination on rehearing of appeal against notice under section 703 of
ICTA) within 30 days before 6 April 2007, the appellant or an officer of
Revenue and Customs may require the tribunal to state and sign a case
15
under section 707(2) of this Act, despite not having declared dissatisfaction
with the determination.
Transactions in securities: appeals to House of Lords
132   (1)
This paragraph applies until paragraph 47 of Schedule 9 to the
Constitutional Reform Act 2005 (c. 4) comes into force.
20
      (2)
Section 710 has effect until that time as if—
(a)
references in subsections (1), (2) and (4) to the Supreme Court were
references to the House of Lords, and
(b)
in subsection (3) the words “unless leave has been given under and
in accordance with section 1 of the Administration of Justice
25
(Appeals) Act 1934” were substituted for the words “except with the
leave of the Court of Appeal or the Supreme Court”.
      (3)
Section 711(4) has effect until that time as if the reference to the Supreme
Court were a reference to the House of Lords.
Transfers of assets abroad: non-transferors receiving benefit- exclusion of income arising before
30
10 March 1981
133   (1)
Section 732 (non-transferors receiving a benefit as a result of relevant
transactions) applies whenever the relevant transfer referred to in that
section took place.
      (2)
But the relevant income referred to in section 733(1) (by reference to which
35
the amount of income treated as arising under section 732 is determined)
does not include income that arose before 10 March 1981.
Transfers of assets abroad: whether trustees are “persons abroad”
134   (1)
This paragraph deals with whether section 475 (residence of trustees)
applies in determining if the single person mentioned in section 474 is a
40
person abroad (as defined in section 718) for the purposes of sections 727 to
730 (charge where individuals receive capital sums as a result of transfers of

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
683

assets abroad etc) (and accordingly whether section 718(2)(b) applies for
those purposes).
      (2)
Section 475 does not apply for the purposes of sections 727 to 730 in relation
to income payable before 15 June 1989.
      (3)
Section 475 does not apply for the purposes of sections 727 to 730 in relation
5
to income payable on or after 15 June 1989 if—
(a)
the individual received or became entitled to receive the capital sum
mentioned in section 729(1) before that date, and
(b)
the capital sum was wholly repaid or the right to it waived before 1
October 1989.
10
      (4)
In sub-paragraph (3) “capital sum” has the meaning given in section 729, and
subsection (4) of that section applies for the purposes of that sub-paragraph
as it applies for the purposes of section 729(1).
135   (1)
Sub-paragraph (2) deals with whether section 474 (trustees of settlement to
be treated as a single and distinct person) and section 475 (residence of
15
trustees) apply for the purposes of sections 731 to 735 (charge where benefit
received) (and accordingly whether section 718(2)(b) applies for those
purposes).
      (2)
Sections 474 and 475 do not apply for the purposes of sections 731 to 735 in
relation to benefits received before 15 June 1989.
20
      (3)
Sub-paragraphs (4) and (5) apply for the purposes of section 733 (income
charged under section 731) in finding the amount of income treated as
arising under section 732(2) in respect of benefits received on or after 15 June
1989.
      (4)
In determining the relevant income of an earlier tax year for the purposes of
25
section 733(1) (see Step 4), income that arose to the trustees of a settlement
before 6 April 1989 is treated as arising to persons abroad if one or more of
the trustees were resident outside the United Kingdom, even though one or
more were not so resident.
      (5)
But sub-paragraph (4) does not apply if the trustees have been charged to tax
30
on that income.
Transfers of assets abroad: whether personal representatives are “persons abroad”
136   (1)
This paragraph deals with whether section 834 (residence of personal
representatives) applies in determining if personal representatives are
persons abroad (as defined in section 718) for the purposes of sections 727 to
35
730 (charge where individuals receive capital sums as a result of transfers of
assets abroad etc) (and accordingly whether section 718(2)(c) applies for
those purposes).
      (2)
Section 834 does not apply for the purposes of sections 727 to 730 in relation
to income payable before 15 June 1989.
40
      (3)
Section 834 does not apply for the purposes of sections 727 to 730 in relation
to income payable on or after 15 June 1989 if—
(a)
the individual received or became entitled to receive the capital sum
mentioned in section 729(1) before that date, and
(b)
the capital sum was wholly repaid or the right to it waived before 1
45
October 1989.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
684

      (4)
In sub-paragraph (3) “capital sum” has the meaning given in section 729, and
subsection (4) of that section applies for the purposes of that sub-paragraph
as it applies for the purposes of section 729(1).
137   (1)
Sub-paragraph (2) deals with whether section 834 (residence of personal
representatives) applies for the purposes of sections 731 to 735 (charge
5
where individuals receive a benefit as a result of transfers of assets abroad
etc) (and accordingly whether section 718(2)(c) applies for those purposes).
      (2)
Section 834 does not apply for the purposes of sections 731 to 735 in relation
to benefits received before 15 June 1989.
      (3)
Sub-paragraphs (4) and (5) apply for the purposes of section 733 (income
10
charged under section 731) in finding the amount of income treated as
arising under section 732(2) in respect of benefits received on or after 15 June
1989.
      (4)
In determining the relevant income of an earlier tax year for the purposes of
section 733(1) (see Step 4), income that arose to personal representatives
15
before 6 April 1989 is treated as arising to persons abroad if one or more of
them were resident outside the United Kingdom, even though one or more
were not so resident.
      (5)
But sub-paragraph (4) does not apply if the personal representatives have
been charged to tax on that income.
20
Transfers of assets abroad: company residence for transfers between 20 March 1990 and 29
November 1993
138   (1)
In relation to transfers and associated operations on or after 20 March 1990
and before 30 November 1993, a body corporate regarded as resident in a
territory outside the United Kingdom for the purposes of any double
25
taxation arrangements is treated as if it were resident outside the United
Kingdom for the purposes of Chapter 2 of Part 13 (transfer of assets abroad).
      (2)
In this paragraph “transfers” and “associated operations” have the same
meaning as in Chapter 2 of Part 13 (see sections 716 and 719 respectively).
Transfers of assets abroad: information powers concerning transfers between 20 March 1990
30
and 29 November 1993 involving companies
139   (1)
So far as section 749(6) (restrictions on information to be provided under
section 748) applies for the purposes of section 749(2) or (3), it applies in
relation to transfers and associated operations on or after 20 March 1990 and
before 30 November 1993 with the modification specified in sub-paragraph
35
(2).
      (2)
The modification is that the reference to bodies corporate resident outside
the United Kingdom includes a reference to bodies corporate regarded as
resident in a territory outside the United Kingdom for the purposes of any
double taxation arrangements.
40
Transfers of assets abroad: income arising before 26 November 1996
140
Sections 721(5)(b) and (c) and 728(3)(b) and (c) do not apply if the income
arose before 26 November 1996.