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 14 — Tax avoidance
685

Transfers of assets abroad: meaning of “associated operation” and consideration of associated
operations alone
141   (1)
In relation to any time before 5 December 2005, the reference in section
716(1)(b) (meaning of “relevant transfer”) to income which becomes payable
to a person abroad does not include income that becomes so payable just as
5
a result of one or more associated operations.
      (2)
In relation to any time before 5 December 2005, section 719 (meaning of
“associated operation”) applies as if subsection (2) were omitted.
      (3)
In relation to any time before 5 December 2005, the reference in section
721(2) (individuals with power to enjoy income as a result of relevant
10
transactions) to income which an individual has power to enjoy does not
include income which the individual has power to enjoy just as a result of
one or more associated operations.
      (4)
In relation to any time before 5 December 2005, the reference in section
728(1)(a) (individuals receiving capital sums as a result of relevant
15
transactions) to income which has become the income of a person abroad
does not include income that has become such income just as a result of one
or more associated operations.
      (5)
In this paragraph—
(a)
“associated operation” has the meaning given in section 719, and
20
(b)
references to power to enjoy income are to be read in accordance
with section 722 (when an individual has power to enjoy income of a
person abroad).
Individuals in partnership: recovery of excess relief
142
In section 792(1)—
25
(a)
the reference to the claiming of relief includes a reference to the
claiming of relief as mentioned in section 74(1)(a) and (b) of FA 2005,
and
(b)
the reference to sections 104, 107 and 110 includes a reference to
section 117 of ICTA (including as applied by section 118ZB of that
30
Act) and section 118ZE of that Act.
143   (1)
The losses covered by section 794(1) and (2) in relation to a trade include
losses within section 74(5) of FA 2005 made in the trade.
      (2)
The income covered by section 794(3) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
35
      (3)
Sub-paragraph (4) applies for the purposes of section 794(5) if, as a result of
paragraph 142(b), the relevant restriction provision would be section 117 of
ICTA (including as applied by section 118ZB of that Act) or section 118ZE of
that Act.
      (4)
The relevant restriction provision is instead taken to be—
40
(a)
in the case of section 117 of ICTA (other than as applied by section
118ZB of that Act), section 104,
(b)
in the case of section 117 of ICTA (as applied by section 118ZB of that
Act), section 107, and
(c)
in the case of section 118ZE of ICTA, section 110.
45

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
686

      (5)
In section 794(6) the reference to subsection (2)(b) includes a reference to
section 74(11)(b) of FA 2005.
Individuals claiming relief for film-related trading losses
144   (1)
The claims covered by section 797(1)(a) include claims within section
119(1)(a) of FA 2004.
5
      (2)
For the purposes of section 797—
(a)
a “relevant disposal” does not include a disposal which was made
before 10 December 2003, and
(b)
an event occurring before the tax year 2007-08 is an “exit event” if
(and only if) it is an “exit event” for the purposes of section 119 of FA
10
2004.
145   (1)
The losses covered by section 800(3)(a) include losses in relation to which a
claim is made as mentioned in section 121(1)(a) or (b) of FA 2004.
      (2)
The income covered by section 800(5) includes amounts treated as received
as a result of the application of section 74 of FA 2005.
15
      (3)
The losses covered by section 800(6) in relation to a trade include losses
within section 121(1A)(b) of FA 2004 made in the trade.
      (4)
In section 800(9) the reference to the making of a claim includes a reference
to the making of a claim as mentioned in section 122A(1) of FA 2004.
146
In section 801(3) the reference to the making of a claim includes a reference
20
to the making of a claim as mentioned in section 122A(1) of FA 2004.
147   (1)
In section 802(1) the reference to the making of a claim includes a reference
to the making of a claim as mentioned in section 122A(1) of FA 2004.
      (2)
The repeal by this Act of section 122A of FA 2004 (or any provision inserting
or amending, or affecting the application of, that section) does not affect the
25
power of the Commissioners for Her Majesty’s Revenue and Customs to
make regulations under that section having effect before the tax year 2007-
08.
148   (1)
After the commencement of section 802, the Partnerships (Restrictions on
Contributions to a Trade) Regulations 2006 (S.I. 2006/1639) have effect as if
30
made under that section.
      (2)
The Regulations so have effect subject to the following modifications.
      (3)
They have effect as if in regulation 2—
(a)
for the definition of “ICTA” there were substituted—
““ITA 2007” means the Income Tax Act 2007;”, and
35
(b)
for the definition of “relevant individual” there were substituted—
““relevant individual” means—
(a)
a limited partner (within the meaning given
by section 106 of ITA 2007),
(b)
a member of a limited liability partnership, or
40
(c)
a non-active partner (within the meaning
given by section 112 of ITA 2007),
where the partnership carries on a trade in which the
individual makes a film-related loss (as defined in

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 14 — Tax avoidance
687

section 800(2) of ITA 2007) for which the individual
makes a claim as mentioned in section 802(1) of that
Act;”.
      (4)
They have effect as if in regulation 3(a) for “section 120 of the Finance Act
2004” there were substituted “section 799 of ITA 2007”.
5
      (5)
They have effect as if in regulation 4—
(a)
for “contribution to the trade”, wherever occurring, there were
substituted “capital contribution”,
(b)
for “section 119(2)(b) or (c) of the Finance Act 2004”, wherever
occurring, there were substituted “section 797(2)(b) of ITA 2007”, and
10
(c)
for paragraph (c)(ii) there were substituted—
“(ii)
the amount of income treated as received in
accordance with section 797(5) of that Act.”
      (6)
See paragraph 35 of this Schedule for provision about the effect of the
Partnerships (Restrictions on Contributions to a Trade) Regulations 2005
15
(S.I. 2005/2017) after the commencement of section 802.
149   (1)
In section 803 references to chargeable events include events that are
chargeable events for the purposes of section 119 of FA 2004.
      (2)
Accordingly, the total amount of income mentioned in section 803(3) is to
include any income treated as received as a result of section 119(5)(b) of FA
20
2004.
Individuals in partnership: exit charge
150   (1)
The losses covered by section 805(1)(b) include losses in relation to which a
claim is made as mentioned in section 126(1)(c) of FA 2004.
      (2)
The disposals covered by section 805(2)(a) and (b) do not include disposals
25
made before 10 February 2004.
151   (1)
In section 806 at Step 4 non-taxable consideration received before 10
February 2004 is excluded.
      (2)
In section 806 at Step 5—
(a)
the reference to section 805 includes a reference to section 127 of FA
30
2004, and
(b)
the reference to chargeable events includes a reference to chargeable
events for the purposes of section 127 of FA 2004.
152   (1)
This paragraph applies for the purposes of sections 805 to 807 if the
individual carried on the trade at any time before 26 March 2004.
35
      (2)
Any reference to expenditure incurred in the trade in exploiting the licence
does not include expenditure incurred before 10 February 2004.
153
The losses covered by section 807(4) include losses in relation to which a
claim has been made as mentioned in section 128(2)(a) or (b) of FA 2004.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Deduction of income tax at source
688

Part 15
Deduction of income tax at source
Deduction by deposit-takers: discretionary or accumulation settlements
154   (1)
A deposit with a deposit-taker which meets the settlement condition in
section 856(6) is not a relevant investment for the purposes of Chapter 2 of
5
Part 15 if conditions A and B are met in relation to the deposit.
      (2)
Condition A is that the deposit was made before 6 April 1995.
      (3)
Condition B is that neither an officer of Revenue and Customs nor any
trustee of the settlement has notified the deposit-taker that the deposit meets
the settlement condition in section 856(6).
10
155   (1)
A notification under paragraph 154(3) given by a trustee must be in the form
provided by the Commissioners for Her Majesty’s Revenue and Customs.
      (2)
A deposit-taker is entitled not to deduct a sum representing income tax
under section 851 from a payment of interest on a deposit covered by a
notification under paragraph 154(3) if sub-paragraph (3) applies to the
15
payment.
      (3)
This sub-paragraph applies to a payment if—
(a)
it is made within 30 days after the date when the deposit-taker
receives the notification, and
(b)
at the time it is made, it is not reasonably practicable for the deposit-
20
taker to deduct a sum representing income tax from the payment.
      (4)
If an officer of Revenue and Customs is satisfied that a deposit covered by a
notification under paragraph 154(3) does not meet the settlement condition
in section 856(6), the officer must—
(a)
cancel the notification, and
25
(b)
give notice of the cancellation to the deposit-taker concerned.
      (5)
An officer of Revenue and Customs may give notice to a trustee of a
settlement requiring the trustees to provide—
(a)
information about any notification given by a trustee under
paragraph 154(3), and
30
(b)
such information as the officer may reasonably require for the
purposes of giving a notification under that paragraph about interest
to which the trustees are entitled.
      (6)
For the purposes of this paragraph crediting interest counts as paying it.
Deduction by deposit-takers and building societies: declarations of non-UK residence
35
156   (1)
Section 858(2)(c) (which requires a declaration of non-UK residence in
respect of an individual or individuals beneficially entitled to interest to
contain the name and address of the individual or individuals concerned)
does not apply to a declaration made before 6 April 2001.
      (2)
Section 859(2)(c) (which requires a declaration of non-UK residence in
40
respect of a Scottish partnership beneficially entitled to interest to contain
the name and address of the partners) does not apply to a declaration made
before 6 April 2001.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Deduction of income tax at source
689

Deduction by deposit-takers: qualifying certificates of deposit
157   (1)
This paragraph applies to a certificate of deposit which was issued by a
deposit-taker before 13 March 1984 on terms which provide for interest to be
payable on the deposit at any time after 5 April 1985 (whether or not interest
is payable on it before that date).
5
      (2)
The certificate of deposit is to be treated as a qualifying certificate of deposit
for the purposes of section 865.
Deduction by deposit-takers: qualifying time deposits
158   (1)
This paragraph applies to a deposit with a deposit-taker which—
(a)
was made before 6 July 1984, and
10
(b)
meets the condition in sub-paragraph (2).
      (2)
The condition is that the deposit is made on terms which—
(a)
do not make provision for the transfer of the right to repayment,
(b)
prevent partial withdrawals of, or additions to, the deposit, and
(c)
require the deposit-taker—
15
(i)
to repay the sum at the end of a specified period ending after
5 April 1985, or
(ii)
if interest is payable only when the deposit is repaid, to repay
the sum on demand or on notice.
      (3)
The deposit is to be treated as a qualifying time deposit for the purposes of
20
section 866.
Deduction by deposit-takers and building societies: saving for regulations
159   (1)
This paragraph applies to regulations which—
(a)
were made under section 477A(1) to (2A) of ICTA (building societies:
regulations for deduction of tax),
25
(b)
were in force immediately before the commencement of the repeal of
those provisions by this Act, and
(c)
could have been made under section 17 of TMA 1970 as amended by
this Act, if those amendments had been in force at the time the
regulations were made.
30
      (2)
The regulations have effect after the commencement of the repeal of section
477A(1) to (2A) of ICTA as if made under section 17 of TMA 1970 as
amended by this Act.
160   (1)
This paragraph applies to regulations about the making of declarations to
building societies which—
35
(a)
were made under section 477A(1) to (2A) of ICTA,
(b)
were in force immediately before the commencement of the repeal of
those provisions by this Act, and
(c)
could have been made under section 132 or 133 of FA 1999 (electronic
communications), if provision about the making of declarations to
40
building societies had precluded to any extent the use of electronic
communications for that purpose at the time that the regulations
were made.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Deduction of income tax at source
690

      (2)
The regulations have effect after the commencement of the repeal of section
477A(1) to (2A) of ICTA as if made under section 132 and 133 of FA 1999.
      (3)
Regulations under sections 132 and 133 of FA 1999 may make any provision
in relation to Chapter 2 of Part 15 of this Act which they could have made if
that Chapter had come into force before those sections.
5
Deduction by deposit-takers, building societies etc: collection of tax
161
Chapter 15 of Part 15 has effect for return periods which—
(a)
fall within accounting periods ending on or after 6 April 2007, and
(b)
end on or after that date.
162   (1)
This paragraph applies to a payment—
10
(a)
which is made in an accounting period beginning before 6 April 2007
and ending on or after that date, and
(b)
which was made before 6 April 2007, but which would have been a
payment within section 946 if it had been made on or after that date.
      (2)
A payment to which this paragraph applies is to be treated as a payment
15
within section 946 if it is made in a return period which—
(a)
falls within the accounting period,
(b)
begins before 6 April 2007, and
(c)
ends on or after that date.
      (3)
In addition, a payment to which this paragraph applies which was made in
20
an earlier return period which falls within the accounting period is to be
treated as a payment within section 946.
Deduction from certain payments of yearly interest: interest paid by banks
163   (1)
In the case of payments of interest to which this paragraph applies, section
878 (exceptions from duty to deduct: interest paid by banks) has effect with
25
the modification in sub-paragraph (2).
      (2)
The modification is the substitution for subsections (1) and (2) of that section
of “The duty to deduct a sum representing income tax under section 874
does not apply to a payment of interest by a bank carrying on a genuine
banking business in the United Kingdom.”
30
      (3)
This paragraph applies to interest payable on an advance made before 29
April 1996.
Deduction from certain payments of yearly interest: interest paid on advances from banks
164   (1)
In the case of payments of interest to which this paragraph applies, section
879 (exceptions from duty to deduct: interest paid on advances from banks)
35
has effect with the modification in sub-paragraph (2).
      (2)
The modification is the substitution for subsections (1) to (4) of that section
of “The duty to deduct a sum representing income tax under section 874
does not apply to a payment of interest in the United Kingdom on an
advance from a bank carrying on a genuine banking business in the United
40
Kingdom.”
      (3)
This paragraph applies to interest payable before 29 April 1996.

Income Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Deduction of income tax at source
691

      (4)
In the case of an institution which—
(a)
immediately before 29 April 1996 was not treated for the purposes of
section 349(3)(a) of ICTA as a bank carrying on a genuine banking
business in the United Kingdom, and
(b)
on that day fell within the definition of “bank” given by section 840A
5
of ICTA,

this paragraph applies to interest payable on an advance made before that
day.
      (5)
In the case of an institution which—
(a)
immediately before 29 April 1996 was treated for the purposes of
10
section 349(3)(a) of ICTA as a bank carrying on a genuine banking
business in the United Kingdom, and
(b)
on that day did not fall within the definition of “bank” given by
section 840A(1) of ICTA,

this paragraph applies to the interest mentioned in sub-paragraph (6).
15
      (6)
That interest is any interest payable on an advance made before 29 April
1996, if at the time when the interest is paid the person beneficially entitled
to the interest is within the charge to corporation tax as respects the interest.
Deduction from certain UK public revenue dividends
165   (1)
This paragraph applies if—
20
(a)
any person holds any gilt-edged securities in relation to which a
direction was given under section 50(1) of ICTA at any time before 6
April 1998, and
(b)
that person at any time before that date made an application under
section 50(2) of that Act with respect to those securities.
25
      (2)
The person is treated as having made a deduction at source application
under section 895 in respect of the securities which (unless withdrawn) is
treated as having effect from that date.
166   (1)
This paragraph applies in relation to any gilt-edged securities issued before
6 April 1998 which—
30
(a)
are securities the interest on which, if paid immediately before that
date, would have fallen to be paid after deduction of income tax, and
(b)
are registered within the meaning of section 895 but are not securities
in relation to which any direction under section 50 of ICTA was
given before that date.
35
      (2)
Chapter 5 of Part 15 has effect as if the appropriate person had made a
deduction at source application under section 895 in respect of the securities
so as to enable that application to have effect from (and including) that date.
      (3)
In sub-paragraph (2) “the appropriate person” means—
(a)
in the case of securities transferred before 6 April 1998 but after the
40
time when the balance was struck for a dividend on them falling due
on or after that date, the person who held the securities at the time
when the balance was struck,
(b)
in any other case, the person holding the securities in question
immediately before 6 April 1998.
45