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3435. These amendments make the adaptations necessary to this section and its heading as a result of the abolition of Schedule D and its Cases by this Bill.
3436. The main reference in section 396(1) of ICTA to tax charged under Schedule D Case VI has been replaced by a reference to tax charged under or by virtue of a relevant provision. This ties in with the substituted subsection (2) which, in common with the approach taken generally to replacing references to Schedule D Case VI, refers to the table of provisions in section 834A of ICTA for this purpose but with the exclusion of one provision in that table. The reference to section 761(1)(b)(ii) of ICTA derives from the replaced section 396(2) of ICTA.
3437. Section 834A of ICTA is inserted by this Schedule. It is the equivalent for corporation tax of the income tax provision in section 1016 of ITA. For further information, see the commentary in these notes on section 834A of ICTA.
3438. See also section 436A of ICTA which excludes a loss under that section from relief under section 396 of ICTA and prevents any relief under the latter section being set against profits under section 436A.
3439. The inserted section 396(2A) and (2B) of ICTA preserves relief for losses arising in an accounting period ending on or before 31 March 2009 against any income arising from a relevant provision in later accounting periods. Subsection (2B) reflects the commencement date for the insertion of a reference to Chapter 5 of Part 17 of ICTA in the superseded subsection (2).
3440. Section 399(1B) of ICTA is not rewritten for corporation tax purposes. The loss relief provisions it restricts, in particular section 396 of ICTA (losses from miscellaneous transactions), cannot apply. The gains that match the losses in question are not chargeable to tax and so losses are not eligible for relief. This provision is the equivalent for corporation tax purposes of section 399(1) of ICTA. That provision was not rewritten but repealed by ITTOIA for the same reasons.
3441. A new label life assurance trade profits provisions is inserted into section 431(2) of ICTA. It is used in various consequential amendments to the life assurance provisions of the Corporation Tax Acts. They include the use of the label, instead of provisions applicable to Case I of Schedule D (or some variant), in places such as section 434(1) of ICTA, section 83YC(10) of FA 1989 and section 210A(10A) of TCGA.
3442. This amendment repeals section 584 of ICTA. Subsection (9) has not been rewritten. See Change 98 in Annex 1.
3443. These amendments repeal sections 586 and 587 of ICTA. See Change 99 in Annex 1.
3444. This amendment repeals section 695 of ICTA. Subsection (6) has not been rewritten. See Change 100 in Annex 1.
3445. The reference to section 834A of ICTA is to the provision inserted by this Schedule.
Section 781 of ICTA
3446. The reference to section 834A of ICTA is to the provision inserted by this Schedule.
3447. Subsection (9) is concerned with successions. Section 337(1)(b) of ICTA and section 18 of ITTOIA are not concerned with successions. And section 337(1)(a) is not rewritten in this Bill. So the closing words of subsection (9) are no longer needed and this Bill omits them.
3448. The reference to section 834A of ICTA is to the provision inserted by this Schedule.
Section 798A of ICTA
3449. Subsection (4)(a) of this section applies to all income chargeable to tax under Schedule D Case V. But the rule in subsection (3) applies only if there are deductions or expenses allowable in the calculation of the income. So the amendments by this Bill identify such foreign income as comprising only:
3450. The new subsection (5) preserves the distinction between post-cessation receipts charged to tax by section 103 of ICTA (to which section 798A does not apply) and those charged to tax by section 104 of ICTA (to which section 798A does apply).
3451. These amendments insert sections 807B to 807G into ICTA. These sections rewrite double taxation relief provisions in Schedule 9 (loan relationships) to FA 1996 and Schedules 26 (derivative contracts) and 29 (intangible fixed assets) to FA 2002. Those provisions were inserted in those Schedules by The Corporation Tax (Implementation of the Mergers Directive) Regulations (SI 2007/3186) and amended by The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (SI 2008/1579).
3452. Because of the similarity of the provisions for each regime (loan relationships, derivative contracts and intangible fixed assets) each section deals with all three regimes.
3453. This amendment repeals section 817 of ICTA. See Change 101 in Annex 1.
Section 826(5A) of ICTA
3454. Section 749A of ITTOIA rewrites the exemption from income tax in section 826(5) of ICTA. Section 826(5A) of ICTA, which states that the exemption from tax does not extend to corporation tax, is repealed with this subsection.
3455. The partial definition of income inserted into section 834(1) of ICTA provides that income includes anything to which the charge to corporation tax on income applies. It reflects the fact that, where something that is not income by nature is made subject to the charge on income, it is impliedly treated as income for corporation tax purposes. .
3456. The terms of the partial definition assume you know what the charge on income applies to. Therefore, its relevance is confined to contexts other than defining the application of the charge. As with the other definitions in section 834(1), the partial definition does not apply if the context otherwise requires.
3457. This amendment provides for the purposes of corporation tax the equivalent of section 1016 of ITA.
3458. This Bill omits the Schedules and the cases of Schedule D under which most income has been charged. There are various places in the Corporation Tax Acts, notably section 396 of ICTA, where there is a need to refer generically to the charging scope of Schedule D Case VI.
3459. This amendment inserts section 834A of ICTA. The section provides a list that replicates the scope of Schedule D Case VI so far as relevant to those generic references in the Corporation Tax Acts to Case VI. As in the income tax equivalent, the list omits those purely administrative uses of Case VI to recover excess relief, over-repayments of tax and the like, to which the generic references of Case VI have no application.
3460. Section 834A(3) of ICTA excludes from the list certain foreign income charged under Chapter 8 of Part 10 of this Bill (which deals with income not otherwise charged, whether the source is in or outside the United Kingdom), as such income is not within Schedule D Case VI.
3461. This amendment includes the insertion of subsections (2D) and (2E) in section 842 of ICTA. It is based on paragraph 39 of Schedule 26 to FA 2002.
3462. This amendment inserts a new section into ICTA. The explanation of total profits follows the use of the expression in section 9(3) of ICTA.
3463. This amendment repeals paragraph 5 of Schedule 30 to ICTA. See Change 102 in Annex 1.
Section 12AE of TMA
3464. This Bill legislates the Crown Option. So this section is not needed and is repealed. See Change 55 in Annex 1.
3465. This subsection is obsolete because sections 34 to 36 of ICTA have not charged sums under Schedule D Case VI since 1 April 1998.
3466. This Bill legislates the Crown Option. So this section is not needed and is repealed. See Change 55 in Annex 1.
3467. A number of trading income rules which require a claim in the source legislation are rewritten without that requirement. As a consequence the references in this section to claims under sections 84, 91B and 101(2) of ICTA and section 43(5) of FA 1989 are removed without replacement. See Changes 28, 38, 39 and 68 in Annex 1.
3468. The residence rules in section 66 of FA 1988 and section 249 of FA 1994 apply for the purposes of the Taxes Acts as defined in section 118 of TMA. This Bill rewrites those rules for the purposes of the Corporation Tax Acts (Chapter 3 of Part 2). Because the Corporation Tax Acts are defined more narrowly (Schedule 1 to the Interpretation Act 1978) than the Taxes Acts, this new section is introduced into TMA to apply to that Act the rules given in Chapter 3 of Part 2.
Section 91 of IHTA
3469. Section 91 of IHTA currently refers to Part 16 of ICTA for the meaning of charges on residue. This term has not been rewritten in this Bill and therefore the meaning is inserted into section 91 of IHTA. See the commentary on clause 947.
Paragraph 3(1) of Schedule 12 to FA 1988
3470. This Schedule deals with the change of status of building societies. The rule in this paragraph prevents the change of status from being a discontinuance of the building societys trade for the purposes of CAA.
3471. The main rules about what is a discontinuance for the purposes of CAA are in section 577 of CAA (and sections 558 and 559 deal with, respectively, partnership changes and successions). This Bill is drafted on the basis of a company starting or ceasing to carry on a trade etc, rather than on the basis of a trade etc commencing or being discontinued. So section 337(1)(a) of ICTA is not specially rewritten and there is no longer any rule that treats any event as the equivalent of the setting up, commencement or discontinuance of a trade etc. It follows that paragraph 3(1) of Schedule 12 to FA 1988 is no longer needed and this Bill repeals it.
Section 59 of TCGA
3472. This section is amended to rewrite section 115(5) to (5C) of ICTA so far as it applies to chargeable gains of a company. The addition of the words so far as providing for that relief make clear that the rule (for both capital gains tax and corporation tax) goes no further than removing any exemption for chargeable gains in a double taxation arrangement. See Change 87 in Annex 1.
3473. These amendments insert two new provisions rewriting section 91G(1) of, and (2) and paragraph 5 of Schedule 10 to, FA 1996 respectively. These two provisions within the loan relationships regime (Chapter 2 of Part 4 of FA 1996) are, in essence, capital gains provisions.
3474. These amendments insert new provisions which rewrite parts of both the loan relationships regime (Chapter 2 of Part 4 of FA 1996) and the rules on alternative finance arrangements in FA 2005 (rewritten as part of the loan relationships regime in Part 6 of the Bill). These provisions are, in essence, capital gains provisions.
3475. Section 151E, which rewrites section 84A(8) of FA 1996, is to be repealed from an appointed day (see Part 8 (loan relationships) of Schedule 2).
3476. These amendments insert new provisions which rewrite those parts of the intangible assets regime in Schedule 29 to FA 2002 which are, in essence, capital gains provisions.
3477. This includes those parts of paragraph 132 of Schedule 29 to FA 2002 which have permanent effect. Paragraph 132(2) to (4) provides rules of transition dealing only with a temporary overlap of the capital gains and intangible fixed assets regimes (unless there is an extension under section 152(3) of TCGA of the time limit) and can never be relevant to disposals after 31 March 2003. So they are not rewritten.
3478. This Bill is drafted on the basis of a company starting or ceasing to carry on a trade etc, rather than on the basis of a trade etc commencing or being discontinued. So section 337(1)(a) of ICTA is not specially rewritten and there is no longer any rule that requires an event to be regarded as the equivalent of the setting up, commencement or discontinuance of a trade etc. It follows that the closing words of section 158(2) of TCGA are no longer needed and this Bill omits them.
3479. The residence rules in section 66 of FA 1988 and section 249 of FA 1994 apply for the purposes of the Taxes Acts as defined in section 118 of TMA. This Bill rewrites those rules for the purposes of the Corporation Tax Acts (Chapter 3 of Part 2). Because the Corporation Tax Acts are defined more narrowly (Schedule 1 to the Interpretation Act 1978) than the Taxes Acts, this new section is introduced into TCGA to apply to that Act the rules given in Chapter 3 of Part 2.
Section 126 of FA 1995
3480. This section no longer applies for corporation tax purposes, following the amendment of it by FA 2003 and the enactment of the scheme of corporation tax for non-United Kingdom resident companies. In subsection (7A)(b) the reference to section 114 of ICTA would need amendment but the whole of paragraph (b) is no longer needed and so is repealed by this Bill.
3481. This amendment is a consequence of removing the term profit share return from the provisions covering alternative finance arrangements. Refer to the commentary on clause 513. Sub-paragraph (ca) is amended to include what is currently profit share return under section 49A of FA 2005 and sub-paragraph (cb) can be omitted.
Paragraph 84 of Schedule 18 to FA 1998
3482. Paragraph 84 of Schedule 18 to FA 1998 makes administrative provision for HMRC to operate the Crown Option under which they may determine which Case of Schedule D applies if an item falls within more than one Case of that Schedule.
3483. This Bill provides priority rules for all such possible overlaps (see, for example, clause 982 (provisions which must be given priority over Part 10)). These reflect how the Crown Option is applied. So the administrative provisions in paragraph 84 of Schedule 18 to FA 1998 are redundant. See Change 55 in Annex 1.
Section 63 of FA 1999
3484. Section 63 of FA 1999 provides transitional relief to mitigate the effect on football and other sports clubs of new accounting standards for the treatment of intangible assets.
3485. Section 63 of FA 1999 applies only to contracts entered into before the beginning of the first accounting period in which a club adopts the new accounting standards. The new accounting rules are effective for accounting periods ending on or after 23 December 1998. So section 63 applies only to contracts entered into before 24 December 1999.
3486. It is unlikely that any contract entered into before 24 December 1999 will still be in force when this Bill comes into effect. So section 63 of FA 1999 is considered to be redundant. See Change 103 in Annex 1.
Section 46 of FA 2000
3487. The amendments to this section include those needed to replace the references to Schedule D Case I or VI, as a result of the omission by this Bill of the Schedules and the cases of Schedule D. The reference to section 834A of ICTA is to the provision inserted by this Schedule.
3488. A number of the references in subsection (2A) have been omitted as unnecessary. These are not within the provisions listed in section 834A of ICTA to which subsection (2) now refers. But they are not in fact relevant to the exemption in this section, which applies to income applied solely for the purposes of the charitable company (subsection (3)). The omitted references all provide for a recovery of tax or similar charge and therefore do not represent income of the charity that could be so applied.
Sections 108, 112, 115, 263 265, 559 and 577 of CAA
3489. This Bill is drafted on the basis of a company starting or ceasing to carry on a trade etc, rather than on the basis of a trade etc commencing or being discontinued. The amendments to these sections reflect this change of approach. See Change 104 in Annex 1.
Paragraph 141 of Schedule 29 to FA 2002
3490. Paragraph 141 of Schedule 29 to FA 2002 is not rewritten. Paragraph 141(2) provides that references in Schedule 29 to the Inland Revenue are, subject to stated exceptions, references to any officer of the Board. The exceptions mentioned in paragraph 141(1) are in relation to the discretionary extension of the time limits for group relief under Part 6 of Schedule 29 and for reinvestment relief under Part 7 of Schedule 29 and in relation to clearance applications in respect of specified provisions in Part 11 of Schedule 29. In the case of these exceptions Inland Revenue means the Board. Matters to be dealt with by the Board are traditionally those requiring the exercise of judgement and discretion in particularly sensitive areas. The Board here is stated to mean the Commissioners for Inland Revenue reflecting directly the defined usage of terms in section 1(1) of TMA.
3491. Paragraph 141 of Schedule 29 to FA 2002 provides a way for Schedule 29 to make the necessary references to Revenue officers while preserving the distinction between functions that could be performed at an ordinary level in the department and those that could not. The terminology has however been overtaken by the creation of HMRC and the provisions of CRCA. If paragraph 141 were rewritten, it would be necessary to translate there the references to Board, Inland Revenue and Commissioners for Inland Revenue into the post-CRCA equivalents while preserving the special treatment in respect of the provisions referred to in paragraph 141(1).
3492. However this is not necessary. A general interpretative provision is appropriate when the intangible fixed assets rules are set out in a separate Finance Act Schedule. But in the Bill, these rules are part of the main body of the corporation tax rules. So the appropriate post-CRCA term is simply inserted into each provision.
3493. For intended references to any officer of the Board under the general rule in paragraph 141(2) of Schedule 29 to FA 2002, the post-CRCA term is any officer of Revenue and Customs (section 50(1) of CRCA).
3494. For intended references to the Commissioners for Inland Revenue under the specific rule in paragraph 141(1) and (3) of Schedule 29 to FA 2002, the post CRCA term is the Commissioners for Her Majestys Revenue and Customs (sections 1(1) and 50(1) of CRCA). However, as explained in the notes relating to the clauses involved, changes are proposed in respect of paragraph 35(2) of Schedule 29 to FA 2002 (rewritten as clause 753(2)) and paragraph 39(1)(a) of Schedule 29 to FA 2002 (rewritten as clause 756(1)) to reflect the fact that the power attributed there to the Commissioners for HMRC is, in practice, exercised by an officer of HMRC (see also Change 1 in Annex 1).
3495. It is not necessary to rewrite the final sentence in paragraph 141(1) of Schedule 29 to FA 2002 which refers to the authority to delegate Boards functions. Under section 13 of CRCA practically all functions of the Commissioners are stated to be delegable to an officer of the Department. The established rewrite approach to denoting a function as proper to the Commissioners for HMRC is to leave section 13 of CRCA to spell out that it need not be carried out by the Commissioners personally.
3496. This definitional provision in not rewritten because it is superseded in the Bill.
3497. An index of definitions is included in a Bill-wide Schedule so paragraph 143 is not rewritten.
Sections 28 and 44 of the Energy Act 2004
3498. The reference to section 834A of ICTA is to the provision inserted by this Schedule.
Section 48 of ITTOIA
3499. Section 48 of ITTOIA restricts the amount which can be deducted in calculating the profits of a trade for income tax purposes in respect of the cost of the hire of a car or motor cycle with a retail price (when new) of more than £12,000 other than a qualifying hire car or motor cycle.
3500. The amendments in this paragraph remedy two errors in section 48 of ITTOIA.
3501. Section 578A(4) of ICTA restricts a recovery charge if any deduction has been restricted under section 578A(3). Section 48(3) of ITTOIA deals only with a previous restriction under section 48(2). The amendment extends the restriction on the recovery charge to cases where the original restriction was made to any other deduction.
3502. Section 48(4) of ITTOIA refers to a rebate or release but neither paragraph of the subsection deals with a rebate. The amendment to paragraph (a) ensures that the subsection applies to rebates as well as to releases of debts.
3503. See Change 83 in Annex 1.
3504. Section 48 of ITTOIA restricts the amount which can be deducted in calculating the profits of a trade for income tax purposes in respect of the cost of the hire of a car or motor cycle with a retail price (when new) of more than £12,000 other than a qualifying hire car or motor cycle.
3505. This amendment remedies a small omission in the definition in section 49 of ITTOIA of qualifying hire car for the purpose of section 48 of ITTOIA. See Change 105 in Annex 1.
3506. These amendments clarify the operation of ITTOIA in cases where there is a change in the persons carrying on a trade etc. See Change 17 in Annex 1.
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