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Section 777: Provisions supplementary to section 776
3384. Section 777(4) of ICTA provides (to summarise) that documents are not conclusive evidence of persons’ intentions. It is repealed without replacement, because it merely declares what the courts would hold anyway.
Schedule 23A: Manufactured dividends and interest
3385. Paragraph 7A(9) of Schedule 23A to ICTA is repealed without replacement. Following paragraph 5 of Schedule 13 to FA 2007 and the repeal of section 737A of ICTA, it is not possible for a deemed manufactured payment to give rise to “relevant tax relief” within the meaning of paragraph 7A(10) of Schedule 23A to ICTA. So it is not necessary to extend the disallowance of relief in paragraph 7A(2) to deemed manufactured payments.
3386. Paragraph 8(3)(a) of Schedule 23A to ICTA is repealed without replacement, as it is unnecessary. See Change 51 in Annex 1.
Schedule 28A: Change in ownership of company with investment business: deductions
3387. Paragraphs 6(b), 7(1)(aa), 13(1)(c) and 16(1)(aa) of Schedule 28A to ICTA are repealed without replacement, on the ground that they are obsolete. See the commentary on the repeal by this Schedule of section 768B(7) and (9)(b) of ICTA.
3388. Paragraph 11(4) of Schedule 28A to ICTA defines “post-change accounting period” for the purposes of that paragraph. This expression no longer appears in that paragraph, therefore paragraph 11(4) of that Schedule is now otiose. It is repealed without replacement.
Part 2: Other enactments
Inheritance Tax Act 1984
Section 23: Gifts to charities
3389. This amendment extends the relief given by section 23 (gifts to charity) to gifts to a registered club. See the commentary on Chapter 9 of Part 13. It is based on paragraph 9(2) of Schedule 18 to FA 2002.
Finance Act 1989
Section 102: Surrender of company tax refund etc within group
3390. Section 102(3)(c) of FA 1989 refers to the payment of the tax credit comprised in franked investment income. This reference is obsolete, and section 102(3)(c) of FA 1989 is repealed without replacement.
Schedule 12: Close companies: consequential provisions
3391. The provisions mentioned in paragraph 1(a) of Schedule 12 to FA 1989 are rewritten in the Bill. Paragraph 1(a) of that Schedule is rewritten with paragraphs 3 and 4 of that Schedule in clauses 31, 465 and 1102 (companies with small profits, close companies and company distributions: powers to obtain information). Paragraph 1(c) and (d) of that Schedule are rewritten with paragraphs 3 and 4 of that Schedule in sections 401B and 421A of ITTOIA, which are inserted by this Schedule. Paragraph 1(b) of Schedule 12 to FA 1989 is spent and is not rewritten. Paragraph 1 of Schedule 12 to FA 1989 is therefore repealed.
Taxation of Chargeable Gains Act 1992
Section 190: Tax recoverable from another group company or controlling director
3392. The definition of “director” in section 190(13) of TCGA refers to section 168(8) of ICTA, which has been rewritten and repealed. Accordingly, the amendment to that subsection refers not only to clause 452, which is based on section 417(5) of ICTA, but also to section 67(1) and (2) of ITEPA, which are based on section 168(8) of ICTA.
Section 217D: Industrial and provident societies and co-operatives
3393. Section 217D of TCGA rewrites and relocates the provisions in section 486(8), (9) and (12) of ICTA which are about corporation tax on chargeable gains.
Sections 256, 256A, 256B, 256C, 256D: Charities and gifts of non-business assets etc
3394. The separation between income tax and corporation tax also results in a separation of the legislation giving relief from tax for charities. Bodies constituted as charitable trusts are within the charge to income tax and capital gains tax while those constituted as companies or other forms of body corporate are within the charge to corporation tax.
3395. ITA amended section 256 of TCGA and inserted sections 256A and 256B to make specific provision for charitable trusts. This Bill completes the process by making specific provision for charitable companies by amendment to section 256 and by the insertion of sections 256C and 256D. See the commentary on clause 493.
Section 257: Gifts to charities etc
3396. This amendment extends the relief given by section 257 of TCGA to gifts to a registered club. See commentary on Chapter 9 of Part 13. It is based on paragraph 9(3) of Schedule 18 to FA 2002.
Charities Act 1993
Section 10: Disclosure of information to Commission
3397. Section 10(2) of the Charities Act 1993 allows institutions, undertakings or bodies listed in paragraphs (a) to (e) to disclose Revenue and Customs information to the Charity Commission.
3398. The exclusions in new subsection (2A) of section 10 of the Charities Act 1993 are necessary because Part 11 also rewrites claims under sections 507 and 508 of ICTA which, although exempting income under section 505(1) of ICTA, are not claims for exemption made under that section. See Change 36 in Annex 1
3399. For the amendments to section 25A see Changes 32, 35, 36 and 37 in Annex 1.
Finance Act 2000
Schedule 15: The corporate venturing scheme
3400. Schedule 15 applies only in relation to shares issued on or after 1 April 2000 but before 1 April 2010 (see section 63(4) of FA 2000). For that reason, Schedule 15 is not being rewritten.
Paragraph 21A
3401. In paragraph 21A of Schedule 15 to FA 2000, this Schedule omits the reference to the second limb of section 776(13)(a) of ICTA, for the reason given in the commentary on this Schedule in relation to that provision.
3402. For the definition of “property deriving its value from land” in paragraph 21A of Schedule 15 to FA 2000, this Schedule substitutes a suitable reference to clause 833 of this Bill, which, like that paragraph, is a corporation tax provision.
Paragraph 46(2)
3403. Part 6 of Schedule 15 provides for the withdrawal or reduction of investment relief on the disposal of “relevant shares” (as defined in paragraph 2). For the purposes of that Part, paragraph 46(2) lists four types of disposal including:
(a) by way of a bargain made at arm’s length for full consideration.
3404. One of the requirements for relief to be available under Part 7 of Schedule 15 on the disposal of shares to which investment relief is attributable is set out in paragraph 67(3):
(3) The second requirement is that the disposal on which the loss is incurred must be a disposal of the kind described in paragraph (a), (b), (c) or (d) of paragraph 46(2).
3405. Change 11 in Annex 1 omits the words “for full consideration” from clause 244(4)(a) rewriting paragraph 29(4)(a) of Schedule 16 to FA 2002. Clause 68(2)(a) also omits those words when rewriting section 575(1)(a) of ICTA for the purposes of share loss relief in this Bill.
3406. Paragraph 46(2)(a) of Schedule 15 to FA 2000 is the only other place in the Tax Acts where those words qualify the words “bargain made at arm’s length”. Change 11, therefore, also omits them from paragraph 46(2)(a) for the purposes of both Part 6 and Part 7 of Schedule 15.
Capital Allowances Act 2001
Section 63: Cases in which disposal value is nil
3407. This amendment provides that section 63(2) of CAA, which provides that the disposal value of plant and machinery disposed of by way of gift to a charity or certain other bodies is nil, also applies to a gift to a registered club. See the commentary on Chapter 9 of Part 13. It is based on paragraph 9(3) of Schedule 18 to FA 2002.
Section 99: The monetary limit
3408. The monetary limit for the purpose of expenditure by a company on long-life assets depends on the number of associated companies the company has. The changes in the rules for companies with small profits apply also to this rule. See Change 3 in Annex 1.
Section 253: Companies with investment business
3409. The amendment to section 253(7) of CAA amends an error in the source legislation: the reference to section 768C(11) of ICTA should be to section 768C(5) of that Act. These provisions are rewritten in clauses 682(13) and 699(3) of the Bill. Since the provision being amended is merely a subjection, this correction does not change the law.
Schedule A1: First-year tax credits
3410. `For the amendments to Schedule A1 see Changes 32, 35, 36 and 37 in Annex 1.
Finance Act 2002
Schedules 34 and 35: Stamp duty: withdrawal of group relief and withdrawal of relief for company acquisitions: supplementary provisions
3411. The definitions of “director” in paragraph 8(4) of Schedule 34 to FA 2002 and paragraph 9(4) of Schedule 35 to that Act both refer to section 168(8) of ICTA, which has been rewritten and repealed. Accordingly, the amendments to those sub-paragraphs refer not only to clause 452, which is based on section 417(5) of ICTA, but also to section 67(1) and (2) of ITEPA, which are based on section 168(8) of ICTA.
Income Tax (Earnings and Pensions) Act 2003
Section 68: Meaning of “material interest” in a company
3412. This provision amends section 68(2) and (3) of ITEPA for the sake of consistency with clause 457. See the commentary on that clause. This amendment is a drafting clarification, and does not change the law.
Schedule 2: Approved share incentive plans
3413. This Schedule amends paragraph 80 of Schedule 2 to ITEPA in line with the rewrite of section 234A of ICTA in the Bill. See Change 58 in Annex 1.
Schedule 5: Enterprise management incentives
3414. In paragraph 11A of Schedule 5 to ITEPA, this Schedule omits the reference to the second limb of section 776(13)(a) of ICTA, for the reasons given in the commentary on this Schedule in relation to that provision, and substitutes a suitable reference to section 188(3) of ITA. Paragraph 11A of Schedule 5 to ITEPA and section 188 of ITA are very similar provisions.
Companies (Audit, Investigations and Community Enterprise) Act 2004
Section 54: Becoming a charity or a Scottish charity: requirements
3415. This amendment replaces a reference to section 505(1) of ICTA with a reference to the clauses of this Bill which rewrite that section. See Changes 32, 35, 36 and 37 in Annex 1.
Income Tax (Trading and Other Income) Act 2005
Section 148D: Lessor under long funding operating lease: periodic deduction
3416. This amendment substitutes for section 148D new sections 148D to 148DB in the same terms as clauses 363 to 365 of this Bill. Those clauses of this Bill are based on section 502E of ICTA which corresponds, for corporation tax purposes, to section 148D of ITTOIA.
Section 148E: long funding operating lease: lessor’s additional expenditure
3417. This amendment substitutes for section 148E new sections 148E to 148EB in the same terms as clauses 366 to 368 of this Bill. Those clauses of this Bill are based on section 502F of ICTA which corresponds, for corporation tax purposes, to section 148E of ITTOIA.
Section 148F: Lessor under long funding operating lease: termination of lease
3418. This amendment substitutes a revised section 148F in the same terms as clause 369 of this Bill. That clause of this Bill is based on section 502G of ICTA which corresponds, for corporation tax purposes, to section 148F of ITTOIA.
Chapter 3 of Part 4: Dividends etc. from UK resident companies and tax credits etc. in respect of certain distributions
3419. These provisions insert a number of sections and make other amendments in this Chapter (and inserts paragraph 78A in Schedule 2) to achieve the separation of the income tax effect of sections 249 and 252 of ICTA and related provisions from the equivalent corporation tax effect rewritten in this Bill.
Section 415: Charge to tax under Chapter 6
3420. This provision replaces the reference to section 419 of ICTA with a reference to clause 455 for the sake of consistency with clause 460.
Finance Act 2005
Section 84: Taxation of securitisation companies
3421. Subsection (7) is not rewritten. That subsection set out conditions relating to the first regulations to be made under the section. The first regulations have been made (SI 2006/3296) and the subsection no longer has any application.
Income Tax Act 2007
Section 151: Losses on disposal of shares: interpretation of Chapter
3422. This amendment provides a stand alone definition of “investment company” in place of the definition by cross-reference to and modification of the definition in section 130 of ICTA. References to savings banks and banks for savings are omitted. The amended definition is the same as that in clause 90(1) of this Bill. See Change 21 in Annex 1.
Sections 346, 348(7), 356, 361, 363, 365, 368, 369 and 373: Community investment tax relief
3423. These provisions amend sections 346, 348(7), 356, 361, 363, 365, 368, 369 and 373 of ITA to conform those provisions to the corresponding provisions of this Bill (see the commentary on clauses 227, 229, 238, 244, 246, 248, 251, 252 and 260).
Sections 340 and 341: Application and criteria for accreditation and terms and conditions of accreditation
3424. Clause 219(1)(a) of this Bill provides that accreditation under the powers in Chapter 2 of Part 7 of ITA has effect for the purposes of Part 7 of this Bill. The new subsections introduced by these amendments complete the picture by clarifying in ITA that the powers in Chapter 2 of Part 7 of that Act can be exercised for corporation tax purposes as well as income tax purposes. They make explicit something that is already implicit.
Section 355: Securities or shares: no claim after disposal or excessive receipts of value
3425. This minor textual amendment corrects a typographical error in the description of section 364(1) of that Act.
Section 364: Value received by investor during 6 year period: securities or shares
3426. This minor textual amendment removes words from section 364(1)(d) of ITA which are unnecessary and have, accordingly, not been included in the corresponding clause 247(1)(d) of this Bill.
Chapter 6 of Part 13: Avoidance involving leases of plant and machinery
3427. These amendments amend sections 809ZA and 809ZC and replace section 809ZB with new sections 809ZE and 809ZF. The effect of these amendments is to conform the structure of Chapter 6 of Part 13 of ITA with that of Chapter 2 of Part 20 of this Bill. That Chapter of this Bill is based on sections 785B to 785E of ICTA which correspond for corporation tax purposes to sections 809ZA to 809ZD of ITA.
Section 991: Meaning of “bank”
3428. This provision amends the definition of “bank” to bring the income tax and corporation tax rewrite of the source legislation into line. See Change 65 in Annex 1.
Section 999: Meaning of “local authority”
3429. This provision amends the definition of “local authority”, in relation to Northern Ireland, to bring the income tax and corporation tax rewrite of the source legislation into line. See Change 60 in Annex 1.
Section 1000: Meaning of “local authority association”
3430. This provision amends the definition of “local authority association” to bring the income tax and corporation tax rewrite of the source legislation into line.
Schedule 2 Part 6: Transitionals and savings: losses on disposal of shares
3431. New paragraph 57A inserted in Schedule 2 to ITA clarifies the application of the transitional provisions in Part 6 of that Schedule (losses on disposal of shares) in cases where bonus shares have been issued. It ensures that the provisions in the form that they apply to the original shares also apply in the same form to the corresponding bonus shares whenever issued. Part 5 of Schedule 2 to this Bill (losses on disposals of shares) contains a paragraph in the same terms. See Change 20 in Annex 1.
Finance Act 2008
Schedule 19: Reduction of basic rate of income tax: transitional relief for gift aid charities
3432. This Schedule to FA 2008 provides additional relief for gift aid donations. Paragraph 1(3)(a) of Schedule 19 refers to section 505(1)(c)(ii) of ICTA as the section under which a charitable company will claim exemption for the donation. Before amendment by CTA 2009 section 505(1)(c)(ii) referred to tax under Case III of Schedule D. CTA 2009 amended section 505(1)(c)(ii) to refer to those parts of CTA 2009 which replaced Schedule D Case III. Paragraph 1(3)(a) of Schedule 19 was not amended, however, leaving that statutory reference to refer only to non-trading profits on loan relationships (section 299 of CTA 2009). The reference in Schedule 19 should instead have referred to section 505(1)(c)(iizb), exemption from tax under Part 7 of CTA (annual payments), since gift aid payments are treated as annual payments under section 25 of FA 2002. This amendment substitutes for the implied reference to section 505(1)(c)(iizb) a reference to a claim for exemption by virtue of clause 472 or 475 of this Bill.
3433. It is not considered that this changes the law since the current reference to section 505(1)(c)(ii) does not make proper sense and Parliament cannot have intended to change the effect of Schedule 19. Accordingly paragraph 1(3)(a) must be interpreted to refer to section 505(1)(c)(iizb).
Corporation Tax Act 2009
Section 221A: Sums to which sections 217 to 221 do not apply
3434. Section 774G(7) of ICTA provides, to summarise, that if section 774A or 774C of that Act applies then sections 277 to 281 of ITTOIA and sections 217 to 221 of CTA 2009 (lease premiums) do not. In consequence of the rewrite of sections 774A to 774G of ICTA for corporation tax purposes in this Bill, section 774G(7) of ICTA is rewritten for corporation tax purposes as new section 221A of CTA 2009.
Section 520: Provision not at arm’s length: non-deductibility of relevant return
3435. The reference to any deduction against total profits in subsection (2)(b) is amended to refer to any deduction from total profits. This is for consistency with the terminology used in the Bill to describe the way in which effect is given to reliefs which operate against total profits. See Step 2 of Clause 4(2).
Section 1219: Expenses of management of a company’s investment business
3436. See the commentary on clause 4 for an explanation of this amendment.
Schedule 2: Transitionals and savings etc
Part 1: General provisions
3437. These paragraphs ensure continuity of the law, despite the fact that this Act repeals and rewrites provisions.
3438. Paragraph 2 makes clear that the proposition about the continuity of the law in paragraph 1 does not apply to changes in the law made by this Act.
3439. The paragraphs in this Part stand instead of section 17(2) of the Interpretation Act 1978 and provide a comprehensive set of transitional arrangements.
Part 3: Currency
3440. A number of changes were made to the currency provisions in Schedule 18 to FA 2009. They took effect for accounting periods beginning on or after 29 December 2007. This Part of the Schedule ensures that the old rules continue to apply where a loss is carried back to an accounting period that commenced before 29 December 2007.
3441. The Schedule also enables a company to elect that the new rules only take effect for accounting periods beginning on or after the date of Royal Assent to FA 2009.
Part 5: Losses on disposal of shares
Disposals of new shares
3442. See the commentary on clause 74 and Change 19 in Annex 1.
Relief after an exchange of shares for shares in another company
3443. See the commentary on clause 87 and Change 19 in Annex 1.
Interpretation of Chapter
3444. This paragraph preserves the application of the definition of “investment company” in the source legislation in relation to shares issued before 1 April 2010. See Change 21 in Annex 1.
Application in relation to corresponding bonus shares
3445. This paragraph clarifies the application of the transitional provisions in this Part in cases where bonus shares have been issued. It ensures that the provisions in the form that they apply to the original shares also apply in the same form to the corresponding bonus shares whenever issued. See Change 20 in Annex 1.
Part 11: Close companies
3446. The saving for certain exceptions to the charge under clause 455 (close companies: charge to tax in case of loan to participator) is based on section 420(2) of ICTA. It includes a minor change to bring the law into line with practice. See the commentary on clause 456 and Change 30 in Annex 1.
Part 12: Charitable companies etc
Transactions in deposits
3447. The exemption under section 56(3)(c) of ICTA in relation to transactions in deposits is preserved to take account of any relevant matters still in existence that pre-date the loan relationships legislation of FA 1996. See the commentary to clause 486.
Exemption for investment income and exemption for certain miscellaneous income
3448. These provisions reflect changes made FA 2009 to the taxation of distributions. Dividends of non-United Kingdom resident companies paid before 1 July 2009 were chargeable to tax but not dividends of United Kingdom resident companies.
Transactions with substantial donors and non-charitable expenditure
3449. The treatment of non-charitable expenditure was amended and the rules in relation to substantial donors were introduced in FA 2006. This Part of the Schedule preserves the previous treatment where relevant (see in particular the commentary on clauses 496 and 516).
3450. Clause 508, which rewrites section 506B(9) of ICTA, incorporates a prospective amendment to that subsection made by paragraph 15 of Schedule 9 to the Housing and Regeneration Act 2008. Under this saving provision clause 508 will reflect unamended section 506B(9) until the Order bringing in the amendment has been made and paragraph 15 comes into force.
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