Taxation (International And Other Provisions) Bill - continued          House of Commons

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Section 77G of TMA: Liabilities for assessments made after exemption certificate cancelled

1281.     This section determines how the liability of the licensee is calculated where a certificate issued under section 77F has been in force and then cancelled. It is based on paragraphs 4(1), 5, 7, 7A and 8A of Schedule 15 to FA 1973 and section 86(3) of F(No 2)A 1987.

1282.     The essence of the calculation is that where tax is due for a period which is partly covered by an exemption certificate under section 77F, the tax is apportioned between the period when the certificate was in force and the period after it was revoked in proportion to the profits, gains and chargeable gains of the respective periods.

Section 77H of TMA: Calculations under sections 77C(3) and 77G(7)

1283.     This section sets out further rules to cover situations where apportionments are required in calculating the tax due from the licensee. It is based on paragraph 8A of Schedule 15 to FA 1973.

1284.     The reference to the Board has been changed to an officer of Revenue and Customs in line with practice. See Change 2 in Annex 1.

Section 77I of TMA: Information

1285.     This section sets out the power under which HMRC may seek information from a licensee in respect of transactions with and payments made to a non-UK resident person. It is based on paragraph 2 of Schedule 15 to FA 1973.

1286.     The reference to “an inspector” has been revised to an officer of Revenue and Customs in line with changes made by CRCA.

Section 77J of TMA: Meaning of “related to a licence” as respects tax, or profits or gains

1287.     This section provides a number of definitions that are necessary for these provisions. It is based on section 38(2) of and paragraph 4(1) of Schedule 15 to FA 1973.

Section 77K of TMA: Other definitions in Part 7A

1288.     This section provides further interpretation. It is new.

Part 2: Relocation of section 24 of FA 1974


1289.     This Part inserts sections 8(4A) and (4B), 8ZA and 15A of TMA. The inserted sections are based on section 24 of FA 1974 (returns of persons treated as employees).

1290.     Section 24 of FA 1974 contained provisions enabling information to be obtained about the foreign earnings of individuals working in the United Kingdom. The section covered both employers and employees.

Section 8(4A) and (4B) of TMA: Personal return

1291.     Section 8(4A) and (4B) provide that a notice under section 8 of TMA may require certain employees to provide details of their general earnings. The subsections are based on section 24 of FA 1974.

1292.     Section 8(4B) includes the reference to “general earnings” that was inserted in section 24 of FA 1974 by ITEPA. Section 7(3) of ITEPA defines “general earnings” for the purposes of the Income Tax Acts and the Corporation Tax Acts.

Section 8ZA of TMA: Interpretation of section 8(4A)

1293.     Section 8ZA lists the conditions that must be met if a person is to be subject to section 8(4A). It is based on section 24 of FA 1974.

1294.     The section sets out a series of conditions to be met. This approach differs from the source which simply referred to the conditions in turn.

1295.     Subsection (4) refers to a person who carries on a trade. The definition of trade for the purposes of TMA is to be found in section 118 of that Act. The definition of trade for the purposes of section 24 of FA 1974 is to be found in section 989 of ITA. The definitions differ in form but not in substance. It is therefore not considered that the change in definition constitutes a change in the law.

Section 15A of TMA: Non-resident’s staff are UK client’s employees for section 15 purposes

1296.     Section 15A provides that any person for whose benefit certain employees perform duties may be required to provide details of those employees in response to a notice issued under section 15 of TMA. It is based on section 24 of FA 1974.

1297.     The format follows that established by section 8ZA and uses similar wording.

1298.     The origin for the section is shown in part to be “drafting”. This refers to subsection (5) which states that section 15 applies “only so as to enable P to be required to make a return ..”. The source stated that section 15 applied “only so as to require him to make a return ..”. The intention is to make clear that a return under section 15 is not mandatory simply because the conditions in subsections (2) to (4) of section 15A are met. A notice to make a return under section 15 asking for the names and addresses of the employees must first be issued.

Part 3: Relocation of section 42 of ICTA


1299.     This Part inserts sections 302A, 302B and 302C into Chapter 4 of Part 3 of ITTOIA (profits of property businesses: lease premiums etc), which deal with determinations of amounts treated as receipts by that Chapter. They are based on section 42 of ICTA and take account of amendments to that section by paragraph 133 of Schedule 1 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009/56) which came into force on 1 April 2009.

Section 302A of ITTOIA: Appeals against proposed determinations

1300.     Section 302A provides for determinations of amounts that may affect the liability of more than one person and for appeals against proposed determinations.

Section 302B of ITTOIA: Section 302A: supplementary

1301.     Section 302B supplements section 302A.

Section 302C of ITTOIA: Determination by tribunal

1302.     Section 302C provides for objections to provisional determinations under section 302A to be determined by an independent tribunal.

Section 242 of CTA 2009: Determination by tribunal

1303.     Wording in section 242(2) of CTA 2009 is aligned with that in section 302C(2) of ITTOIA.

Part 4: Relocation of section 84A of ICTA


1304.     This Part inserts section 94A of ITTOIA and amends section 272 of that Act. Section 94A is based on section 84A of ICTA.

1305.     Section 84A of ICTA (costs of establishing share option or profit sharing schemes) is rewritten for corporation tax purposes in section 999 of CTA 2009. It remains in force for income tax purposes as amended by Schedule 1 to CTA 2009.

1306.     Section 84A(5) of ICTA is repealed without replacement as it is a spent commencement provision.

Section 94A of ITTOIA: Costs of setting up SAYE option scheme or CSOP scheme

1307.     Section 94A allows a company a deduction for the costs of setting up an approved “save as you earn” (SAYE) option scheme or an approved “company share option plan” (CSOP) scheme. The deduction is allowed in calculating for income tax purposes the profits of a trade carried on by the company and, by virtue of section 272 of ITTOIA, of a property business carried on by it.

1308.     Only a company may establish an SAYE option scheme or a CSOP scheme. In most cases the profits of the trade or property business carried on by the establishing company will be within the charge to corporation tax and section 999 of CTA 2009 will apply. But a scheme may be established by a non-UK resident company. The profits of a trade or property business carried on by such a company may be within the charge to income tax.

Section 272 of ITTOIA: Profits of a property business: application of trading income rules

1309.     The amendment of section 272(2) to include reference to section 94A ensures that the deduction which is available under section 84A of ICTA (as applied by section 272(1) of ITTOIA) when calculating the profits of a property business will instead be available under section 94A of ITTOIA (as applied by section 272(1) and (2) of that Act).

Part 5: Relocation of section 152 of ICTA


1310.     This Part inserts sections 54A, 54B and 54C of TMA, which deal with taxable amounts of unemployment benefits. They are based on section 152 of ICTA.

1311.     The new wording clarifies the relationship between an application to make a late objection and the making of the late objection itself. See Change 14 in Annex 1.

Section 54A of TMA: No questioning in appeal of amounts of certain social security income

1312.     Section 54A sets out the consequences of a notice being given of a taxable amount of jobseeker’s allowance or income support.

Section 54B of TMA: Notifications of taxable amounts of certain social security income

1313.     Section 54B sets out the process for notification and objection.

Section 54C of TMA: Interpretation of sections 54A and 54B: “appropriate officer” etc

1314.     Section 54C provides definitions.

1315.     The benefit known as “unemployment benefit” has been superseded by jobseeker’s allowance, but the term has been retained in the rewritten legislation as it may be used more generally to cover any form of unemployment benefit.

1316.     Social security functions in Northern Ireland were transferred to the Department for Social Development by the Departments (Transfer and Assignment of Functions) Order (Northern Ireland) 1999 (SR(NI) 1999/481).

Part 6: Relocation of section 337A(2) of ICTA


1317.     This Part inserts section 1301A into CTA 2009.

Section 1301A of CTA 2009: Restriction of deductions for interest

1318.     This new section rewrites section 337A(2)(a) of ICTA, which allows no deduction for interest other than under the loan relationships provisions. Section 337A(2)(a) of ICTA was originally proposed to be repealed by CTA 2009, but was retained as it was considered necessary for any cases where “interest” might not fall within the loan relationships provisions. It is now rewritten within Chapter 1 of Part 20 (restriction of deductions) of CTA 2009 as the more appropriate location for such a provision.

Part 7: Relocation of section 475 of ICTA


1319.     This Part inserts section 154A of ITTOIA, which deals with the restriction of a debit for borrowing costs if a non-UK resident holds 31/2% War Loan for use in a business of banking, insurance or dealing in securities. It is based on section 475 of ICTA.

Section 154A of ITTOIA: Certain non-UK residents with interest on 31/2% War Loan 1952 Or After

1320.     Section 154A rewrites (for income tax) section 475 of ICTA which was overlooked in the preparation of ITTOIA. The corresponding corporation tax rule is in section 405 of CTA 2009.

1321.     Interest on 31/2% War Loan is paid without deduction of tax and is exempt in the hands of a non-UK resident. Because a person may borrow to acquire these securities a deduction may be made for the cost of the borrowing but without any taxable income. This section disallows the appropriate proportion of the costs of borrowing as a trade deduction.

1322.     Subsections (1), (3) and (4) rewrite “31/2% War Loan 1952 or after” as “31/2% War Loan 1952 Or After” to prevent the reader attaching the words “or after” to any following words, thereby adopting the solution used in section 154(8)(b) of FA 1996.

Part 8: Relocation of section 700 of ICTA


1323.     This Part inserts section 682A of ITTOIA, which deals with the power to obtain information from personal representatives and from beneficiaries in estates. It is based on section 700 of ICTA.

Section 682A of ITTOIA: Statements relating to estate income

1324.     Section 682A enables a person to request statements relating to a deceased person’s estate. It is based on section 700(5) and (6) of ICTA. The corresponding corporation tax provision is section 967 of CTA 2009.

1325.     The last part of section 700(5) of ICTA that requires the statement to set out the matters in section 700(5)(a) to (b) separately for each part of estate income, in cases where different applicable rates apply, has not been rewritten. This requirement is considered unnecessary because the requirement to show amounts separately must occur in order for section 682A(1)(b) to be satisfied.

Part 9: Relocation of section 787 of ICTA

Chapter 7 of Part 13 of ITA: Avoidance involving obtaining tax relief for interest

1326.     This Part inserts Chapter 7 in Part 13 of ITA consisting of section 809ZG (tax relief schemes and arrangements), which is based on section 787 of ICTA.

1327.     Section 787 of ICTA originally appeared as section 38 of FA 1976. It is an anti-avoidance provision directed against schemes designed to generate tax relief for interest.

1328.     Section 443 of CTA 2009 rewrote section 787 of ICTA for the purposes of corporation tax, and Schedule 1 to that Act confined section 787 to income tax.

1329.     Most of the income tax provisions in Part 17 of ICTA (tax avoidance) have been rewritten in ITA or will be rewritten in Schedules 4 and 5 to this Bill. For the convenience of the user, section 787 of ICTA is rewritten as a new section in Part 13 of ITA (tax avoidance).

Part 10: Relocation of sections 130 to 132 of FA 1988

Sections 109B to 109F of TMA: Companies ceasing to be UK resident

1330.     This Part inserts sections 109B to 109F of TMA which are based on sections 130 to 132 of FA 1988. The sections provide for securing payment of outstanding tax when a company ceases to be resident in the United Kingdom.

Section 109B of TMA: Provisions for securing payment by company of outstanding tax

1331.     This section sets out the conditions respecting payment of outstanding tax that must be met before a company ceases to be resident in the United Kingdom. It is based on section 130(1) to (5) of FA 1988.

1332.     The reference to “Treasury consent” in section 130(1) of FA 1988 (and hence also the definition in section 130(6)) has not been rewritten as it is obsolete.

Section 109C of TMA: Penalty for company’s failure to comply with section 109B

1333.     This section charges a penalty if a company ceases to be resident in the United Kingdom before each of the conditions in section 109B of TMA is met. It is based on section 131(1) of FA 1988.

Section 109D of TMA: Penalty for other persons if company fails to comply with section 109B

1334.     This section charges a penalty on persons other than the company in certain circumstances where a company ceases to be resident in the United Kingdom before each of the conditions in section 109B of TMA is met. It is based on section 131(2) to (5) of FA 1988.

Section 109E of TMA: Liability of other persons for unpaid tax

1335.     This section provides for persons other than the migrating company to be liable for unpaid tax where tax payable by that company is not paid within a specified time. It is based on section 132 of FA 1988.

Section 109F of TMA: Interpretation of sections 109B to 109E

1336.     This section is based on sections 130(7) and (8) and 131(6) of FA 1988.

Part 11: Relocation of section 151 of FA 1989

Section 30AA of TMA: Assessing income tax on trustees and personal representatives

1337.     This Part inserts section 30AA of TMA which is based on section 151 of FA 1989.

1338.     Section 151 of FA 1989 is the only one of a number of management provisions introduced by that Act which did not take effect by way of amendment of TMA. For the convenience of users, it is now relocated in TMA.

1339.     As a consequence of the amendments made to section 151(2) of FA 1989 by paragraph 281(2) and (3) of Schedule 1 to ITA, paragraph 91 of Schedule 2 to ITTOIA is spent, and is accordingly omitted. Those amendments removed from section 151(2) of FA 1989 the two references to gains whose interpretation was the subject-matter of paragraph 91 of Schedule 2 to ITTOIA.

Part 12: Relocation of Schedule 12 to F(No 2)A 1992 so far as applying for income tax purposes


1340.     This Part inserts Chapter 3A of Part 14 of ITA (Banks etc in compulsory liquidation). It is based on Schedule 12 to F(No 2)A 1992.

1341.     The source provisions applied for both income tax and corporation tax purposes. The corporation tax aspects are rewritten in Chapter 6 of Part 13 of CTB2. The income tax aspects are rewritten in ITA.

1342.     The pattern of sections in ITA closely follows that in CTB2.

Section 837A of ITA: Overview of Chapter

1343.     This section gives an overview of the Chapter. It is new.

Section 837B of ITA: Application of Chapter

1344.     This section sets out the conditions that a company must meet in order for the Chapter to apply. It is based on paragraph 1 of Schedule 12 to F(No 2)A 1992.

1345.     Subsection (6) refers to an EEA firm with permission under paragraph 15 of Schedule 3 to the Financial Services and Markets Act 2000. The source qualified this by adding “(as a result of qualifying for authorisation by virtue of paragraph 12 of that Schedule)”. This qualification is considered unnecessary as the only way in which permission under paragraph 15 may be given is by virtue of paragraph 12. These words are therefore repealed without replacement.

Section 837C of ITA: Charge to income tax on winding up receipts

1346.     This section charges amounts received during the winding up period. It is based on paragraph 3(1), (2) and (3) of Schedule 12 to F(No 2)A 1992.

Section 837D of ITA: Transfer of rights to payment

1347.     This section charges sums received in respect of transfers of rights as if those sums were winding up receipts. It is based on paragraph 5 of Schedule 12 to F(No 2)A 1992.

1348.     In the case of a non-arm’s length transaction the source provides that market value is to be substituted for the consideration received. However, the tax charge is based on amounts received. In relation to the deemed amounts arising from non-arm’s length transactions the source, therefore, states that “references .. to sums received shall be construed accordingly.”

1349.     Although the meaning is not in doubt the source is not as clear as it might have been. In the rewritten section a slightly different approach is adopted by explicitly treating the value of transferred rights as winding up receipts.

Section 837E of ITA: Allowable deductions

1350.     This section provides rules for setting allowable deductions against winding up receipts. It is based on paragraph 4 of Schedule 12 to F(No 2)A 1992.

Section 837F of ITA: Election to carry back

1351.     This section gives a company the right to elect to carry back a winding up receipt to the date that the business ceased. It is based on paragraph 6 of Schedule 12 to F(No 2)A 1992.

Section 837G of ITA: Relationship of Chapter with other income tax provisions

1352.     This section gives priority to a charge under this Chapter over potential charges arising under other provisions. It is based on paragraph 3(4) and (5) of Schedule 12 to F(No 2)A 1992.

Section 837H of ITA: Interpretation of Chapter

1353.     This section sets out a number of definitions and interpretations relevant to the Chapter. It is based on paragraph 2 of Schedule 12 to F(No 2)A 1992.

Part 13: Relocation of section 200 of FA 1996 so far as applying for income tax purposes


1354.     This Part inserts section 835B of ITA. It is based on section 200 of FA 1996.

Section 835B of ITA: Domicile for income tax purposes of overseas electors

1355.     Section 835B specifies that action taken by an individual to register as a voter for United Kingdom elections shall not affect the question of the individual’s domicile for the purposes of income tax unless the individual chooses that it should affect the question.

1356.     Section 200 of FA 1996 continues to apply for capital gains tax and inheritance tax purposes.

Part 14: Relocation of section 36 of FA 1998 and section 111 of FA 2009


1357.     This Part inserts new sections 59F to 59H of TMA. It is based on section 36 of FA 1998 and section 111 of FA 2009.

Section 59F of TMA: Arrangements for paying tax on behalf of group members

1358.     This section provides for arrangements to be made between members of a group for one of the members to discharge one or more of the other members’ corporation tax liabilities. The reference to “the Board” is replaced with a reference to “an officer of Revenue and Customs”. See Change 2 in Annex 1.

Sections 59G and 59H of TMA: Managed payment plans

1359.     These sections make provision for taxpayers to enter into managed payment plans. Under managed payment plans, taxpayers agree to pay income tax, capital gains tax or corporation tax due by instalments balanced equally before and after the normal due dates. While in the plan, taxpayers are protected from the interest and penalty consequences on payments made after the normal due date.

Part 15: Relocation of section 118 of FA 1998


1360.     This Part inserts sections 43E and 43F of TMA, which cover the making of claims for income tax purposes by means of electronic communications. It is based on section 118 of FA 1998 and paragraph 1(1) of Schedule 17 to the Communications Act 2003.

Section 43E of TMA: Making of income tax claims by electronic communications etc

1361.     Section 43E of TMA gives the Commissioners for HMRC the power to specify that certain claims made by individuals for income tax purposes may be made by an electronic communications service. It sets out the scope of the Commissioners’ authority and certain restrictions.

Section 43F of TMA: Effect of directions under section 43E

1362.     Section 43F of TMA sets out the effect of directions under section 43E.

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Prepared: 19 November 2009