Income Tax (Trading and Other Income) Act 2005 (c. 5)

(The document as of February, 2008)

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(2) This is subject to any express provision to the contrary.

(3) In this section--

(a) "miscellaneous income" means profits or other income charged to income tax under or by virtue of a provision to which section 836B of ICTA applies, and

(b) "miscellaneous losses" means losses arising from a transaction which is of such a nature that, if profits or other income had arisen from it, the income would have been charged to income tax under or by virtue of such a provision.

(4) Provision corresponding to that made by this section is made by--

(a) section 26 (in relation to trades, professions and vocations), and

(b) section 272 (in relation to property businesses).

Chapter 3 Supplementary and general provisions

Orders and regulations

873 Orders and regulations made by Treasury or Board

(1) Any power of the Treasury or the Board of Inland Revenue to make any order or regulations under this Act is exercisable by statutory instrument.

(2) Any statutory instrument containing any order or regulations made by the Treasury or the Board of Inland Revenue under this Act is subject to annulment in pursuance of a resolution of the House of Commons.

(3) Subsection (2) does not apply in relation to any order or regulations made under--

(a) section 86 (meaning of "urban regeneration company"),

(b) section 724 (purchased life annuity payments),

(d) section 883(5) (transitional or saving provision).

Interpretation

874 Activities in UK sector of continental shelf

(1) Any profits--

(a) from exploration or exploitation activities carried on in the UK sector of the continental shelf, or

(b) from exploration or exploitation rights,

are treated for income tax purposes as profits from activities or property in the United Kingdom.

(2) In this section--

"exploration or exploitation activities" means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or the UK sector of the continental shelf,
"exploration or exploitation rights" means rights to assets to be produced by exploration or exploitation activities or interests in or to the benefit of such assets, and
"the UK sector of the continental shelf" means the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964 (c. 29).

875 Meaning of "caravan"

(1) In this Act "caravan" means--

(a) a structure designed or adapted for human habitation which is capable of being moved by being towed or being transported on a motor vehicle or trailer, or

(b) a motor vehicle designed or adapted for human habitation,

but does not include railway rolling stock which is on rails forming part of a railway system or any tent.

(2) A structure composed of two sections--

(a) separately constructed, and

(b) designed to be assembled on a site by means of bolts, clamps or other devices,

is not prevented from being a caravan just because it cannot, when assembled, be lawfully moved on a highway (or, in Scotland or Northern Ireland, road) by being towed or being transported on a motor vehicle or trailer.

876 Meaning of "farming" and related expressions

(1) In this Act "farming" means the occupation of land wholly or mainly for the purposes of husbandry, but does not include market gardening (see subsection (5)).

(2) Husbandry includes (for example)--

(a) hop growing, and

(b) the breeding and rearing of horses and the grazing of horses in connection with those activities.

(3) For the purposes of this Act the cultivation of short rotation coppice is regarded as farming and not as forestry.

(4) In this Act "woodlands" does not include land on which short rotation coppice is cultivated.

(5) In this Act "market gardening" means the occupation of land as a garden or nursery for the purpose of growing produce for sale.

(6) For the purposes of this section "short rotation coppice" means a perennial crop of tree species planted at high density, the stems of which are harvested above ground level at intervals of less than 10 years.

877 Meaning of grossing up

(1) In this Act references to grossing up by reference to a rate of tax are to calculating the amount ("the gross amount") which after deduction of income tax at that rate would equal the amount to be grossed up ("the net amount").

(2) The gross amount is the sum of the net amount and the tax deducted.

(3) The gross amount may also be expressed as--

---

where--

GA is the gross amount,
NA is the net amount, and
R is the percentage rate of tax by reference to which the net amount is to be grossed up.

878 Other definitions

(1) In this Act, unless otherwise indicated (whether expressly or by implication)--

"the Board of Inland Revenue" means the Commissioners of Inland Revenue,
"charity" means a body of persons or trust established for charitable purposes only,
"houseboat" means a boat or similar structure designed or adapted for use as a place of human habitation,
"income" includes amounts treated as income (whether expressly or by implication),
"the Inland Revenue" means any officer of the Board of Inland Revenue,
"non-UK resident" means not resident in the United Kingdom (and references to a non-UK resident or a non-UK resident person are to a person who is not resident there),
"normal self-assessment filing date", in relation to a tax year, means the 31st January following the tax year,
"personal representatives", in relation to a person who has died, means--
(a)
in the United Kingdom, persons responsible for administering the estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having functions under its law equivalent to those of administering the estate of the deceased,
"tax year", in relation to income tax, means a year for which any Act provides for income tax to be charged,
"the tax year 2005-06" means the tax year beginning on 6th April 2005 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way), and
"UK resident" means resident in the United Kingdom (and references to a UK resident or a UK resident person are to a person who is resident there).

(2) For the purposes of this Act, the remittance basis applies to a person for a tax year for which the person makes a claim under section 831 (claims for relevant foreign income to be charged on the remittance basis).

(3) In this Act any reference to a claim or election is to a claim or election in writing or in any form authorised (in relation to the case in question) by directions under section 118 of FA 1998.

(4) For further information about claims and elections, see TMA 1970 (in particular, section 42(2), (10) and (11) and Schedule 1A).

(5) Section 839 of ICTA (how to tell whether persons are connected) applies for the purposes of this Act unless otherwise indicated (whether expressly or by implication).

(6) Section 840 of ICTA (meaning of control in relation to a body corporate) applies for the purposes of this Act unless otherwise indicated (whether expressly or by implication).

879 Interpretation: Scotland

(1) In the application of this Act to Scotland--

"assignment" means an assignation,
"mortgage" means--
(a)
a standard security, or
(b)
a heritable security, as defined in the Conveyancing (Scotland) Act 1924 (c. 27), but including a security constituted by ex facie absolute disposition or assignation, and
"surrender" includes renunciation.

(2) In the application of this Act to Scotland, any reference to property or rights being held on trust or on trusts is a reference to the property or rights being held in trust.

(3) In the application of section 755 (interest on foreign currency securities etc. owned by non-UK residents) to Scotland, "Act" includes an Act of the Scottish Parliament.

(4) In the application of sections 769 (housing grants) and 882 (consequential amendments) and Part 1 of Schedule 2 (transitionals and savings: general provisions) to Scotland, "enactment" includes an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament.

(5) The express provision made by subsection (4) does not affect the construction of "enactment" in the application of section 631 (retained and accumulated income) to Scotland.

880 Interpretation: Northern Ireland

(1) In the application of section 755 (interest on foreign currency securities etc. owned by non-UK residents) to Northern Ireland, "Act" includes any Act, Order in Council or Measure constituting Northern Ireland legislation.

(2) In the application of section 769 (housing grants) and 882 (consequential amendments) and Part 1 of Schedule 2 (transitionals and savings: general provisions) to Northern Ireland, "enactment" includes an enactment comprised in, or in an instrument made under, Northern Ireland legislation.

(3) The express provision made by subsection (2) does not affect the construction of "enactment" in the application of section 631 (retained and accumulated income) to Northern Ireland.

General and final

881 Disapplication of corporation tax: section 9 of ICTA

Section 9 of ICTA (computation of income for corporation tax purposes: application of income tax principles) does not operate on the provisions of this Act so as to convert them into provisions of the Corporation Tax Acts.

882 Consequential amendments

(1) Schedule 1 (which contains consequential amendments) has effect.

(2) The Treasury may by order make such modifications of any enactment or provision made under an enactment as the Treasury consider appropriate in consequence of this Act.

(3) In subsection (2) "modifications" includes amendments or repeals.

(4) An order under subsection (2)--

(a) must not change the effect of the law as it was immediately before 6th April 2005, and

(b) may include such transitional or saving provision as the Treasury consider appropriate.

(5) Subsection (4)(a) does not apply so far as an order contains provision made in consequence of a change already made by this Act in the effect of the law.

883 Commencement and transitional provisions etc.

(1) This Act comes into force on 6th April 2005 and has effect--

(a) for income tax purposes, for the tax year 2005-06 and subsequent tax years, and

(b) for corporation tax purposes, for accounting periods ending after 5th April 2005.

(2) Subsection (1) is subject to subsections (3) to (5) (including Schedule 2).

(3) Subsection (1) does not apply to the following provisions of this Act (which therefore come into force on the passing of this Act)--

(a) section 873 (orders and regulations made by Treasury or Board),

(b) sections 875 to 881 (certain interpretation and general provisions),

(d) this section other than subsection (4) below,

(e) section 885 and Schedule 4 (abbreviations and general index),

(f) section 886 (short title), and

(g) paragraphs 78 and 148(5) of Schedule 2 (powers relating to open-ended investment companies and periodical payments of personal injury damages etc.) and subsection (4) below so far as it applies for the purposes of those provisions.

(4) Schedule 2 (which contains transitional provisions and savings etc.) has effect.

(5) The Treasury may by order make such transitional or saving provision as the Treasury consider appropriate in connection with the coming into force of this Act.

884 Repeals and revocations

Schedule 3 (which contains repeals and revocations of enactments including certain spent enactments) has effect.

885 Abbreviations and general index in Schedule 4

(1) Schedule 4 (which contains abbreviations and defined expressions that apply for the purposes of this Act) has effect.

(2) Part 1 of that Schedule gives the meaning of the abbreviated references to Acts used in this Act.

(3) Part 2 of that Schedule lists the places where expressions used in this Act are defined or otherwise explained--

(a) in this Act for the purposes of this Act or for purposes including this Act,

(b) in this Act for the purposes of a Part or Chapter of this Act, or

886 Short title

This Act may be cited as the Income Tax (Trading and Other Income) Act 2005.

SCHEDULES

Section 882

SCHEDULE 1 Consequential amendments

Part 1 Income and Corporation Taxes Act 1988

1 The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.

2 In section 1(1) (the charge to income tax)--

(a) omit paragraph (a), and

(b) omit the word "and" at the end of paragraph (b) and after that paragraph insert--

" (ba) all amounts which are charged to tax under any of the following provisions of ITTOIA 2005--

(i) Part 2 (trading income),

(ii) Part 3 (property income),

(iii) Part 4 (savings and investment income), and

(iv) Part 5 (miscellaneous income), and " .

3 (1) Amend section 1A (application of lower rate to income from savings and distributions) as follows.

(2) In subsection (1AA)--

(a) in paragraph (a) for "Schedule F" substitute "Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc., stock dividends from UK resident companies and loans to participators)", and

(b) for paragraph (b) substitute--

" (b) dividends chargeable under Chapter 4 of Part 4 of that Act (dividends from non-UK resident companies) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged). "

(3) In subsection (1A)--

(a) in paragraph (a)--

(i) for "Schedule F", in the first place where it occurs, substitute "Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005", and

(ii) for "Schedule F", in the second place where it occurs, substitute "dividend", and

(b) for paragraph (b) and the word "and" at the end of the paragraph substitute--

" (b) in the case of dividends chargeable under Chapter 4 of Part 4 of that Act or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act, the dividend ordinary rate; and " .

(4) In subsection (2)--

(a) in paragraph (a) for the words from "chargeable under" to "section 119" substitute " (other than relevant foreign income) chargeable under--

(i) Chapter 2 of Part 4 of ITTOIA 2005 (charge on interest);

(ii) Chapter 7 of that Part of that Act (charge on purchased life annuity payments) other than income from annuities specified in section 718(2) of that Act; or

(iii) Chapter 8 of that Part of that Act (charge on profits from deeply discounted securities); " ,

(b) in paragraph (aa) omit "under Case VI of Schedule D",

(d) in paragraph (c) for "equivalent foreign income" substitute "income falling within subsection (3) below", and

(e) in paragraph (d) for "547(1)(a) (chargeable event gains on life policies etc)" substitute "465 of ITTOIA 2005 (gains from contracts for life insurance etc.)".

(5) For subsection (3) substitute--

" (3) The income which falls within this subsection is any relevant foreign income which--

(a) would fall within subsection (2)(a) but for the exclusion of relevant foreign income;

(b) is a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005; or

(6) In subsection (4)--

(a) in paragraph (a), for the words from "income" to "Kingdom" substitute "relevant foreign income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis)", and

(b) omit paragraph (b) and the word "or" at the end of paragraph (a).

(7) In subsection (5)--

(a) for "section 550" substitute "sections 535 to 537 of ITTOIA 2005", and

(b) in paragraph (b)(i) for "Schedule F" substitute "Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005", and

" (ii) dividends chargeable under Chapter 4 of Part 4 of that Act (if any) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (if any), " .

(8) In subsection (6) for "section 550" substitute "sections 535 to 537 of ITTOIA 2005".

(9) Omit subsection (7).

(10) After subsection (7) insert--

" (8) In this section "relevant foreign distribution" means any distribution of a company not resident in the United Kingdom which--

(a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b) would be chargeable under Chapter 3 of that Part of that Act if the company were resident in the United Kingdom.

(9) And, for the meaning of "relevant foreign income", see section 832(1). "

4 (1) Amend section 1B (rates of tax applicable to Schedule F income) as follows.

(2) In subsection (1)--

(a) for paragraphs (a) and (b) substitute--

" (a) income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.) (if any), and

(b) dividends chargeable under Chapter 4 of Part 4 of that Act (dividends from non-UK resident companies) (if any) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged) (if any), " and

(b) for "Schedule F", in the second place where it occurs, substitute "dividend".

(3) In subsection (2) for "Schedule F", in both places where it occurs, substitute "dividend".

(4) After subsection (2) insert--

" (3) In this section "relevant foreign distribution" has the same meaning as in section 1A (see subsection (8) of that section). "

(5) In the side-note for the section for "Schedule F" substitute "distribution".

5 In section 4 (construction of references in Income Tax Acts to deduction of tax), omit subsection (1B).

6 After section 6(4) (the charge to corporation tax and exclusion of income tax and capital gains tax) insert--

" (4A) In sections 74(1), 79(1), 79A(1), 79B(1), 83A(1), 84(1), 86(1), 86A(2)(a), 87(1), (2) and (4), 88, 89, 90(1) and (3), 94(1), 100(2)(b), 101, 102, 401(1), 491(10), 577(7)(b), 579(2), 588(3), 589A(8) and 817(2), and in paragraph 5(11) of Schedule 30, "profession" includes vocation. "

7 (1) Amend section 9 (computation of income: application of income tax principles) as follows.

(2) After subsection (2) insert--

" (2A) But no income shall be computed, and no assessment shall be made, for purposes of corporation tax under ITTOIA 2005.

(2B) Instead, income shall continue to be computed, and the assessment shall continue to be made, for purposes of corporation tax under Schedules A and D and the Cases of Schedule D.

(2C) For (but only for) the purpose of continuing to apply for purposes of corporation tax, those Schedules and Cases are treated as if they were still part of income tax law (and therefore applied in accordance with subsection (1) above for purposes of corporation tax). "

(3) In subsection (3)(a)--

(a) for ", D and F," substitute "and D",

(b) for "those Schedules" substitute "Schedule D", and

(4) In subsection (4) after "Acts" insert "(other than ITTOIA 2005)".

(5) In subsection (6) omit "60 to 69,".

8 (1) Amend section 15 (Schedule A) as follows.

(2) In subsection (1A)--

(a) in paragraph (b) for "within the charge to income tax under Schedule A" substitute "the profits of a UK property business within the charge to income tax under Chapter 3 of Part 3 of ITTOIA 2005", and

(b) for "as separate Schedule A businesses" substitute "for the purposes of those charges as separate businesses".

(3) Before subsection (4) insert--

" (3A) Subsection (1) applies for corporation tax purposes (and does not apply for income tax purposes except so far as necessary to ensure its application for corporation tax purposes by virtue of section 9). "

(4) In subsection (4) at the end insert "and under Chapter 3 of Part 3 of ITTOIA 2005 (profits of a property business)".

9 (1) Amend section 18 (Schedule D) as follows.

(2) After subsection (4) insert--

" (4A) Subsections (1) to (4) apply for corporation tax purposes (and do not apply for income tax purposes except so far as necessary to ensure their application for corporation tax purposes by virtue of section 9). "

(3) In subsection (5) at the end insert "and under ITTOIA 2005 (see, in particular, the charge under Chapter 2 of Part 2 of that Act (trade profits))".

(4) Omit subsection (6).

10 Omit section 20 (Schedule F).

11 Omit section 21 (persons chargeable and basis of assessment under Schedule A).

12 (1) Amend section 21A (computation of amount chargeable under Schedule A) as follows.

(2) In subsection (2) omit "sections 112 and 113 of that Act (expenditure in connection with provision of security asset or service);".

(3) In subsection (4)--

(a) omit "section 82 (interest paid to non-residents),", and

(b) omit "section 96 (farming and market gardening: relief for fluctuating profits),".

13 In section 21B (application of other rules applicable to Case I of Schedule D)--

(a) omit ", 108, 109A",

(b) after "(post-cessation receipts and expenses, etc)" insert ", with any reference to a trade within the charge to income tax being read as a reference to a UK property business", and

14 In section 21C (the Schedule A charge and mutual business)--

(a) in subsection (1) after "the charge to" insert "corporation", and

(b) in subsection (4) from the beginning to "the person who would" substitute "The company to which the profit arises is the company which would".

15 (1) Amend section 30 (expenditure on making sea walls) as follows.

(2) In subsection (1) for "he shall be" substitute "that person shall be".

(3) In subsection (2) for "he would be" substitute "that person would be".

(4) After that subsection insert--

" (2A) If--

(a) the transferor is a company within the charge to corporation tax and the transferee is a person within the charge to income tax, or

(b) the transferor is a person within the charge to income tax and the transferee is a company within the charge to corporation tax,

subsection (2) above shall apply only for the purpose of determining the amount of the payment which the company is treated as making in any year of assessment.

For any entitlement of the person within the charge to income tax to a deduction for any of the expenditure, see sections 316 and 318 of ITTOIA 2005 (corresponding income tax provision). "

16 Omit sections 31A and 31B (deductions for expenditure by landlords on energy-saving items).

17 (1) Amend section 34 (treatment of premiums etc. as rent) as follows.

(2) In subsection (1) for "the purposes of the Tax Acts" substitute "corporation tax purposes".

(3) In subsection (6)--

(a) for "that other person" substitute "if that other person is a company, the company",

(b) for "tax" substitute "corporation tax",

(d) for "his" substitute "its".

(4) In subsection (7A) for "chargeable" substitute "accounting".

(5) In subsection (8)--

(a) for "person" substitute "company",

(b) for "tax", wherever it occurs, substitute "corporation tax", and

18 (1) Amend section 35 (charge on assignment of lease granted at an undervalue) as follows.

(2) In subsection (2) for "him in consequence of his" substitute "the assignor in consequence of the assignor's".

(3) In subsection (2A)(b) for "chargeable" substitute "accounting".

(4) In subsection (3) for "tax" substitute "corporation tax".

19 (1) Amend section 36 (charge on sale of land with right to reconveyance) as follows.

(2) In subsection (1)--

(a) for "him", in both places where it occurs, substitute "the vendor", and

(b) for "his" substitute "the vendor's".

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