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

(The document as of February, 2008)

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(3) In subsection (3) for "under Case VI of Schedule D" substitute "(in the case of corporation tax, under Case VI of Schedule D)".

(4) In subsection (5) omit the words from "and the reference" to the end.

172 In section 401(1) (relief for pre-trading expenditure)--

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

(b) for "trade, profession or vocation", wherever it occurs, substitute "trade or profession",

(d) for "his" substitute "the company's", and

(e) for "him" substitute "the company".

173 In section 417(3)(b) (meaning of "associate" etc.) for "Chapter 1A of Part XV (see section 660G(1) and (2))" substitute "Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)".

174 (1) Amend section 421 (taxation of borrower where loan under section 419 released etc.) as follows.

(2) In subsection (1)--

(a) for "advance and" substitute "advance made to the trustees of a trust and after the trust has ended",

(b) in paragraph (a) for "the total income of the person to whom the loan or advance was made", "him" and "Schedule F" substitute "the income of the person from whom the debt was due ("the debtor") for corporation tax purposes", "the debtor" and "dividend" respectively,

(c) in paragraph (b) for "he shall not be liable to pay income tax at the Schedule F" substitute "the debtor shall not be liable to pay corporation tax at the dividend", and

(d) omit paragraphs (c) and (d).

(3) Omit subsections (2) and (3).

175 In section 431(2) (interpretative provisions relating to insurance companies) in the definition of "annuity business" for the words "section 580C" substitute "section 725 of ITTOIA 2005 (immediate needs annuities)".

176 In section 431D(3)(b) (meaning of "overseas life assurance business") after "Chapter II of Part XIII" insert "or Chapter 9 of Part 4 of ITTOIA 2005".

177 In section 434 (franked investment income etc.) omit subsection (1A).

178 (1) Amend section 437 (general annuity business) as follows.

(2) In subsection (1C)(b)(ii) after "capital elements" insert "and amounts exempt under section 717 of ITTOIA 2005".

(3) Omit "and" at the end of subsection (1C)(b).

(4) After subsection (1C)(c) insert " and

(d) the amounts exempt under section 717 of ITTOIA 2005 shall be determined in accordance with Chapter 7 of Part 6 of that Act, but for this purpose--

(i) it is immaterial whether or not an annuitant claims any relief to which the annuitant is entitled under that section; and

(ii) where, by virtue of section 718 of that Act, section 717 does not apply to an annuity, the annuity shall be treated as being exempt to the same extent that it would have been apart from that section. "

179 (1) Section 468J (dividend distributions of authorised unit trusts) is amended as follows.

(2) In subsection (2) for "Tax Acts" substitute "Corporation Tax Acts".

(3) At the end of subsection (4) insert "(including a dividend treated as paid to a unit holder who is not liable to corporation tax)".

180 (1) Section 468L (interest distributions of authorised unit trusts) is amended as follows.

(2) In subsection (1A) after "this Chapter" insert "and Chapter 2 of Part 4 of ITTOIA 2005 (interest)".

(3) In subsection (2) for "Tax Acts" substitute "Corporation Tax Acts".

(4) At the end of subsection (3) insert "(including a payment of interest treated as made to a unit holder who is not liable to corporation tax)".

181 (1) Amend section 469 (other unit trusts) as follows.

(2) In subsection (2A) for "section 231(1)" substitute "section 397(1) of ITTOIA 2005".

(3) For subsection (2B) substitute--

" (2B) Section 348(4)(a) above and sections 399(2) and (6) and 400(2) and (3) of ITTOIA 2005 shall not apply where the recipient of the distribution in question is the trustees of the scheme. "

(4) In subsection (3)--

(a) after "the Tax Acts" insert "other than ITTOIA 2005", and

(b) at the end insert "(and see Chapter 10 of Part 4 of that Act for their treatment under that Act)".

(5) In subsection (9) for "paragraph 7 of Schedule 5AA" substitute "section 568 of ITTOIA 2005".

182 In section 472A (trading profits etc. from securities: taxation of amounts taken to reserves)--

(a) in subsection (1) for "person" substitute "company", and

(b) in subsection (2) for "person's" substitute "company's".

183 In section 473(1) and (4) (conversion etc. of securities held as circulating capital) for "person" substitute "company".

184 (1) Amend section 477A (building societies: regulations for deduction of tax) as follows.

(2) In subsection (4)--

(a) for "terminal bonus" substitute "interest", and

(b) for "contractual savings scheme" substitute "SAYE savings arrangement".

(3) Omit subsections (5) and (6).

(4) In subsection (9) omit the words from "but" to the end of the subsection.

(5) In subsection (10) after "this section--" insert--

" "certified SAYE savings arrangement" has the meaning given by section 703 of ITTOIA 2005 " .

185 Omit section 480C (relevant deposits: computation of tax on interest).

186 (1) Amend section 481 ("deposit-taker", "deposit" and "relevant deposit") as follows.

(2) In subsection (1A) for "sections 480A and 480C" substitute "section 480A".

(3) In subsection (5A)--

(a) at the end of paragraph (a) insert "above or an uncertificated right falling within section 552(1)(c) of ITTOIA 2005", and

(b) in paragraph (c)--

(i) for ", as defined in section 56(5), has" substitute "or uncertificated eligible debt security units have", and

(ii) omit "or 480C".

(4) In subsection (6) omit the word ", 480C".

187 (1) Amend section 482 (supplementary provisions) as follows.

(2) In subsection (6)--

(a) after "481(5)" insert "and (5A)",

(b) after the definition of "appropriate person" insert--

" "certificate of deposit" for corporation tax purposes has the meaning given in section 56(5) above and for income tax purposes has the meaning given in section 552(2) of ITTOIA 2005, "

(c) in the definition of "qualifying certificate of deposit" for ", as defined in section 56(5), which is" substitute "or uncertificated eligible debt security units, being a certificate or units", and

(d) after the definition of "qualifying time deposit" insert--

" "uncertificated eligible debt security units" has the meaning given in section 552(2) of ITTOIA 2005 " .

(3) In subsection (8) for "section 56(5)" substitute "subsection (6) above".

188 (1) Section 486 (industrial and provident societies and co-operative associations) is amended as follows.

(2) In subsection (1)--

(a) after "distribution" insert "for the purposes of corporation tax", and

(b) for "the purposes of corporation tax" substitute "those purposes".

(3) In subsection (4) at the end insert "for the purposes of corporation tax".

(4) Omit subsection (5).

189 (1) Amend section 491 (distribution of assets of body corporate carrying on mutual business) as follows.

(2) In subsection (1) for "any person" substitute "any company".

(3) In subsection (2) for "the person" substitute "the company".

(4) In subsection (3)--

(a) for "the purposes of tax", wherever it occurs, substitute "the purposes of corporation tax",

(b) for "the recipient", wherever it occurs, substitute "the recipient company",

(d) for "chargeable period" substitute "accounting period".

(5) In subsection (4) omit "113 or".

(6) Omit subsection (5).

(7) In subsection (10) omit "or vocation".

190 (1) Amend section 492 (treatment of oil extraction activities etc for tax purposes) as follows.

(2) In subsection (1) for "for all purposes of income tax, and for the purposes of the charge of corporation tax on income," substitute "for the purposes of the charge of corporation tax on income".

(3) In subsection (4)--

(a) in paragraph (a) after "are treated by virtue of" insert "section 16(1) of ITTOIA 2005 or",

(b) in paragraph (a) for "the purposes specified in that subsection" substitute "income tax purposes or (as the case may be) for the purposes of the charge of corporation tax on income",

(d) after "notwithstanding anything in that" insert "section or".

191 In section 493(2)(a)(i) (valuation of oil disposed of or appropriated in certain circumstances) for "falling within section 492(1)(a) or (b)" substitute "falling within the definition of "oil-related activities" in section 16(2) of ITTOIA 2005 or within section 492(1)(a) or (b) above".

192 In section 495(2) (regional development grants) for "section 492(1)" substitute "section 16(1) of ITTOIA 2005 or section 492(1) above".

193 In section 496(1)(c) (tariff receipts and tax-exempt tariffing receipts) for "section 492(1)" substitute "section 16(1) of ITTOIA 2005 or section 492(1) above".

194 In section 502(1) (interpretation of Chapter 5), in the definition of "ring fence trade"--

(a) in paragraph (a) for "any of paragraphs (a) to (c) of subsection (1) of section 492" substitute "the definition of "oil-related activities" in section 16(2) of ITTOIA 2005 or within section 492(1) above", and

(b) in paragraph (b) for "that subsection" substitute "section 16(1) of ITTOIA 2005 or section 492(1) above".

195 (1) Amend section 503 (letting of furnished holiday accommodation treated as a trade for certain purposes) as follows.

(2) In subsection (1)--

(a) for "specified in subsection (2)" substitute "of Chapter 2 of Part 10 (loss relief for corporation tax)",

(b) omit "in the United Kingdom",

(d) for "particular person or partnership or body of persons" substitute "particular company or partnership".

(3) Omit subsections (2) and (3).

(4) In subsection (5)--

(a) for "Part X" substitute "Chapter 2 of Part 10", and

(b) after "other provision of the" insert "Corporation".

(5) In the side-note after "certain" insert "corporation tax".

196 (1) Amend section 504 (meaning of the "commercial letting of furnished accommodation") as follows.

(2) Omit subsection (4).

(3) In subsection (6)--

(a) omit "year of assessment or",

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

(d) for "he" substitute "the company", and

(e) for "him" substitute "the company".

(4) In subsection (6A) for "above is--" to the end substitute "above is the period of two years beginning at the end of the accounting period in which the accommodation was let."

(5) In subsection (7)--

(a) omit "year of assessment or", and

(b) omit "year or" in both places where it occurs.

(6) In subsection (8) omit "year of assessment or".

(7) In subsection (9)--

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

(b) for "he" substitute "it".

197 After section 504 insert--

" 504A Letting of furnished holiday accommodation treated as trade for certain income tax purposes

(1) For the purposes specified in subsection (2)--

(a) a UK property business which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation is treated as if it were a trade the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005, and

(b) all such lettings made by a particular person or partnership or body of persons are treated as one trade.

The "commercial letting of furnished holiday accommodation" has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.

(2) Subsection (1) applies for the purposes of--

(a) Chapter 1 of Part 10 (loss relief for income tax),

(b) section 833(4)(c) (income regarded as earned income), and

(3) Chapter 1 of Part 10 as applied by this section has effect with the following adaptations--

(a) no relief is to be given to an individual under section 381 (relief for losses in early years of trade) in respect of a year of assessment if any of the accommodation in respect of which the trade is carried on in that year was first let by that person as furnished accommodation more than three years before the beginning of that year of assessment;

(b) section 384 (restrictions on right of set-off) has effect with the omission of subsections (6) to (8) (which relate to certain losses attributable to capital allowances);

(c) section 390 (treatment of interest as loss) has effect as if the reference to a trade carried on wholly or partly in the United Kingdom were a reference to the UK property business so far as it is treated as a trade.

(4) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

(5) Relief is not to be given for the same loss, or the same portion of a loss, both under a provision of Chapter 1 of Part 10 as applied by this section and under any other provision of the Income Tax Acts. "

198 (1) Amend section 505 (charities: general) as follows.

(2) In subsection (1)--

(a) in paragraph (a) after "Schedules A and D" insert ", or under Parts 2 and 3 of ITTOIA 2005,",

(b) in paragraph (c)(ii) after "Schedule D" insert "or under Chapter 2, 7, 8 or 10 of Part 4 of ITTOIA 2005 (interest, purchased life annuity payments, profits from deeply discounted securities and distributions from unauthorised unit trusts), section 579 of that Act so far as it relates to annual payments (royalties etc. from intellectual property), Chapter 4 of Part 5 of that Act so far as it relates to annual payments (certain telecommunication rights: non-trading income) or Chapter 7 of Part 5 of that Act (annual payments not otherwise charged)",

(d) after paragraph (c)(iia) insert--

" (iiaa) from tax under Chapter 4 of Part 4 of ITTOIA 2005 (dividends from non-UK resident companies) or from tax under Chapter 8 of Part 5 of that Act (income not otherwise charged) so far as it applies to relevant foreign distributions, " ,

(e) in paragraph (c)(iib) from "income" to "and" at the end of sub-paragraph (iib) substitute "such dividends as would, in the case of income tax, be chargeable to tax under Chapter 4 of Part 4 of ITTOIA 2005 or such distributions (other than dividends) as would, in the case of income tax, be chargeable to tax under Chapter 8 of Part 5 of that Act so far as it would apply to what would be a relevant foreign distribution,",

(f) in paragraph (c)(iii) for "Schedule F" substitute "Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)",

(g) in paragraph (d) after "Schedule D" insert "or Chapter 2 of Part 4 of ITTOIA 2005 (interest)",

(h) in paragraph (e) after "Schedule D" insert "or Part 2 of ITTOIA 2005 (trading income)", and

(i) in paragraph (f) after "Schedule D" insert "or Part 2 or 5 of ITTOIA 2005 (trading and miscellaneous income)".

(3) After subsection (1) insert--

" (1AA) In subsection (1)(c)(iiaa) and (iib) "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. "

(4) In subsection (2) after "chargeable to", in the second place where it occurs, insert "income tax under Chapter 7 of Part 5 of ITTOIA 2005 (annual payments not otherwise charged) so far as it does not apply to relevant foreign income and shall be chargeable to corporation".

199 In section 512(1) (exemptions for Atomic Energy Authority and National Radiological Protection Board)--

(a) in paragraph (a) after "under" insert "Part 3 of ITTOIA 2005 so far as it relates to the profits of a UK property business and under",

(b) in paragraph (b)--

(i) after "under" insert "ITTOIA 2005 and", and

(ii) after "dividends" insert "or income within Chapter 10 of Part 4 of ITTOIA 2005 (distributions from unauthorised unit trusts)", and

(c) in paragraph (c) for "Schedule F" substitute "Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)".

200 Omit section 514 (funds for reducing the national debt).

201 (1) Amend section 524 (taxation of receipts from sale of patent rights) as follows.

(2) In subsection (1)--

(a) for "person", "he" and "him" substitute "company", "the company" and "it" respectively,

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

(3) In subsection (2)--

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

(b) after "charged to", in both places where it occurs, insert "corporation", and

(4) In subsection (2A)--

(a) omit paragraph (a), and

(b) in paragraph (b) omit "in the case of an election for the purposes of corporation tax,".

(5) In subsection (3)--

(a) for the words from the beginning to "in the United Kingdom" substitute "Where a relevant non-resident company", and

(b) in paragraph (a), for "he shall be chargeable to tax" substitute "the company shall be chargeable to corporation tax".

(6) Omit subsection (4).

(7) For subsection (5) substitute--

" (5) In subsection (3) above "relevant non-resident company" means a company not resident in the United Kingdom which would be within the charge to corporation tax in respect of any proceeds of the sale of the patent rights not consisting of a capital sum. "

(8) In subsection (6) omit "subsection (4) shall not apply, but".

(9) In subsection (7)--

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

(b) for "him", in both places where it occurs, substitute "it", and

(10) In subsection (8) for "him" substitute "it".

202 (1) Amend section 525 (receipts from sale of patent right: death, winding up or partnership change) as follows.

(2) For subsection (1) substitute--

" (1) Where a body corporate on which, by reason of the receipt of a capital sum, a charge falls or would otherwise fall to be made under section 524 commences to be wound up--

(a) no sums shall be charged under that section on that body for any accounting period subsequent to that in which the winding up commences; and

(b) the amount falling to be charged for the accounting period in which the winding up commences shall be increased by the total amounts which, but for the winding up, would have fallen to be charged for subsequent accounting periods. "

(3) Omit subsection (2).

(4) In subsection (4)--

(a) in paragraph (a)--

(i) for "chargeable period" substitute "accounting period",

(ii) omit "(or, if he is dead, his personal representatives)", and

(iii) for "his" substitute "its", and

(b) omit paragraph (b) and the word "and" immediately preceding it.

(5) In the sidenote omit "death,".

203 (1) Amend section 526 (relief for expenses) as follows.

(2) In subsection (1)--

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

(b) for "him", in the first place where it occurs, substitute "it",

(d) for "chargeable" substitute "accounting".

(3) Omit subsection (2).

204 In section 527(4) (spreading of royalties over several years) at the end insert "of this Act or by virtue of section 595 of ITTOIA 2005".

205 (1) Amend section 528 (manner of making allowances under section 526) as follows.

(2) Omit subsection (2).

(3) In subsection (3) omit "as that provision applies for the purposes of corporation tax".

(4) In subsection (3A) omit "a person's or" and "479 or".

206 Omit section 529 (patent income to be earned income in certain cases).

207 (1) Amend section 531 (disposals of know-how) as follows.

(2) In subsection (1)--

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

(b) for "him", in both places where it occurs, substitute "the company",

(d) for "all purposes" substitute "the purposes of corporation tax".

(3) For subsection (2) substitute--

" (2) Subject to subsection (3) below, where--

(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b) the know-how is disposed of as part of the disposal of all or part of the trade,

the consideration shall for the purposes of corporation tax be treated as a payment for goodwill in relation both to the person making the disposal and to the person acquiring the know-how (if that person provided the consideration). "

(4) In subsection (3)(a) for "to either of the persons concerned if they so elect" substitute "if, in the case of the person disposing of the know-how being within the charge to corporation tax, that person and the person acquiring the know-how (whether or not within the charge to corporation tax) elect for that subsection not to apply".

(5) After subsection (3) insert--

" (3A) If--

(a) an election is made under section 194 of ITTOIA 2005 (provision corresponding to subsections (2) and (3) of this section for the purposes of income tax), and

(b) the person making the acquisition mentioned in that section is within the charge to corporation tax,

the persons making the election under that section are treated as also making an election under subsection (3) of this section (even though the person disposing of the know-how is not within the charge to corporation tax). "

(6) In subsection (4)--

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

(b) for "him" substitute "the company", and

(7) In subsection (5)--

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

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

(8) Omit subsection (6).

(9) In subsection (7) for "(6)" substitute "(5)".

208 In section 532 (application of Capital Allowances Act) for "529" substitute "528".

209 (1) Amend section 533 (interpretation of intellectual property provisions) as follows.

(2) In subsection (1)--

(a) for "529" substitute "528", and

(b) for the definition of "income from patents" substitute--

" "income from patents" means--

(a) any royalty or other sum paid in respect of the use of a patent; and

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