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

(The document as of February, 2008)

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(a) " , and

(b) at end insert " , or

(b) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum; " .

558 (1) Amend section 392 (Schedule A businesses) as follows.

(2) In subsection (2) for "a Schedule A business" substitute "a UK property business, or a Schedule A business,".

(3) After that subsection insert--

" (2A) If the person is within the charge to income tax in respect of the allowance or charge and he was not carrying on a UK property business at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on such a business in that period and as if--

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business. "

(4) In subsection (3)--

(a) after "the person" insert "is a company within the charge to corporation tax in respect of the allowance or charge and it",

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

(5) In the sidenote for "Schedule A" substitute "UK property and Schedule A".

559 In section 393B(4) (meaning of "qualifying expenditure") after "the profits of a" insert "UK property business or"

560 (1) Amend section 393T (giving effect to allowances and charges) as follows.

(2) In subsection (2) for "a Schedule A business" substitute "a UK property business, or a Schedule A business,".

(3) After that subsection insert--

" (2A) If the person is within the charge to income tax in respect of the allowance or charge and his interest in the flat is not an asset of a UK property business carried on by him at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on a UK property business in that period and as if--

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business. "

(4) In subsection (3)--

(a) for "the person's" substitute "the person is a company within the charge to corporation tax in respect of the allowance or charge and its",

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

561 (1) Amend section 406 (reduction where premium relief previously allowed) as follows.

(2) In subsection (1) for "section 87 of ICTA" substitute "sections 60 to 67 of ITTOIA 2005 or under sections 87 and 87A of ICTA".

(3) In subsection (2) for "section 87 of ICTA" substitute "sections 60 to 67 of ITTOIA 2005 or under sections 87 and 87A of ICTA".

562 In section 454(1)(c) (qualifying expenditure) after "an election under" insert "section 194 of ITTOIA 2005 or under".

563 In section 455(4) (excluded expenditure) after "goodwill under" insert "section 194(3) of ITTOIA 2005 or under".

564 In section 462(3) (disposal values) after "goodwill under" insert "section 194(2) of ITTOIA 2005 or under".

565 In section 479(4) (persons having qualifying non-trade expenditure: income tax) for "taxed under Case VI of Schedule D" substitute "assessed to income tax".

566 In section 481(5)(b) (anti-avoidance: limit on qualifying expenditure) after "in accordance with section" insert "587 of ITTOIA 2005 or section".

567 In section 483(c) (meaning of "income from patents") after "payable under" insert "section 587, 593 or 594 of ITTOIA 2005 or under".

568 In section 488(3)(a) (balancing allowances) for "section 113(1)" to "to trade etc.)" substitute "section 18 of ITTOIA 2005 or section 337(1) of ICTA (effect of company ceasing to trade etc.)".

569 (1) Amend section 529 (giving effect to allowances and charges) as follows.

(2) In subsection (1) for "a Schedule A business" substitute "a UK property business, or a Schedule A business,".

(3) After that subsection insert--

" (1A) If the person entitled or liable to an allowance or charge for a chargeable period is within the charge to income tax in respect of the allowance or charge and he was not carrying on a UK property business at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on such a business in that period and as if--

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business. "

(4) In subsection (2)--

(a) for the words from the beginning to "chargeable period" substitute "If the person entitled or liable to an allowance or charge for a chargeable period is a company within the charge to corporation tax in respect of the allowance or charge and it",

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

570 In section 536(5)(a) (contributions not made by public bodies and not eligible for tax relief)--

(a) in sub-paragraph (i) for "Schedule A" substitute "property", and

(b) in sub-paragraph (v) after "listed in" insert "section 12(4) of ITTOIA 2005 or".

571 In section 558(1)(c) (effect of partnership changes) for the words from "result in" to the end substitute " --

(i) involve all of the persons carrying on the relevant activity before the change permanently ceasing to carry it on, or

(ii) result in the relevant activity being treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.). "

572 (1) Amend section 559 (effect of successions) as follows.

(2) In subsection (1) for paragraph (b) substitute--

" (b) the following condition is met. "

(3) After that subsection insert--

" (1A) The condition is that--

(a) all of the persons carrying on the relevant activity before the succession permanently cease to carry it on, or

(b) the relevant activity is treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.). "

573 In section 577(1) (definitions) in the definition of "property business" after "means" insert "a UK property business,".

574 (1) Amend Schedule 1 (abbreviations and defined expressions) as follows.

(2) In Part 1 in the appropriate place insert--

" ITTOIA 2005

The Income Tax (Trading and Other Income) Act 2005 " .

(3) In Part 2--

(a) in the entry for "ordinary Schedule A business" for "Schedule A" substitute "property",

(b) in the entry for "overseas property business" for "65A(4), 70A(4) and 832(1) of ICTA" substitute "70A(4) and 832(1) of ICTA and Chapter 2 of Part 3 of ITTOIA 2005", and

" UK property business

section 832(1) of ICTA and Chapter 2 of Part 3 of ITTOIA 2005 " .

Finance Act 2002 (c. 23)

575 The Finance Act 2002 is amended as follows.

576 In section 64(1) (adjustment on change of basis) after "to be made for" insert "corporation".

577 (1) Amend Schedule 16 (community investment tax relief) as follows.

(2) In paragraph 27(2) omit "under Case VI of Schedule D".

(3) In paragraph 50(3), for "Chapter 1A of Part 15 of the Taxes Act 1988 (see section 660G(1) and (2))" substitute "Chapter 5 of Part 5 of the Income Tax (Trading and Other Income) Act 2005 (see section 620 of that Act)".

578 (1) Amend Schedule 22 (computation of profits: adjustment of change of basis) as follows.

(2) In paragraph 2, in item 4 of the first step for "tax purposes" substitute "corporation tax purposes".

(3) In paragraph 3(2) for ", profession" to the end substitute "is not regarded as the same if section 337(1) of the Taxes Act 1988 applies (companies beginning or ceasing to carry on trade)."

(4) For paragraph 4 substitute--

" 4 If the amount of the adjustment is positive, it is chargeable to corporation tax and is treated as receipt of the trade, profession or vocation arising on the last day of the first period of account for which the new basis is adopted. "

(5) In paragraph 9--

(a) in sub-paragraph (1) for "person who is chargeable to tax" substitute "company which is chargeable to corporation tax",

(b) in sub-paragraph (2)(c) for "the time allowed" substitute "twelve months of the end of the first accounting period to which the new basis applies",

(d) in sub-paragraph (4) for "tax" substitute "corporation tax", and

(e) in sub-paragraph (5) for "tax", in each place where it occurs, substitute "corporation tax".

(6) Omit paragraphs 11 and 12.

(7) In paragraph 13--

(a) in sub-paragraph (1) for "computed" to the end substitute "computed as if the partnership were a company resident in the United Kingdom", and

(b) omit sub-paragraphs (3), (4) and (6).

(8) Omit paragraph 14.

(9) For paragraph 15 substitute--

" 15 In this Schedule "adjustment charge" means a charge under Part 2 of this Schedule. "

(10) In paragraph 17--

(a) in sub-paragraph (2) omit paragraph (a), and

(b) in sub-paragraph (3) omit "9ZA or" and "personal, trustee or".

579 (1) Amend paragraph 64 of Schedule 25 (transitional provisions concerning loan relationships in the case of authorised unit trusts and open-ended investment companies) as follows.

(2) At the beginning of sub-paragraph (7) insert "Subject to sub-paragraph (9),".

(3) After sub-paragraph (8) insert--

" (9) So far as sub-paragraphs (3) to (6) are capable of applying at any time after 5th April 2005--

(a) they have effect as if any reference in them to a relevant discounted security were a reference to a security that is a deeply discounted security for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 (profits from deeply discounted securities) (see 430 of that Act), and

(b) in those sub-paragraphs--

"redeem" means make a disposal, within the meaning of that Chapter (except by a transfer within the meaning of that Chapter), or convert as mentioned in section 437(1)(c) of that Act, and
"transfer" has the same meaning as in that Chapter. "

580 In Schedule 29 (gains and losses of a company from intangible fixed assets), in paragraph 101(3), for "Chapter 1A of Part 15 of the Taxes Act 1988 (settlements: liability of settlor) (see section 660G(1) and (2) of that Act)" substitute "Chapter 5 of Part 5 of the Income Tax (Trading and Other Income) Act 2005 (see section 620 of that Act)".

Proceeds of Crime Act 2002 (c. 29)

581 The Proceeds of Crime Act 2002 is amended as follows.

582 In section 319(2) (source of income) for "Case 6 of Schedule D" substitute "Chapter 8 of Part 5 of the Income Tax (Trading and Other Income) Act 2005".

583 (1) Amend Schedule 10 (tax) as follows.

(2) In paragraph 2(7) (introductory) at the end insert ", and "ITTOIA 2005" means the Income Tax (Trading and Other Income) Act 2005".

(3) In paragraph 5 (relevant discounted securities)--

(a) for "relevant" substitute "deeply", and

(b) for the words from "Schedule 13" to "c.8)" and "that Schedule" substitute respectively "Chapter 8 of Part 4 of ITTOIA 2005" and "that Chapter".

(4) In paragraph 6 (rights to receive amounts stated in certificates of deposit etc.)--

(a) after "deposit etc.)" insert ", or a right falling within the definition of "deposit rights" in section 552(1) of ITTOIA 2005", and

(b) for the words "of that Act", in the second place where they occur, substitute "of the Taxes Act 1988 or Chapter 11 of Part 4 of ITTOIA 2005".

(5) In paragraph 8 (futures and options)--

(a) for "paragraph 4 of Schedule 5AA to the Taxes Act 1988" substitute "section 562 of ITTOIA 2005", and

(b) for "that Schedule" substitute "Chapter 12 of Part 4 of that Act".

(6) In paragraph 11 (trading stock)--

(a) in sub-paragraph (3) after "1988" insert "or section 173 of ITTOIA 2005" and after "discontinuance" insert "or cessation", and

(b) in sub-paragraph (4) for "that section" substitute "section 100 of the Taxes Act 1988 or (as the case may be) section 174 of ITTOIA 2005".

Income Tax (Earnings and Pensions) Act 2003 (c. 1)

584 The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.

585 In section 6(5) (exception to charge to tax on employment income for income of divers and diving supervisors) for the words from "Case I" to "ICTA" substitute "Part 2 of ITTOIA 2005 (trading income) by virtue of section 15 of that Act".

586 In section 61(1) (application of provisions to workers under arrangements made by intermediaries: interpretation) in the definition of "business" after "includes a" insert "UK property business or".

587 In section 178 (exception for loans where interest qualifies for tax relief)--

(a) in paragraph (c)--

(i) for "under Case I or II of Schedule D" substitute "to tax", and

(ii) after "carried on" insert "wholly or partly in the United Kingdom", and

(b) in paragraph (d) for "under Schedule A in respect of a Schedule A business" substitute "to tax in respect of a UK property business, or a Schedule A business,".

588 In section 180(5) (threshold for benefit of loan to be treated as earnings)--

(a) in paragraph (c)--

(i) for "under Case I or II of Schedule D" substitute "to tax", and

(ii) after "carried on" insert "wholly or partly in the United Kingdom", and

(b) in paragraph (d) for "under Schedule A in respect of a Schedule A business" substitute "to tax in respect of a UK property business, or a Schedule A business,".

589 In section 189(3)(a) (exception where double charge) for "section 677 of ICTA (sums paid to settlor otherwise than as income)" substitute "section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement)".

590 In section 215 for "section 331(1) of ICTA" substitute "section 776(1) of ITTOIA 2005".

591 In section 302(4) (exemption of consular employees' employment income), in the definition of "reciprocal arrangement", for "and section 322 of ICTA" substitute ", sections 646A and 681A of this Act and section 771 of ITTOIA 2005 (relevant foreign income of consular officers and employees)".

592 After section 325 insert--

" 325A Health and employment insurance payments

(1) No liability to income tax in respect of employment income arises on any payment if or to the extent that--

(a) were the payment an annual payment falling within Chapter 7 of Part 5 of ITTOIA 2005, it would be exempt from income tax under section 735 of that Act (health and employment insurance payments), and

(b) it meets conditions A and B.

(2) Condition A is that the payments are made--

(a) to a person ("the employee") who made payments or contributions in respect of premiums under an insurance policy which another person took out wholly or partly for the employee's benefit, or

(b) to the employee's husband or wife.

(3) Condition B is that the payments are attributable on a just and reasonable basis to the payments or contributions in respect of premiums. "

593 In section 357(2) (business entertainment and gifts: exception where employer's expenses disallowed) after "disallowed under" insert "section 45 or 867 of ITTOIA 2005 or under".

594 In Chapter 2 of Part 5, after section 360 insert--

" 360A Social security contributions

(1) No deduction from earnings is allowed under this Chapter for any contribution paid by any person under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992.

(2) But this prohibition does not apply to an employer's contribution (see subsection (3)) which is allowable as a deduction--

(a) under section 336 (the general rule),

(b) under any of sections 337 to 342 (travel expenses), or

(3) For this purpose "an employer's contribution" means--

(a) a secondary Class 1 contribution,

(b) a Class 1A contribution, or

within the meaning of Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992. "

595 In section 394(2) (charge on benefit to which Chapter 2 of Part 6 applies) for "to tax under Case VI of Schedule D" substitute "to income tax".

596 In section 397(1) (certain lump sums: calculation of amount taxed by virtue of section 394) for "Case VI of Schedule D" substitute "subsection (2) of that section".

597 In section 399(1)(b) (employment-related loans: interest treated as paid) omit "under Case VI of Schedule D".

598 In section 476 (charge on occurrence of chargeable event) for subsection (5) substitute--

" (5) If the employee has been divested of the employment-related securities option by operation of law--

(a) income tax is charged on the amount determined under section 478, and

(b) the person liable for any tax so charged is the relevant person in relation to the chargeable event (see section 477(7)). "

599 In section 477(7) (chargeable events) for "(charge under Case VI of Schedule D)" substitute "(charge to income tax)".

600 (1) Amend section 493 (no charge on acquisition of dividend shares) as follows.

(2) Omit subsections (1), (2) and (4).

(3) After subsection (3) insert--

" (3A) For the exemption of such amounts from income tax, see section 770 of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment). "

601 For section 496 (no charge on cash dividend retained for reinvestment) substitute--

" 496 No charge on cash dividend retained for reinvestment

For the exemption from income tax of amounts retained under paragraph 68(2) of Schedule 2 (amount of cash dividend not reinvested), see section 770 of ITTOIA 2005 (amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment). "

602 In section 497(3) (limitations on charges on shares ceasing to be subject to plan) for the words from "as" to the end substitute "under Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan)."

603 In section 502(4)(a) (meaning of "capital receipt" in section 501) at the end insert "or section 770 of ITTOIA 2005 (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment)".

604 (1) Amend section 515 (tax advantages and charges under other Acts) as follows.

(2) In subsection (1) omit paragraph (a).

(3) In subsection (2) omit "and" at the end of paragraph (a).

(4) In subsection (2) at the end of paragraph (b) insert " , and

(c) sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc.)) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment). "

605 In section 516(4) (approved SAYE option schemes), in the definition of "SAYE option scheme", for "approved savings schemes" substitute "approved savings arrangements".

606 (1) Amend section 575 (taxable pension income: foreign pensions) as follows.

(2) In subsection (1) for the words "the amount" onwards substitute "the full amount of the pension income arising in the tax year, but subject to subsections (2) and (3)."

(3) For subsection (2) substitute--

" (2) The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount, unless as a result of subsection (3) the pension income is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(3) That pension income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

(4) But if that pension income arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of condition B and subsection (5)(a).

(5) See also Chapter 4 of that Part (unremittable income). "

607 (1) Amend section 613 (taxable pension income: foreign annuities) as follows.

(2) In subsection (2) for the words "the amount" onwards substitute "the full amount of the annuity arising in the tax year, but subject to subsections (3) and (4)."

(3) For subsections (3) and (4) substitute--

" (3) The full amount of the annuity arising in the tax year is to be calculated on the basis that the annuity is 90% of its actual amount, unless as a result of subsection (4) the annuity is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(4) The annuity is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

(5) But if the annuity arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of condition B and subsection (5)(a).

(6) See also Chapter 4 of that Part (unremittable income). "

608 (1) Amend section 631 (taxable pension income: pre-1973 pensions paid under the Overseas Pensions Act 1973) as follows.

(2) In subsection (1) for the words "the amount" onwards substitute "the full amount of the pension income arising in the tax year".

(3) For subsection (2) substitute--

" (2) The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount.

(3) The pension income is treated as relevant foreign income for the purposes of section 838 of that Act (expenses attributable to collection or payment of relevant foreign income). "

609 (1) Amend section 635 (taxable pension income: foreign voluntary annual payments) as follows.

(2) In subsection (2) for the words "the amount" onwards substitute "the full amount of the pension income arising in the tax year, but subject to subsections (3) and (4)".

(3) For subsection (3) substitute--

" (3) The full amount of the pension income arising in the tax year is to be calculated on the basis that the pension is 90% of its actual amount, unless as a result of subsection (4) the pension income is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(4) That pension income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of that Act (relevant foreign income: remittance basis and deductions and reliefs).

(5) But if that pension income arises in the Republic of Ireland, section 839 of that Act (annual payments payable out of relevant foreign income) applies with the omission of condition B and subsection (5)(a).

(6) See also Chapter 4 of that Part (unremittable income). "

610 After section 644 insert--

" 644A Health and employment insurance payments

(1) No liability to income tax arises in respect of a pension or annuity payment if or to the extent that--

(b) it meets conditions A and B.

(2) Condition A is that the payments are made--

(a) to a person ("the pensioner") who made payments or contributions in respect of premiums under an insurance policy which another person took out wholly or partly for the pensioner's benefit, or

(b) to the pensioner's husband or wife.

(3) Condition B is that the payments are attributable on a just and reasonable basis to the payments or contributions in respect of premiums. "

611 After section 646 insert--

" 646A Foreign pensions of consular employees

(1) No liability to income tax arises in respect of foreign pension income of a consular officer or employee in the United Kingdom for a foreign state if--

(a) Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and

(b) the officer or employee meets conditions A to C.

(2) Condition A is that the officer or employee is not--

(a) a British citizen,

(b) a British overseas territories citizen,

(d) a British Overseas citizen.

(3) Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question.

(4) Condition C is that the officer or employee--

(a) is a permanent employee of that state, or

(b) was not ordinarily resident in the United Kingdom immediately before becoming a consular officer or employee in the United Kingdom of that state.

(5) In this section--

"consular officer or employee" includes any person employed for the purposes of the official business of a consular officer at--
(a)
any consulate,
(b)
any consular establishment, or
(c)
any other premises used for those purposes,
"foreign pension income" means--
(a)
income to which section 573 or 629 applies, and
(b)
income arising from a source outside the United Kingdom to which section 609, 610, 611 or 633 applies; and
"reciprocal agreement" has the same meaning as in section 302.

(6) Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302. "

612 In section 655(2) (structure of Part 10) for the entries relating to sections 84 and 85 of FA 2000 substitute--

" section 781 of ITTOIA 2005 (exemption from income tax for payments under New Deal 50plus);
section 782 of ITTOIA 2005 (exemption from income tax for payments under employment zone programmes). "

613 (1) Amend section 679 (taxable social security income: foreign benefits) as follows.

(2) In subsection (1) for the words "the amount" onwards substitute "the full amount of the social security income arising in the tax year, but subject to subsection (2)."

(3) For subsection (2) substitute--

" (2) That income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs).

(3) See also Chapter 4 of that Part (unremittable income). "

614 After section 681 insert--

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