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Income Tax (Trading and Other Income) Act 2005 (c. 5)(The document as of February, 2008) Page 54 Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 (b) the amount invested in shares or securities of the company under the policy or contract exceeds 10% of the total amount of premiums paid up to that time under the policy or contract. Other definitions128 (1) In this Part of this Schedule "security" has the same meaning as in section 132(3)(b) of TCGA 1992. (2) Any references in this Part of this Schedule to shares or securities include a reference to any option, warrant or other right to acquire shares or securities. (3) In sub-paragraph (3) "warrant" has the same meaning as in paragraph 14 of Schedule 2 to FISMA 2000. Part 8 Miscellaneous incomeIntellectual property: contributions to expenditure not made by public bodies nor eligible for tax relief129 Section 604 applies with the omission of subsection (3)(b) in relation to contributions made before 27th July 1989. Certain telecommunication rights130 Chapter 4 of Part 5 does not apply to an indefeasible right to use a telecommunications cable system ("IRU") acquired before 21st March 2000. 131 (1) That Chapter also does not apply to an IRU acquired by a person on or after that date (directly or indirectly) from an associate or an associated company if the associate or associated company acquired the IRU before that date. (2) In sub-paragraph (1)--
(b) in relation to any other person, means a company of which that person has control within the meaning of subsections (2) to (6) of that section. Income treated as income of settlor: exception for pension income132 (1) Subject to sub-paragraph (4), section 627 applies before 6th April 2006 with the following amendments. (2) In subsection (2)(c) for "a relevant pension scheme" substitute "an approved pension arrangement". (3) For subsection (3) substitute-- " (3) In subsection (2) an "approved pension arrangement" means-- (a) an approved scheme or exempt approved scheme, (b) a relevant statutory scheme, (c) a retirement benefits scheme set up by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees, (d) a contract or scheme which is approved under Chapter 3 of Part 14 of ICTA (retirement annuities), (e) a personal pension scheme which is approved under Chapter 4 of that Part, (f) an annuity purchased for the purpose of giving effect to rights under a scheme falling within any of paragraphs (a) to (c) and (e), or (g) any pension arrangements of any description prescribed by regulations made under section 11(2)(h) of the Welfare Reform and Pensions Act 1999 (c. 30) or Article 12(2)(h) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11)). (4) In subsection (3) "approved scheme", "exempt approved scheme", "relevant statutory scheme" and "retirement benefits scheme" have the same meaning as in Chapter 1 of Part 14 of ICTA (retirement benefit schemes). " (4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 627 of this Act for that section as amended by sub-paragraphs (2) and (3) above. Amounts treated as income of settlor: income paid to unmarried minor children of settlor133 (1) In relation to income which-- (a) arises under a settlement made or entered into before 9th March 1999, and (b) does not arise directly or indirectly from funds provided on or after that date, section 629 applies with the omission from subsection (1) of paragraph (b) and the word "or" before that paragraph. (2) Where subsection (1) of section 629 applies for a tax year only in relation to such income as is mentioned in sub-paragraph (1), that section applies with the substitution for subsections (3) and (4) of-- " (3) Income paid to or for the benefit of a child of a settlor is not treated as provided in subsection (1) for a tax year in which the total amount paid to or for the benefit of that child which but for this subsection would be so treated does not exceed £100. " (3) Where subsection (1) of section 629 applies for a tax year in relation to such income as is mentioned in sub-paragraph (1) above and other income, that section applies with the substitution for subsection (4) of-- " (4) In subsection (3) a child's "relevant settlement income" means income which (apart from that subsection) would be treated as income of the settlor under subsection (1) and which-- (a) so far as consisting of such income as is mentioned in paragraph 133 of Schedule 2, is income paid to or for the benefit of the child, and (b) so far as consisting of other income, is income paid to or for the benefit of, or otherwise treated as income of, the child. " (4) Any apportionment required for the purposes of sub-paragraph (1)(b) is to be made on a just and reasonable basis. Amounts treated as income of settlor: capital sums paid to settlor by trustees of settlement134 (1) In relation to any case which involves any previous tax years before 1995-96, subsection (3) of section 635 applies in accordance with sub-paragraphs (2) and (3) below. (2) So far as that subsection applies in relation to those previous tax years, for paragraph (c) substitute-- " (c) so much of any income arising under the settlement in any previous year which has not been distributed as is shown to consist of income which has been treated as income of the settlor by virtue of section 671, 672, 674, 674A or 683 of ICTA, (d) any income arising under the settlement in any previous year which has been treated as the income of the settlor by virtue of section 673 of ICTA, (e) any sums paid by virtue or in consequence of the settlement, to the extent that they are not allowable, by virtue of section 676 of ICTA, as deductions in computing the settlor's income for any previous year, (f) any sums paid by virtue or in consequence of the settlement in any previous year which have been treated as the income of the settlor by virtue of section 664(2)(b) of ICTA, (g) any sums included in the income arising under the settlement as amounts which have been or could have been apportioned to a beneficiary as mentioned in section 681(1)(b) of ICTA, and " . (3) For paragraph (d) of that subsection substitute-- " (h) an amount equal to the sum of tax at the rate applicable to trusts on-- (i) the total amount of income arising under the settlement in that year and any previous year which has not been distributed, less (ii) the total amount of the income and sums referred to in paragraph (c) (in relation to tax years 1995-96 onwards) and paragraphs (c), (d), (e), (f) and (g) as substituted by paragraph 134 of Schedule 2 (in relation to tax years before 1995-96). " (4) In relation to any sum paid before 6th April 1995, subsection (3) of section 634 applies with the substitution of "in one of the events specified in section 673(3) of ICTA" for paragraphs (a) and (b). (5) Subsection (5)(a) of section 634 does not apply if the direction or assignment was given or made before 6th April 1981. Amounts treated as income of settlor: capital sums paid to settlor by body connected with settlement135 In relation to any capital sum paid to the settlor before tax year 1995-96, section 641 applies with the insertion after subsection (6) of-- " (6A) Where a capital sum is paid to the settlor in a tax year by a body corporate connected with the settlement in that year it is to be assumed until the contrary is shown that an associated payment of an amount not less than that of the capital sum has been made to that body by the trustees of the settlement. " Beneficiaries' income from estates in administration: basic amounts136 (1) Sub-paragraph (2) applies if any previous tax year to which regard is to be had for the purposes of section 665 (assumed income entitlement) is a tax year before 2005-06 (an "old tax year"). (2) In relation to the old tax year, the reference in step 4 in subsection (1) of that section to basic amounts relating to the person's absolute interest in respect of which the person is liable to income tax for that year is to be taken as a reference to the amount deemed to have been paid to that person as income for that year in respect of that interest by virtue of section 696 of ICTA. (3) Sub-paragraph (4) applies if one or more of the absolute interests referred to in section 671(1) (successive absolute interests) was held in one or more old tax years. (4) The reference in section 671(2)(b) to the basic amounts relating to any previous such interest includes a reference to the amounts deemed to have been paid to the previous holder as income for the old tax years in respect of that interest by virtue of section 696 of ICTA. (5) Sub-paragraph (6) applies if any of the limited interests referred to in section 672(1)(d) (successive interests: assumed income entitlement of holder of absolute interest following limited interest) was held in one or more old tax years. (6) The reference in section 672(4) to the basic amounts relating to any previous such interest includes a reference to the amounts deemed to have been paid to the holders of any such interests as income for the old tax years in respect of those interests by virtue of section 695 of ICTA. (7) In the case of a UK estate, references in this paragraph to the amounts deemed to have been paid are references to the amounts that would be deemed to have been paid apart from sections 695(4)(a) and 696(4) of ICTA (grossing up). Beneficiaries' income from estates in administration: income treated as bearing income tax137 A sum treated as part of the aggregate income of an estate by virtue of section 547(1)(c) of ICTA (gains from life insurance contracts etc.) as the result of an event that occurred before 6th April 2004 is treated for the purposes mentioned in section 680 of this Act as bearing income tax at the basic rate. Part 9 Exempt incomeUlster savings certificates138 In the case of certificates acquired before 27th July 1981, section 693(5) applies with the substitution for "the Department of Finance and Personnel" of "the Treasury". SAYE interest139 Any scheme which was certified as mentioned in section 326(2)(c), (3)(b) or (4)(b) of ICTA before 1st December 1994 is treated as a certified SAYE savings arrangement for the purposes of Chapter 4 of Part 6 of this Act. 140 A European authorised institution arrangement is not an institutional arrangement for the purposes of Chapter 4 of Part 6 if the arrangement was established before 2nd May 1995. 141 (1) Neither-- (a) the Treasury specification rules, nor (b) the Treasury authorisation rules, apply to any scheme which was certified as mentioned in section 326(3)(b), (4)(b) or (5)(b) of ICTA before 31st July 1995. (2) In sub-paragraph (1)--
Venture capital trust dividends: shares acquired before the tax year 2004-05142 In the case of dividends paid in respect of shares acquired before the tax year 2004-05, Chapter 5 of Part 6 (venture capital trust dividends) applies as if the references in section 709(4) (annual acquisition limit) to £200,000 were references to £100,000. Purchased life annuity payments: old determinations concerning capital elements143 (1) Any determination in relation to an annuity as to the amount of the capital element that was made under Chapter 5 of Part 14 of ICTA before 6th April 2005 and any decision on appeal that was so made against such a determination have effect on and after that date, so far as is required for the purposes of this Act, as a determination or decision as to the extent to which annuity payments made under the annuity are within section 717(1) (exemption for part of purchased life annuity payments) in accordance with section 719 (extent of exemption under that section). (2) And a notification of such a determination or appeal or of an alteration of such a determination has effect accordingly. Purchased life annuity payments: carry forward of excess capital elements144 (1) This paragraph applies if, in the case of an annuity to which section 656(2) of ICTA applied immediately before 6th April 2005, the total of the amounts determined in accordance with that section to be capital elements in respect of the annuity payments that arose before that date (and accordingly not to be annual payments for income tax purposes) exceeded the total of those annuity payments. (2) The amount of the excess is to be added to the fixed sum mentioned in section 719(4) for the first payment that arises after 5th April 2005. Purchased life annuity payments: penalty for false statements145 (1) Section 723(7) (liability to penalty for false statements and representations to obtain exemption under Chapter 7 of Part 6) does not apply (and section 658(5) of ICTA continues to apply) to any statement or representation made before 6th April 2005, despite the fact that it relates to the tax year 2005-06 or any subsequent tax year. (2) Section 723(7) (liability to penalty for false statements and representations to obtain exemption under Chapter 7 of Part 6) applies (and section 658(5) of ICTA does not apply) to any statement or representation made on or after 6th April 2005, despite the fact that it relates to a tax year before the tax year 2005-06. Certain annual payments by individuals146 (1) Sections 727 (exemption for certain annual payments by individuals) and 730 (exemption for foreign maintenance payments) do not apply to-- (a) any payment falling due before 16th March 1988, or (b) any payment falling due on or after that date but before 6th April 2000 to which this paragraph applies. (2) Paragraph (b) of sub-paragraph (1) applies to a payment made in pursuance of an existing obligation (within the meaning of section 36(3) of FA 1988) unless it meets any of conditions A to E. (3) Condition A is that the payment is treated as income of the payer under Chapter 5 of Part 5 as a result of section 624 or 629. (4) Condition B is that the payment fell due from a husband to a wife or a wife to a husband at a time after 5th April 1990 when they were living together. (5) Condition C is that an election is duly made under section 39 of FA 1988 in respect of the payment. (6) Condition D is that the payment fell due on or after 6th April 1994 and is made-- (a) in pursuance of an obligation within section 36(4)(a) to (c) of FA 1988 that is an obligation under-- (i) an order made by a court, (ii) a written or oral agreement, or (iii) a deed executed for giving effect to an agreement, and (b) for the benefit, maintenance or education of a person (whether or not the person to whom the payment is made) who attained the age of 21 on or before the day on which the payment fell due but after 5th April 1994. (7) Condition E is that-- (a) the payment is made in pursuance of an obligation within section 36(4)(a) of FA 1988 (existing obligations under certain court orders), (b) the payment is made for the benefit, maintenance or education of a person (whether or not the person to whom the payment is made) who attained the age of 21 before 6th April 1994, and (c) section 38 of FA 1988 (treatment of certain maintenance payments under existing obligations) does not apply to the payment. Annual payments for non-taxable consideration147 Section 729 (exemption for payments for non-taxable consideration) applies in the case of an annuity granted before 30th March 1977-- (a) with the substitution in subsection (1) of "condition B, C or D" for "condition B or C", and (b) with the substitution of the following subsections for subsection (5)-- " (5) Condition D is that the payment is a payment under an annuity charged on an interest in settled property and granted by an individual to a company-- (a) whose business then consisted wholly or mainly in the acquisition of interests in settled property, or (b) which was then carrying on life assurance business in the United Kingdom. (6) In the application of subsections (4) and (5) to Scotland, the references in those subsections to settled property are to be read as references to property held in trust. " Periodical payments of personal injury damages etc.148 (1) Subject to sub-paragraphs (4) and (5), sections 731, 733 and 734 apply with the modifications in sub-paragraphs (2) and (3). (2) In section 731 (periodical payments of personal injury damages)-- (a) for subsection (2) substitute-- " (2) This subsection applies to periodical payments made in pursuance of-- (a) a court order making a final or interim award of damages in respect of personal injury, (b) an agreement settling a claim or action for such damages, or (c) an agreement for a payment on account of the damages that may be awarded in such an action. " , (b) in subsection (3)(b) for the words from "agreement" to the end of the paragraph substitute "or agreement as is mentioned in subsection (2) or a subsequent agreement", and (c) omit subsection (6). (3) In sections 733(a) and 734(1)(a)(i) for "agreement, undertaking" substitute "or agreement". (4) The modifications in sub-paragraphs (2) and (3) do not apply if an order has been made under section 110(1) of the Courts Act 2003 (c. 39) (commencement) making provision for section 100(2) and (3) of that Act to come into force on a day earlier than 6th April 2005. (5) The power in section 110(1) of that Act includes power to make provision in accordance with which the modifications in sub-paragraphs (2) and (3) do not apply on or after a day appointed by the order that is later than 5th April 2005. Part 10 Foster-care relief149 (1) This paragraph applies if-- (a) a disposal event is treated as occurring in relation to an individual under paragraph 17(2) of Schedule 36 to FA 2003 (foster-care relief: capital allowances), (b) the individual is a relevant individual for the tax year 2004-05, (c) the individual has a chargeable period which corresponds to the income period for the individual's foster-care receipts in that tax year (and therefore the chargeable period is a relevant chargeable period), and (d) the next chargeable period of the individual is not a relevant chargeable period. (2) Subsection (4) of section 825 applies (despite anything in subsection (1) of that section to the contrary) as if the reference to the first subsequent chargeable period which is not a relevant chargeable period were to the period mentioned in sub-paragraph (1)(d). Part 11 Foreign income: special rulesRelevant foreign income charged on remittance basis: income arising before the tax year 2005-06150 A claim may be made under section 831 (claim for relevant foreign income to be charged on the remittance basis) for relevant foreign income to be charged in accordance with section 832 for the tax year 2005-06 or any later tax year, despite that income having arisen in a tax year before the tax year 2005-06; and sections 832 to 834 apply accordingly. Relevant foreign income charged on remittance basis: delayed remittances151 (1) The fact that income arose in a tax year before 2005-06 does not prevent-- (a) a claim being made in respect of it under section 835(1) (relief for delayed remittances), or (b) section 835(5) applying as respects the tax year in which the income arose. (2) But sub-paragraphs (3) to (5) apply if-- (a) such a claim is made in respect of any income ("the delayed income"), (b) the delayed income arose in the tax year 1996-97 or an earlier tax year, (c) the basis year for that year is a different year, and (d) that basis year is not the basis year for two tax years. (3) Section 835(5) does not apply and the delayed income is to be treated as if it were income received in the United Kingdom in that basis year. (4) In this paragraph "basis year", in relation to tax chargeable for any tax year in respect of any income, means the year by reference to which the amount of the income chargeable finally falls to be calculated. (5) This paragraph does not affect which year is to be taken as the basis year for calculating tax chargeable for any tax year. Relief for backdated pensions charged on arising basis152 The fact that the earlier year referred to in subsections (1)(b) and (2) of section 840 (relief for backdated pensions charged on the arising basis) is a tax year before 2005-06 does not prevent-- (a) a claim being made under that section, or (b) such adjustments (by way of repayment of tax, assessment or otherwise) as are necessary to give effect to that section being made as respects such a tax year. Unremittable income that arose before the tax year 2005-06153 (1) A claim may be made under section 842 (claim for relief on unremittable income) for the tax year 2005-06 or any later tax year, despite the income having arisen in a tax year before 2005-06. (2) Without prejudice to paragraph 4 of this Schedule, section 843 (withdrawal of relief) applies for the tax year 2005-06 or any later tax year, despite the income having arisen originally in a tax year before the tax year 2005-06 (whether the claim in respect of it was made under section 584 of ICTA (relief for unremittable overseas income) or section 842 of this Act). (3) Sub-paragraph (4) applies if an appeal against an assessment for the tax year 2005-06 or a later tax year involves a question as to the operation of section 584 of ICTA or Chapter 4 of Part 8 of this Act as respects income that arose in a tax year before 2005-06. (4) Section 31D of TMA 1970 (appeals: election to bring appeal before Special Commissioners) applies with the omission of-- (a) paragraph (b) of subsection (2), (b) the word "or" preceding that paragraph, and (c) subsections (3) to (7) (by virtue of which such an election may be disregarded if the General Commissioners so direct). Part 12 Other provisionsUnpaid remuneration: non-trades and non-property businesses154 (1) This paragraph applies for the purposes of section 865. (2) In relation to a period of account ending before 27th November 2002, an amount charged in the accounts in respect of employees' remuneration includes an amount which is held by an intermediary with a view to its becoming employees' remuneration. (3) In relation to a period of account ending on or after 27th November 2002, an amount charged in the accounts in respect of employees' remuneration includes an amount-- (a) in respect of employee benefit contributions (within the meaning of sections 38 to 44) made before that date, and (b) which is held by an intermediary, with a view to its becoming employees' remuneration. Employee benefit contributions: non-trades and non-property businesses155 Section 866 does not apply to deductions that would otherwise be allowed-- (a) for a period ending before 27th November 2002, or (b) in respect of employee benefit contributions made before that date. 156 (1) Subject to sub-paragraph (3), section 866 applies before 6th April 2006 with the following amendment. (2) In subsection (5)-- (a) for paragraphs (b) and (c) and the word "or" at the end of paragraph (c) substitute-- " (b) contributions under a retirement benefits scheme within the meaning of Chapter 1 of Part 14 of ICTA (see section 611 of that Act), (c) contributions under a personal pension scheme approved under Chapter 4 of that Part (see section 630 of that Act), or " , and (b) omit "For the purposes of paragraph (c)" to the end. (3) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 866(5) of this Act for that subsection as amended by sub-paragraph (2) above. Crime-related payments: non-trades and non-property businesses157 Section 870(2)(b) does not apply to expenditure which was incurred before 1st April 2002. Apportionment of miscellaneous profits or losses to tax years before tax year 2005-06158 (1) This paragraph applies if-- (a) a relevant period of account begins before 6th April 2005 and ends on or after that date, and (b) in order to arrive at the profits or losses of a tax year before the tax year 2005-06 it is necessary to apportion the profits or losses of the relevant period of account to any part of that period falling in a tax year before the tax year 2005-06. (2) A period of account is a "relevant period of account" if-- (a) section 871 applies to the period of account, and (b) the profits or losses of the part of the period of account falling in the tax year 2005-06 are calculated in accordance with this Act. (3) The profits or losses of the relevant period of account-- (a) are calculated in accordance with this Act (and therefore, to that extent, this Act has effect for tax years before the tax year 2005-06), and (b) may be apportioned in accordance with section 871 to any part of the period of account falling in a tax year before the tax year 2005-06. General deduction rules159 Neither-- (a) the inclusion of rules in section 582 for calculating income chargeable to tax under section 579, nor (b) the inclusion of rules in sections 612 and 617(3) to (6) for calculating income chargeable to tax under Chapter 3 or 4 of Part 5, prevents the continued operation of similar rules of law in relation to the calculation of other income (including profits) chargeable to tax under other provisions of this Act. Section 820 of ICTA160 Section 820 of ICTA (application of Income Tax Acts from year to year) applies to this Act as if this Act were in force on the day before 6th April 2005. Amendments of Part 4 of FA 2004 (pension schemes etc.)161 The amendments made by paragraphs 644 to 651 and 655 of Schedule 1 come into force at the same time as the enactments which they amend. Section 884 SCHEDULE 3 Repeals and revocations
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