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Income Tax Act 2007 (c. 3)(The document as of February, 2008) Page 51 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 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66 | P.67 | P.68 | P.69 | P.70 (b) omit the words from "and, in the case of income" to the end. (3) Omit subsections (2A) to (4). (4) Before subsection (5) insert-- " (4A) For the purposes of the Corporation Tax Acts, the trustees are treated as making an annual payment (under deduction of income tax) to each unit holder if an amount is shown in the scheme's accounts as income available for payment to unit holders or for investment. (4B) The amount of an annual payment to a unit holder for a distribution period before the deduction of income tax is its gross amount. (4C) Section 548(2) of ITTOIA 2005 applies for the purpose of calculating the gross amount of an annual payment for a distribution period as it applies for the purpose of calculating the gross amount of income treated as received for a distribution period under Chapter 10 of Part 4 of that Act. (4D) Section 941 of ITA 2007 deals with the deduction of income tax from the gross amount so calculated. " (5) In subsection (5) for "payments are", in both places where it occurs, substitute "payment is". (6) Omit subsections (5A) to (5D) and (7) to (10). 88 (1) Amend section 477A (building societies: regulations for deduction of tax) as follows. (2) Omit subsections (1) to (2A). (3) In subsection (3)-- (a) omit the words from "For any" to "above apply,", and (b) in paragraph (b) omit the words "paid or credited in the year of assessment". (4) Omit subsection (7). (5) For subsection (9) substitute-- " (9) In this section "dividend" includes any distribution (whether or not described as a dividend). " (6) In subsection (10) omit the definitions of "qualifying certificate of deposit", "qualifying deposit right" and "security". (7) In the sidenote for "regulations for deduction of tax" substitute "loan relationships". 89 Omit sections 480A to 482 (deduction of tax by deposit-takers). 90 (1) Amend section 486 (industrial and provident societies and co-operative associations) as follows. (2) Omit subsections (2), (3) and (6). (3) In subsection (7) for "subsection (6)" substitute "section 887(2) of ITA 2007". 91 In section 487(2) (credit unions) for "section 486(6)" substitute "section 887(2) of ITA 2007". 92 (1) Amend section 492 (treatment of oil extraction activities etc for tax purposes) as follows. (2) Omit subsection (2). (3) For subsection (4) substitute-- " (4) In any case where-- (a) in any accounting period a company incurs a loss in activities ("separate activities") which, for that or any subsequent accounting period, are treated by virtue of subsection (1) above as a separate trade for the purposes specified in that subsection, and (b) in any subsequent accounting period any of its trading income is derived from activities ("related activities") which are not part of the separate activities but which, apart from subsection (1) above, would together with those activities constitute a single trade, then, notwithstanding anything in subsection (1) above, the amount of the loss may be set off, in accordance with section 393(1), against so much of its trading income in any subsequent accounting period as is derived from the related activities. " 93 Omit section 504A (letting of furnished holiday accommodation treated as trade for certain income tax purposes). 94 (1) Amend section 505 (charities: general) as follows. (2) In subsection (1)-- (a) in paragraph (a) omit ", or under Parts 2 and 3 of ITTOIA 2005,", (b) in paragraph (c)-- (i) in sub-paragraph (ii) omit the words from "or under Chapter 2, 7, 8 or 10" to the end of the sub-paragraph, (ii) omit sub-paragraphs (iiaa) and (iii), and (iii) for "charity" substitute "charitable company", (c) in paragraph (d) omit "or Chapter 2 of Part 4 of ITTOIA 2005 (interest)", (d) in paragraph (e)-- (i) omit "or Part 2 of ITTOIA 2005 (trading income)", and (ii) for "charity", in each place where it occurs, substitute "charitable company", and (e) in paragraph (f)-- (i) omit "or Part 2 or 5 of ITTOIA 2005 (trading and miscellaneous income)", (ii) for "charity" substitute "charitable company", and (iii) in sub-paragraph (ii) for "charity's" substitute "charitable company's". (3) In subsection (1AA) for "(1)(c)(iiaa) and (iib)" substitute "(1)(c)(iib)". (4) In subsection (1B) for "charity" substitute "charitable company". (5) In subsection (2)-- (a) in paragraph (a), for "a charity" substitute "a charitable company", (b) in paragraph (c) for "tax" substitute "corporation tax", and (c) omit the words from "chargeable to income tax" to "and shall be". (6) In subsection (4)-- (a) for "charity" substitute "charitable company", and (b) for "a chargeable" substitute "an accounting". (7) In subsection (5)-- (a) for "a chargeable" substitute "an accounting", and (b) for "charity's" substitute "charitable company's". (8) In subsection (6) for "a chargeable" in both places where it occurs substitute "an accounting". (9) In subsection (7)-- (a) for "charity's" substitute "charitable company's", and (b) for "charity" in each place where it occurs substitute "charitable company". (10) In the sidenote for "Charities" substitute "Charitable companies". 95 (1) Amend section 506 (charitable and non-charitable expenditure) as follows. (2) In subsection (1) in the appropriate place insert-- " "charitable company" means any body of persons established for charitable purposes only; " . (3) In subsection (2)-- (a) for "chargeable", in both places where it occurs, substitute "accounting", and (b) for "charity" substitute "charitable company". (4) In subsection (3) for "charity" substitute "charitable company". (5) In subsection (4)-- (a) for "chargeable" substitute "accounting", and (b) for "charity", in both places where it occurs, substitute "charitable company". (6) In subsection (5)-- (a) for "chargeable" substitute "accounting", and (b) for "charity" substitute "charitable company". 96 (1) Amend section 506A (transactions with substantial donors) as follows. (2) For "charity" in each place where it occurs substitute "charitable company". (3) In subsection (2)-- (a) for "a chargeable" in both places where it occurs substitute "an accounting", (b) for "the chargeable" in both places where it occurs substitute "the accounting", and (c) for "five chargeable" substitute "five accounting". 97 (1) Amend section 506B (section 506A: exceptions) as follows. (2) In subsections (1) to (4), (7) and (9), for "charity" in each place where it occurs substitute "charitable company". (3) In subsection (5) for "to which section 587B applies" substitute "in respect of which relief is available under section 587B of this Act or section 431 of ITA 2007 (gifts of shares, securities and real property to charities etc)". (4) In subsection (7) for the words after "so far as" substitute " they relate to a donation by the donor, and-- (a) if the donation is made by a company, the payments or benefits do not prevent the donation being a qualifying donation for the purposes of section 339 because of subsection (3B)(b) of that section (restrictions on associated benefits), or (b) if the donation is made by an individual, the payments or benefits do not prevent the donation being a qualifying donation for the purposes of section 416 of ITA 2007 because of subsection (7)(b) of that section (restrictions on associated benefits). " (5) In subsection (8) for the words from "the charity" to the end substitute "a charitable company which owns it (or any part of it)". 98 (1) Amend section 506C (sections 506A and 506B: supplemental) as follows. (2) In subsection (1)-- (a) omit paragraph (d), (b) omit the "or" at the end of paragraph (h), (c) insert "or" at the end of paragraph (i), and (d) after that paragraph insert-- " (j) Chapters 2 and 3 of Part 8 of ITA 2007 (gift aid and gifts of shares, securities and real property). " (3) In subsections (2) and (4) for "charity" substitute "charitable company". (4) In subsection (3) for "a chargeable" substitute "an accounting". (5) In subsection (5) for the words from the beginning to "single charity" substitute "A charitable company and any other charities with which it is connected are to be treated as a single charitable company". 99 In section 507(1) (the National Heritage Memorial fund etc) for "charity" substitute "charitable company". 100 In section 508(1) (scientific research organisations) for "charity" substitute "charitable company". 101 (1) Amend section 510A (tax treatment of European Economic Interest Groupings) as follows. (2) In subsection (2) for "tax in respect of income and gains" substitute "corporation tax". (3) In subsection (3) omit paragraph (b) and the "and" immediately before it. (4) In subsection (6) for "tax in respect of income and gains" substitute "corporation tax". 102 Omit section 515 (exemption for signatories to Operating Agreement for INMARSAT). 103 Omit section 516 (Government securities held by non-resident central banks). 104 In section 517 (exemption for Reserve Bank of India and State Bank of Pakistan) after "exempt from" insert "corporation". 105 In section 519 (exemption for local authorities and local authority associations) for subsection (1) substitute-- " (1) A local authority in the United Kingdom shall be exempt from corporation tax. " 106 (1) Amend section 519A (exemption for Health Service bodies) as follows. (2) For subsection (1) substitute-- " (1) A health service body shall be exempt from corporation tax. " (3) In subsections (3) and (4) for "subsection (1)(b)" substitute "subsection (1)". 107 (1) Amend section 524 (taxation of receipts from sale of patent rights) as follows. (2) In subsection (3)-- (a) omit the "and" immediately after paragraph (a), and (b) omit paragraphs (b) and (c). (3) For subsection (9) substitute-- " (9) If a company is chargeable to corporation tax under subsection (3) above, nothing in subsections (7) and (8) above shall affect the sum representing income tax which is to be deducted under section 910 of ITA 2007 (payments to non-UK residents) from payments of, or of instalments of, the proceeds of the sale. (9A) If any sum representing income tax is deducted under section 910 of ITA 2007, any adjustment necessary to give effect to the provisions of subsection (9) above shall be made by way of repayment of tax. " 108 (1) Amend section 527 (spreading of royalties over several years) as follows. (2) For subsection (1) substitute-- " (1) Where-- (a) a royalty or other sum is paid to a company in respect of the user of a patent, (b) the user extended over a period of six complete years or more, and (c) the payment is one from which a sum representing income tax must be deducted under section 903 of ITA 2007, the company may on the making of a claim require that the corporation tax payable by it by reason of the receipt of that sum shall be reduced so as not to exceed the total amount of corporation tax which would have been payable by it if that royalty or sum had been paid in six equal instalments at yearly intervals, the last of which was paid on the date on which the payment was in fact made. " (3) Omit subsection (4). 109 In section 532 (application of Capital Allowances Act) for "Tax Acts" substitute "Corporation Tax Acts". 110 Omit sections 536 (taxation of royalties where owner abroad), 537 (public lending right) and 537B (taxation of design royalties where owner abroad). 111 In section 539A(8) (conditions for being an excepted group life policy) for paragraph (ii) substitute-- " (ii) "tax advantage" has the meaning given by section 840ZA " . 112 In section 552(5)(f)(i) (information: duty of insurers) for "lower rate" substitute "savings rate". 113 Omit section 555 (entertainers and sportsmen: payment of tax). 114 (1) Amend section 556 (activity treated as trade etc and attribution of income) as follows. (2) After subsection (4) insert-- " (4A) In this section "payment" and "transfer" have the same meanings as in section 13 of ITTOIA 2005. " (3) In subsection (5) omit the words from the beginning to ", and". 115 In section 558 (supplementary provisions) omit subsections (1) to (4). 116 In section 571 (schemes for rationalising industry: cancellation of certificates) after subsection (1) insert-- " (1A) An amount charged to income tax under subsection (1) above is treated for income tax purposes as an amount of income. " 117 (1) Amend section 573 (relief for companies) as follows. (2) In subsection (4) omit the words from "and where" to "chargeable gains". (3) Transpose section 573 as so amended to the beginning of a new Chapter of Part 13 that follows Chapter 5 as Chapter 5A and is entitled "Share loss relief". 118 Omit section 574 (share loss relief for individuals). 119 (1) Amend section 575 (exclusion of relief under section 573 or 574 in certain cases) as follows. (2) In the sidenote omit "or 574". (3) In subsection (1) for "Sections 573 and 574 do" substitute "Section 573 does". (4) In subsection (2)-- (a) for "person" substitute "company", (b) for "him" and, in both places where it occurs, "he" substitute "it", and (c) omit "or 574", in each place where it occurs. (5) In subsection (3) omit "or 574". (6) After subsection (3) insert-- " (4) In this section "new consideration" means consideration in money or money's worth other than consideration of the kind excluded by paragraph (a) or (b) of section 128(2) of the 1992 Act. " (7) Transpose section 575 as so amended to after section 573. 120 (1) Amend section 576 (provisions supplementary to sections 573 to 575) as follows. (2) In the sidenote for "sections 573 to 575" substitute "sections 573 and 575". (3) In subsection (1)-- (a) for "subsections (1A) to (1C)" substitute "subsection (1C)", (b) for "a person" substitute "a company", (c) for "a company" substitute "another company", (d) for "he" and "him", in each place where they occur, substitute "it", and (e) omit "or 574". (4) Omit subsections (1A) and (1B). (5) After subsection (1C) insert-- " (1D) In this section "holding" means any number of shares of the same class held by one company in one capacity, growing or diminishing as shares of that class are acquired or disposed of. For this purpose-- (a) shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange, and (b) subsection (4) of section 104 of the 1992 Act applies as it applies for the purposes of subsection (1) of that section. " (6) Omit subsections (2) to (5). (7) Transpose section 576 as so amended to after section 575. 121 After section 576 insert-- " 576A Qualifying trading companies(1) For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to D. (2) Condition A is that the company either-- (a) meets each of the following requirements on the date of the disposal-- (i) the trading requirement (see section 576B), (ii) the control and independence requirement (see section 576D), (iii) the qualifying subsidiaries requirement (see section 576E), and (iv) the property managing subsidiaries requirement (see section 576F), or (b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company. (3) Condition B is that the company either-- (a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or (b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company. (4) Condition C is that the company-- (a) met the gross assets requirement (see section 576G) both immediately before and immediately after the issue of the shares in respect of which the relief is claimed under this Chapter, and (b) met the unquoted status requirement (see section 576H) at the relevant time within the meaning of that section. (5) Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period-- (a) beginning with the incorporation of the company or, if later, 12 months before the shares in question were issued, and (b) ending with the date of the disposal. " 122 After section 576A insert -- " Qualifying trading companies: the requirements576B The trading requirement(1) The trading requirement is that-- (a) the company, disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or (b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities. (2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades-- (a) the company is treated as a parent company for the purposes of subsection (1)(b), and (b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect. This subsection does not apply at any time after the abandonment of that intention. (3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business. (4) For the purpose of determining the business of a group, activities are disregarded to the extent that they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose. (5) For the purposes of determining the business of a group, activities of a group company are disregarded to the extent that they consist in-- (a) the holding of shares in or securities of a qualifying subsidiary of the parent company, (b) the making of loans to another group company, (c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or (d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended-- (i) that a qualifying trade to be carried on by a group company will be derived, or (ii) that a qualifying trade carried on or to be carried on by a group company will benefit. (6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time. (7) In this section--
(8) In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of "excluded activities" and "qualifying trade") "period B" means the continuous period that is relevant for the purposes of section 576A(3). " 123 After section 576B insert-- " 576C Ceasing to meet the trading requirement because of administration or receivership(1) A company is not regarded as ceasing to meet the trading requirement by reason only of anything done in consequence of the company or any of its subsidiaries being in administration or receivership. This has effect subject to subsections (2) and (3). (2) Subsection (1) applies only if-- (a) the entry into administration or receivership, and (b) everything done as a result of the company concerned being in administration or receivership, is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. (3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 576A(2)-- (a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or (b) the company or any of its subsidiaries is dissolved without winding up. This is subject to subsection (4). (4) Subsection (3) does not apply if -- (a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and (b) the company continues, during the winding up, to be a trading company. (5) References in this section to a company being "in administration" or "in receivership" are to be read in accordance with section 252 of ITA 2007. " 124 After section 576C insert-- " 576D The control and independence requirement(1) The control element of the requirement is that-- (a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise). (2) The independence element of the requirement is that-- (a) the company must not-- (i) be a 51% subsidiary of another company, or (ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise). (3) This section is subject to section 576J(3). (4) In this section--
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