Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(2) Section 74(1) of this Act is not to apply in relation to the 2007-08 loss.

(3) This paragraph applies to professions and vocations as it applies to trades.

Sideways relief: trade leasing allowances given to individuals

23 (1) This paragraph applies if--

(a) a person makes a loss ("the 2006-07 loss") in a trade in the tax year 2006-07,

(b) relief under section 380 or 381 of ICTA is not available for the 2006-07 loss (or for part of it) because of section 384(6) of that Act,

(d) (apart from this paragraph) relief under section 64 or 72 of this Act is not available for the 2007-08 loss (or for part of it) because of section 75 of this Act,

(e) the basis period for the tax year 2007-08 overlaps with the tax year 2006-07, and

(f) ignoring this Act, section 384(6) of ICTA would not have prevented relief under section 380 or 381 of that Act being available for the 2007-08 loss (or for the part).

(2) Section 75 of this Act is not to apply in relation to the 2007-08 loss (or to the part).

Sideways relief: dealings in commodity futures

24 Section 81 does not apply if the arrangements mentioned in that section were made wholly before 6 April 1976.

Terminal trade loss relief

25 (1) This paragraph applies for the purposes of section 89 if the final tax year is the tax year 2007-08, 2008-09 or 2009-10.

(2) Relief for the terminal losses in question can be given for one or more of the tax years 2004-05, 2005-06 and 2006-07 (depending on which tax year is the final tax year).

(3) If relief for the terminal losses is to be given for one or more of those tax years, the relief is given in the way in which it would have been given had it been given under section 388 of ICTA ignoring this Act (and section 91 of this Act is to be read accordingly).

Post-cessation trade loss relief and post-cessation property relief

26 The events covered by section 98(5) (including as applied by section 125(6)(b)) include events--

(a) which occur before the tax year 2007-08, and

(b) in relation to which no claim is made under section 109A of ICTA.

Reliefs for limited partners not to exceed contribution to the firm

27 (1) The relief covered by section 104(5) includes--

(a) relief given for a loss as a result of section 380 or 381 of ICTA,

(b) any amount that, ignoring this Act, would have been included in the individual's aggregate amount in relation to the trade for the purposes of section 117 of ICTA as a result of paragraph 22(3) of Schedule 2 to CAA 2001, and

(2) The income covered by section 104(6) includes amounts treated as received as a result of the application of section 74 of FA 2005.

Reliefs for members of LLPs not to exceed contribution to the LLP

28 (1) The relief covered by section 107(6) includes--

(a) relief given for a loss as a result of section 380 or 381 of ICTA, and

(b) the treatment of a loss as an allowable loss by virtue of section 72 of FA 1991.

(2) The income covered by section 107(7) includes amounts treated as received as a result of the application of section 74 of FA 2005.

Members of LLPs: carry-forward of losses

29 (1) The amounts of loss covered by section 109(1)(b) include amounts of loss which, as a result of section 117 of ICTA (as applied by section 118ZB of that Act), are not--

(a) relieved under section 380 or 381 of ICTA, or

(b) treated as an allowable loss by virtue of section 72 of FA 1991.

(2) In section 109(3)--

(a) references to section 109 include references to section 118ZD of ICTA,

(b) references to sideways relief include references to relief under section 380 or 381 of ICTA, and

(c) references to capital gains relief include references to the treatment of a loss as an allowable loss by virtue of section 72 of FA 1991.

Reliefs for non-active partners not to exceed contribution to the firm

30 (1) The relief covered by section 110(5) includes--

(a) relief given for a loss as a result of section 380 or 381 of ICTA, and

(b) the treatment of a loss as an allowable loss by virtue of section 72 of FA 1991.

(2) Sub-paragraph (1) is subject to paragraph 33.

(3) The income covered by section 110(6) includes amounts treated as received as a result of the application of section 74 of FA 2005.

Non-active partners: carry-forward of losses

31 (1) The amounts of loss covered by section 113(1)(b) include amounts of loss which, as a result of section 118ZE of ICTA, are not--

(a) relieved under section 380 or 381 of ICTA, or

(b) treated as an allowable loss by virtue of section 72 of FA 1991.

(2) In section 113(4)--

(a) references to section 113 include references to section 118ZI of ICTA,

(b) references to sideways relief include references to relief under section 380 or 381 of ICTA, and

(c) references to capital gains relief include references to the treatment of a loss as an allowable loss by virtue of section 72 of FA 1991.

(3) In section 113(8) the reference to section 109 includes a reference to section 118ZD of ICTA.

Restriction on reliefs for non-active partners: pre-10 February 2004 events

32 In Chapter 3 of Part 4 any reference to an early tax year in relation to an individual carrying on a trade does not include a tax year the basis period for which ends before 10 February 2004.

33 (1) Sub-paragraphs (2) to (9) set out relief which is not covered by section 110(5) (relevant relief).

(2) Relief is not covered if it is given for a loss made in a trade in a tax year the basis period for which ends before 10 February 2004.

(3) Sub-paragraphs (4) to (9) apply if the individual carried on a trade in a tax year the basis period for which includes 10 February 2004.

(4) Relief given for a loss made in the trade is not covered so far as the loss derives from an allowance or deduction within sub-paragraph (5).

(5) An allowance or deduction is within this sub-paragraph if it is--

(a) a capital allowance in respect of expenditure incurred before 10 February 2004 which is treated as an expense of the trade, or

(b) a deduction in respect of expenditure incurred before 10 February 2004 under section 42(1) of F(No.2)A 1992 or any of sections 138 to 140 of ITTOIA 2005.

(6) For the purposes of sub-paragraph (4) the amount of a loss that derives from an allowance or deduction within sub-paragraph (5) is determined on a just and reasonable basis.

(7) Relief given for a loss made in the trade is not covered so far as it is given for the pre-announcement allowance in relation to the trade.

(8) "Pre-announcement allowance" is to be read in accordance with section 118ZJ(4) and (6) to (8) of ICTA.

(9) For that purpose, references to the first restricted year are to be read as references to the tax year mentioned in sub-paragraph (3).

If sub-paragraph (3) covers more than one tax year, the first restricted year is the first of the tax years covered.

(10) Sub-paragraph (11) applies for the purpose of applying the restriction in section 110(4) (relevant relief not to exceed contribution to the firm) in relation to an individual if before 10 February 2004 the individual contributed an amount of capital to the firm.

(11) That amount of capital is reduced (but not below nil)--

(a) by the amount of relief (if any) to be left out of account for the purposes of section 110(5) as a result of paragraph 32 or this paragraph (ignoring sub-paragraph (4)), and

(b) by any pre-announcement allowance so far as--

(i) relief has not been given for the allowance, and

(ii) had relief been given for the allowance, the relief would have to be left out of account for the purposes of section 110(5)(b) as mentioned in paragraph (a).

Regulations under section 114

34 (1) The provision which may be made in regulations under section 114 does not include provision affecting the amount of relief that may be given for a loss made in a trade that is not a post-1 December 2004 loss (as determined in accordance with section 795).

(2) The repeal by this Act of sections 118ZN and 118ZO of ICTA (or any provision inserting or amending, or affecting the application of, those sections) does not affect the power of the Commissioners for Her Majesty's Revenue and Customs to make regulations under section 118ZN having effect before the tax year 2007-08.

Application of existing regulations under sections 114 and 802

35 (1) After the commencement of sections 114 and 802, the Partnerships (Restrictions on Contributions to a Trade) Regulations 2005 (S.I. 2005/2017) have effect as if made under those sections.

(2) The Regulations so have effect subject to the following modifications.

(3) They have effect as if in regulation 2--

(a) in the definition of "bank" for "section 840A of ICTA" there were substituted "section 991 of ITA 2007",

(b) for the definition of "contribution to the relevant trade" there were substituted--

" "capital contribution"--

(a) for the purposes of section 114 of ITA 2007, means the contribution to the firm for the purposes of section 104 or 110 of that Act or the contribution to the LLP for the purposes of section 107 of that Act, and

(b) for the purposes of section 802 of ITA 2007, has the meaning given by section 801(3) of that Act; " , and

" "ITA 2007" means the Income Tax Act 2007; " .

(4) They have effect as if in regulations 3 to 6 for "contribution to the relevant trade", wherever occurring, there were substituted "capital contribution".

(5) They have effect as if--

(a) in regulation 3(a) for "section 118ZN of ICTA" there were substituted "section 114(1)(a) and (b) of ITA 2007", and

(b) in regulation 3(b) for the words from "section 119" to the end there were substituted "section 797 of ITA 2007 as mentioned in section 802(2) of that Act".

(6) They have effect as if in regulation 6(c) for "the trade" there were substituted "a trade".

Losses in an employment or office

36 (1) This paragraph applies for the purposes of section 128 if the loss is made in the tax year 2007-08.

(2) Relief for the loss can be given for the tax year 2006-07.

(3) Sub-paragraphs (4) and (5) apply if relief for the loss is claimed for the tax year 2006-07.

(4) If relief is to be given, the relief is given in the way it would have been given had it been given under section 380(1)(b) of ICTA ignoring this Act (and section 129 of this Act is to be read accordingly).

(5) Section 72 of FA 1991 applies as if the relief had been claimed under section 380(1)(b) of ICTA.

Loss relief against miscellaneous income: Case VI losses

37 (1) This paragraph applies if a person makes a loss in any transaction--

(a) which was of such a nature that, if any profits had arisen from it, the person would have been liable to income tax under Case VI of Schedule D for any tax year before the tax year 2005-06, and

(b) which did not fall within section 34, 35 or 36 of ICTA.

(2) So far as relief for the loss has not previously been given, the loss (or the unused part of it) is to be treated as a loss available for deduction in accordance with section 153.

Part 6 Losses on disposal of shares

Qualifying trading companies

38 (1) In relation to shares issued before 17 March 2004, section 134(2)(a) applies with the omission of sub-paragraph (iv) and the "and" immediately before it.

(2) In relation to shares issued before 6 April 1998, section 134 applies with the substitution for subsections (2) to (5) of--

" (2) Condition A is that the company either--

(a) is a trading company on the date of the disposal, or

(b) has ceased to be a trading company at a time which is not more than 3 years before that date and has not since that time been an excluded company or an investment company.

(3) Condition B is that the company either--

(a) has been a trading company for a continuous period of 6 years ending on that date or at that time, or

(b) has been a trading company for a shorter continuous period ending on that date or at that time and has not since the beginning of that period been an excluded company or an investment company.

(4) Condition C is that none of the shares in the company has been listed on a recognised stock exchange at any time in the period--

(a) beginning with the incorporation of the company or, if later, 12 months before the date on which the shares in question were subscribed for, and

(b) ending with the date on which the shares are disposed of.

(5) Condition D is that the company has been UK resident throughout the period from its incorporation until the date of the disposal. "

(3) In relation to shares issued before 7 March 2001, section 134(4)(b) applies with the substitution for "at the relevant time" of "throughout the relevant period".

(4) For the purposes of sub-paragraph (3), shares that were issued--

(a) on or after 5 April 1998, but

(b) before 7 March 2001,

are treated as having been issued on or after 7 March 2001 in respect of any part of the relevant period which falls on or after that date.

(5) Sub-paragraphs (1) to (4) apply in relation to section 576A of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 134.

Disposals of new shares

39 (1) In relation to new shares issued before 6 April 2007, section 136(2) applies with the omission of "This is subject to section 145(3)."

(2) In this paragraph "new shares" is to be read in accordance with section 145.

The trading requirement

40 (1) In relation to shares issued before 6 April 2007, section 137 applies with the following modifications--

(a) the omission of subsection (2),

(b) in subsection (5), the omission of paragraph (d)(ii) and the "or" immediately before it, and

(2) In relation to shares issued before 6 April 2000, section 137 applies with the substitution for the definition of "research and development" in subsection (7) of--

" "research and development" means any activity which is intended to result in a patentable invention (within the meaning of the Patents Act 1977) or in a computer program. "

(3) Section 137 does not apply in relation to shares issued before 6 April 1998.

(4) Sub-paragraphs (1) to (3) apply in relation to section 576B of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 137.

Ceasing to meet trading requirement because of administration or receivership

41 (1) In relation to shares issued before 17 March 2004, section 138 applies with the following modifications--

(a) in subsection (1), the omission of "merely" and the substitution for "the company or any of its subsidiaries" of "its",

(b) in subsection (2)(b), the omission of "concerned",

(d) in subsection (3)(b), the omission of "or any of its subsidiaries", and

(e) in subsection (4), the omission of "is", in the second place where it occurs.

(2) In relation to an administration order the petition for which was presented before 15 September 2003, section 138(2) applies with the substitution for paragraph (a) of--

" (a) the making of the order in question, and " .

(3) In relation to shares issued before 21 March 2000, section 138 applies with the omission of subsections (1) and (2).

(4) In the application of sub-paragraph (3) on or after 21 March 2000, shares--

(a) that were issued on or after 6 April 1998 but before 21 March 2000, and

(b) to which EIS relief or relief under Schedule 5B to TCGA 1992 was attributable immediately before 21 March 2000,

are treated as having been issued on or after 21 March 2000.

(5) Section 138 does not apply in relation to shares issued before 6 April 1998.

(6) Sub-paragraphs (1) to (5) apply in relation to section 576C of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 138.

The control and independence requirement

42 (1) In relation to shares issued before 6 April 2007, section 139(1)(a) applies with the omission of "of the company".

(2) In relation to shares issued before 21 March 2000, section 139 applies with the following modifications--

(a) the substitution for subsections (1) to (3) of--

" (1) The control element of the requirement is that--

(a) the company must not control (or together with any person connected with it control) another company or have a 51% subsidiary, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a).

(2) The independence element of the requirement is that--

(a) the company must not be under the control of another company (or another company and any other person connected with that company) or be a 51% subsidiary of another company, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a).

(3) This section is subject to section 145(3); and nothing in subsection (1) prevents the company having one or more qualifying subsidiaries. " , and

(b) in subsection (4) the omission of the definition of "arrangements" and, in the definition of "control", the omission of "in subsection (1)(a)".

(3) In the application of sub-paragraph (2) on or after 21 March 2000, shares--

(a) that were issued on or after 6 April 1998 but before 21 March 2000, and

(b) to which EIS relief or relief under Schedule 5B to TCGA 1992 was attributable immediately before 21 March 2000,

are treated as having been issued on or after 21 March 2000.

(4) Section 139 does not apply in relation to shares issued before 6 April 1998.

(5) Sub-paragraphs (1) to (4) apply in relation to section 576D of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 139.

(6) For the purposes of sub-paragraph (5), sub-paragraph (2) applies with the following modifications--

(a) in paragraph (a), the substitution for "section 145(3)" of "section 576J(3)", and

(b) in paragraph (b), the insertion at the end of "and paragraph (b)".

The qualifying subsidiaries requirement

43 (1) Section 140 does not apply in relation to shares issued before 6 April 1998.

(2) Sub-paragraph (1) applies in relation to section 576E of ICTA (which makes corresponding provision for the purposes of corporation tax) as it applies in relation to section 140.

The property managing subsidiaries requirement

44 (1) Section 141 does not apply in relation to shares issued before 17 March 2004.

(2) Sub-paragraph (1) applies in relation to section 576F of ICTA (which makes corresponding provision for the purposes of corporation tax) as it applies in relation to section 141.

The gross assets requirement

45 (1) In relation to shares issued before 6 April 2006, section 142 applies with the substitution in subsections (1) and (2)--

(a) of "£15 million" for "£7 million", and

(b) of "£16 million" for "£8 million".

(2) For the purposes of sub-paragraph (1) shares issued on or after 6 April 2006 to a person who subscribed for them before 22 March 2006 are treated as having been issued before 6 April 2006.

(3) Section 142 does not apply in relation to shares issued before 6 April 1998.

(4) Sub-paragraphs (1) to (3) apply in relation to section 576G of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 142.

The unquoted status requirement

46 (1) In relation to shares issued before 7 March 2001, section 143 applies with the following modifications--

(a) the substitution for subsection (1) of--

" (1) The unquoted status requirement is that the company must be an unquoted company throughout the relevant period. " ,

(b) the substitution for subsection (2) of--

" (2) If the company is an unquoted company at the time when any shares are issued, it is not treated for the purposes of this section as ceasing to be an unquoted company in relation to those shares at any subsequent time merely because any shares, stocks, debentures or other securities of the company are at that time--

(a) listed on an exchange designated by an order made for the purposes of section 184(3)(b), or

(b) dealt in by any means designated by an order made for the purposes of section 184(3)(c),

if the order was made after the shares were issued. " , and

" "the relevant period" means the period--

(a) beginning with the incorporation of the company or, if later, the date one year before the issue of the shares in question, and

(b) ending with the date of the disposal. "

(2) For the purposes of sub-paragraph (1)(a) and (c), shares that were issued--

(a) on or after 5 April 1998, but

(b) before 7 March 2001,

are treated as having been issued on or after 7 March 2001 in respect of any part of the relevant period which falls on or after that date.

(3) In the application of sub-paragraph (1)(b) on or after 7 March 2001, shares--

(a) that were issued on or after 5 April 1998 but before 7 March 2001, and

(b) to which EIS relief or relief under Schedule 5B to TCGA 1992 was attributable immediately before 7 March 2001,

are treated as having been issued on or after 7 March 2001.

(4) Section 143 does not apply in relation to shares issued before 6 April 1998.

(5) Sub-paragraphs (1) to (4) apply in relation to section 576H of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 143.

(6) For the purposes of sub-paragraph (5), sub-paragraph (1) applies with the insertion after "section 184(3)(b)" and "section 184(3)(c)" of "of ITA 2007".

Power to amend requirements by Treasury order

47 (1) Section 144 does not apply in relation to shares issued before 6 April 1998.

(2) Sub-paragraph (1) applies in relation to section 576I of ICTA (which makes corresponding provision for the purposes of corporation tax) as it applies in relation to section 144.

Relief after an exchange of shares for shares in another company

48 (1) In relation to new shares issued before 6 April 2007, section 145 applies with--

(a) the substitution for subsection (1)(e) of--

" (e) before the issue of the new shares, the Commissioners for Her Majesty's Revenue and Customs have, on the application of the new company or the old company, notified that company that the exchange of shares--

(i) will be effected for genuine commercial reasons, and

(ii) will not form part of any such scheme or arrangement as is mentioned in section 137(1) of TCGA 1992. " , and

(b) the omission of subsection (3)(a).

(2) Section 145 does not apply in relation to shares issued before 6 April 1998.

(3) Sub-paragraphs (1)(a) and (2) apply in relation to section 576J of ICTA (which makes corresponding provision for the purposes of corporation tax) as they apply in relation to section 145.

(4) For the purposes of sub-paragraph (3), sub-paragraph (1) applies with the substitution for "TCGA 1992" of "the 1992 Act".

Substitution of new shares for old shares

49 (1) Section 146 does not apply in relation to shares issued before 6 April 1998.

(2) Sub-paragraph (1) applies in relation to section 576K of ICTA (which makes corresponding provision for the purposes of corporation tax) as it applies in relation to section 146.

Interpretation of Chapter

50 (1) In relation to shares issued before 6 April 1998, section 151 applies with the following modifications--

(a) in the definition of "excluded company" in subsection (1), the substitution for "in land, in commodities or futures or in shares, securities or other financial instruments" of "in shares, securities, land, trades or commodity futures",

(b) in subsection (7), the insertion after "excluded company" of "or is a non-UK resident".

(2) Sub-paragraph (1) applies in relation to section 576L of ICTA (which makes corresponding provision for the purposes of corporation tax) as it applies in relation to section 151.

(3) For the purposes of sub-paragraph (2), sub-paragraph (1)(b) has effect with the substitution for "subsection (7)" of "subsection (5)".

Meaning of "qualifying subsidiary"

51 (1) In relation to shares issued before 17 March 2004, section 191 (as applied by sections 137(7), 139(4), 140(2) and 142(4)) applies with the following modifications--

(a) in subsection (1), the insertion at the end of "and, except as provided by subsection (3), continue to be met until the time that is relevant for the purposes of section 134(2)",

(b) in subsection (2), the substitution for paragraph (a) of--

" (a) the relevant company, or another of its subsidiaries, possesses at least 75% of the issued share capital of, and at least 75% of the voting power in, the subsidiary,

(aa) the relevant company, or another of its subsidiaries, would in the event of a winding up of the subsidiary, or in any other circumstances, be beneficially entitled to receive at least 75% of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary,

(ab) the relevant company, or another of its subsidiaries, is beneficially entitled to at least 75% of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary, " ,

(c) in paragraph (c) of subsection (2), the substitution for "either of the conditions in paragraphs (a) and (b)" of "any of the conditions in paragraphs (a), (aa), (ab) and (b)",

(d) in subsection (3), the substitution for "any other company" of "the relevant company" and the substitution for the words from "the winding up or dissolution" to the end of that subsection of--

" (a) the winding up or dissolution is for genuine commercial reasons, and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax,

(b) the net assets, if any, of the subsidiary or, as the case may be, the relevant company are distributed to its members, or dealt with as bona vacantia, before the time that is relevant for the purposes of section 134(2) or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up. " ,

(e) the omission of subsection (4),

(f) in subsection (5), the substitution for "arrangements are in existence for" of "of" and the insertion after "another subsidiary" of "within the continuous period that is relevant for the purposes of section 134(3)",

(g) in subsection (5)(a), the omission of "to be",

(h) in subsection (5)(b), the substitution for "is not to be" of "not", and

(i) after subsection (5), the insertion of--

" (6) The persons who are equity holders of a subsidiary, and the percentage of the assets of a subsidiary to which an equity holder would be entitled, is to be determined in accordance with paragraphs 1 and 3 of Schedule 18 to ICTA, taking--

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