Office of Public Sector Information
SCHEDULE 1 continued PART 2 continued
(3) In subsection (6C) for “Schedule 13 to the Finance Act 1996 (relevant discounted securities)” substitute “Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see section 433)”.
434 (1) Amend section 142 (capital gains on stock dividends) as follows.
(2) In subsection (1) for the words from “section 249” to “that section” substitute “section 410(2), (3) or (4) of ITTOIA 2005 applies”.
(3) In subsection (3) for “the appropriate amount in cash (within the meaning of section 251(2) to (4) of the Taxes Act)” substitute “the cash equivalent of the share capital in accordance with section 412 of ITTOIA 2005”.
435 After section 148 insert—
(1) Profits and gains that are chargeable under Chapter 12 of Part 4 of ITTOIA 2005 are not to be brought into account for the purposes of capital gains tax, except where section 148B applies.
(2) Where—
(a) losses are sustained by a person from a disposal, and
(b) had profits or gains arisen to the person from the disposal, they would be chargeable under that Chapter,
the losses are not to be brought into account for the purposes of capital gains tax, except where section 148C applies.
(1) This section deals with how this Act applies where profits or gains arising to a person from such a disposal as is referred to in section 564(4) of ITTOIA 2005 (“the deemed disposal”) are chargeable to tax under Chapter 12 of Part 4 of that Act.
(2) Amounts taken into account or allowable as deductions in calculating the profits or gains are not to be excluded from any calculation made for the purposes of this Act as a result of section 37 or 39.
(3) For the purposes of this Act the amount of the consideration for the acquisition by the person of any asset the person disposes of by the future running to delivery or the exercise of the option is increased by the amount of the profits or gains chargeable under Chapter 12 of Part 4 of ITTOIA 2005.
(4) Any increase made as a result of subsection (3) is to be disregarded in calculating any indexation allowance.
(5) For the purposes of this Act the amount of the consideration for the acquisition of any asset acquired by the person by means of the future running to delivery or the exercise of the option is increased by the amount of the profits or gains chargeable under Chapter 12 of Part 4 of ITTOIA 2005.
(6) If the deemed disposal is a disposal of an option by the grantor, for the purposes of subsections (3) to (5) any determination—
(a) whether profits or gains arose to the grantor from that disposal, and
(b) of the amount of those profits or gains,
is to be made as if the deemed disposal and the disposal by which the option was granted were a single transaction.
(7) Section 565 of ITTOIA 2005 (interpretation of section 564 of that Act) applies for the purposes of this section as it applies for the purposes of section 564 of that Act.
(1) This section deals with how this Act applies where a loss sustained by a person from such a disposal as is referred to in section 564(4) of ITTOIA 2005 (“the deemed disposal”) is brought into account for the purposes of section 392 of ICTA (losses).
(2) Amounts taken into account or allowable as deductions in calculating that loss are not to be excluded from any calculation made for the purposes of this Act as a result of section 37 or 39.
(3) If the deemed disposal is a disposal of an option by the grantor, for the purposes of subsections (4) and (5) any determination—
(a) whether the grantor sustained a loss from that disposal, and
(b) of the amount of that loss,
is to be made as if the deemed disposal and the disposal by which the option was granted were a single transaction.
(4) If the loss from the deemed disposal equals or is less than—
(a) the amount of the consideration for the acquisition of any asset acquired by the person sustaining the loss by means of the future running to delivery or the exercise of the option, or
(b) the amount of the consideration for the acquisition by that person of any asset the person disposes of by the future running to delivery or the exercise of the option,
for the purposes of this Act the amount of that consideration is reduced by the amount of the loss.
(5) If the loss from the deemed disposal exceeds the amount of that consideration—
(a) that consideration is reduced to nil, and
(b) an amount equal to the excess is treated for the purposes of this Act as a chargeable gain accruing to the person sustaining the loss on the appropriate occasion.
(6) In a case where the consideration mentioned in subsection (4)(a) is reduced under subsection (5)(a), the appropriate occasion is the first occasion after the acquisition mentioned in subsection (4)(a) when there is a disposal of the asset in question.
(7) In a case where the consideration mentioned in subsection (4)(b) is so reduced, the appropriate occasion is the disposal the person sustaining the loss makes by the future running to delivery or the exercise of the option, as the case may be.
(8) In subsection (6) the reference to a disposal of the asset in question includes a reference to anything that would be such a disposal but for section 116(10) or 127.
(9) In subsections (6) and (7) the references to a disposal include references to a disposal which, in accordance with this Act, would (apart from subsection (5)(b)) be a disposal on which neither a gain nor a loss accrues.
(10) Section 565 of ITTOIA 2005 (interpretation of section 564) applies for the purposes of this section as it applies for the purposes of section 564.”
436 In section 151 (personal equity plans) for subsections (2) and (2A) substitute—
“(2) The provisions of Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans), except section 694(1) and (2), shall apply in relation to regulations made under subsection (1) as they apply to regulations made under section 694(1), but with the substitution for any reference to income tax of a reference to capital gains tax.”
437 In section 151A(6) (venture capital trusts: reliefs) for the words from “in accordance” to the end of the subsection substitute “as references to shares not acquired within the limit in section 709(4) of ITTOIA 2005; and the question whether shares are acquired within that limit shall be determined as it is for the purposes of Chapter 5 of Part 6 of that Act.”
438 After section 151B insert—
(1) This section applies if—
(a) as a result of any scheme or arrangement which has an unallowable purpose, the circumstances are, or might have been, as mentioned in paragraph (a), (b) or (c) of section 449(2) of ITTOIA 2005,
(b) under the scheme or arrangement, a payment falls to be made otherwise than in respect of the acquisition or disposal of a strip, and
(c) as a result of that payment or the circumstances in which it is made, a loss accrues to any person.
(2) The loss shall not be an allowable loss.
(3) For the purposes of this section a scheme or arrangement has an unallowable purpose if the main benefit, or one of the main benefits that might have been expected to result from, or from any provision of, the scheme or arrangement (apart from section 449 of ITTOIA 2005 and this section) is—
(a) the obtaining of a tax advantage by any person, or
(b) the accrual to any person of an allowable loss.
(4) The reference in subsection (1)(b) to the acquisition or disposal of a strip shall be construed as if it were in Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see, in particular, sections 437 and 445 of that Act for the meaning of “disposal” and “acquisition” and section 444 of that Act for the meaning of “strip”).
(5) In subsection (3)(a) “tax advantage” has the meaning given by section 709(1) of the Taxes Act.
(6) This section applies to losses accruing on or after 17th March 2004.”
439 In section 156(4) (assets of Class 1) after “Taxes Act” insert “or section 19 of ITTOIA 2005”.
440 In section 198(5)(b) (replacement of business assets used in connection with oil fields) after “the Taxes Act” insert “or defined as “oil-related activities” in section 16(2) of ITTOIA 2005”.
441 (1) Amend section 241 (furnished holiday lettings) as follows.
(2) For subsection (2) substitute—
“(2) For the purposes of this section as it applies to capital gains tax the “commercial letting of furnished holiday accommodation” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.
For the purposes of this section as it applies to corporation tax in respect of chargeable gains the “commercial letting of furnished holiday accommodation” has the meaning given by section 504 of the Taxes Act.”
(3) In subsection (3)(a) for the words from “Schedule A business” to “Kingdom” substitute “UK property business (within the meaning of the Taxes Act), or any Schedule A business (within the meaning of that Act), which consists of, or so far as it consists of, the commercial letting of furnished holiday accommodation”.
442 In section 251(8)(b) (general provisions concerning debts) for “relevant discounted security for the purposes of Schedule 13 to that Act if paragraph 3(2)(c) of that Schedule” substitute “deeply discounted security for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 if section 432(2) of that Act”.
443 In section 254(1)(c) (definition of “a qualifying loan” for relief for debts on qualifying corporate bonds) for “relevant” and “Schedule 13 to the Finance Act 1996” substitute respectively “deeply” and “Chapter 8 of Part 4 of ITTOIA 2005”.
444 After section 261 insert—
(1) This section applies if—
(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and
(b) the know-how is disposed of as part of the disposal of all or part of the trade.
(2) If, as a result of section 194 of ITTOIA 2005, the consideration is treated for income tax purposes as—
(a) a capital receipt for goodwill (in relation to the person disposing of the know-how), or
(b) a capital payment for goodwill (in relation to the person acquiring the know-how),
the consideration is treated for capital gains tax purposes in the same way.
(3) This section has effect as if it were contained in Chapter 14 of Part 2 of ITTOIA 2005.”
445 (1) Amend section 271 (miscellaneous exemptions) as follows.
(2) In subsection (1)(f) for “section 322 of the Taxes Act” substitute “section 771 of ITTOIA 2005”.
(3) In subsection (4)—
(a) for “bonus”, in both places, substitute “interest”,
(b) for “section 326 or 326A of the Taxes Act (certified contractual savings schemes and tax-exempt special savings accounts)” substitute “section 702 of ITTOIA 2005 (certified SAYE savings arrangements)”,
(c) for “savings scheme”, in the first place where it occurs, substitute “savings arrangement”,
(d) for “certified contractual savings scheme” substitute “certified SAYE savings arrangement”,
(e) for “scheme”, in the last place where it occurs, substitute “arrangement”, and
(f) at end insert—
“In this subsection “certified SAYE savings arrangement” has the meaning given by section 703 of ITTOIA 2005.”
446 In section 286(3) (connected persons: interpretation) for “Chapter 1A of Part XV of the Taxes Act (see section 660G(1) and (2) of that Act)” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.
447 (1) Amend section 288 (interpretation) as follows.
(2) In subsection (1) after the definition of “ITEPA 2003” insert—
““ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;”.
(3) After subsection (7) insert—
“(7A) In the application of this Act to Scotland “surrender” includes renunciation.”
448 In Schedule A1 (application of taper relief), in paragraph 17(6), for “section 660G(1) and (2) of the Taxes Act” substitute “section 620 of ITTOIA 2005”.
449 In Schedule 1 (application of exempt amount and reporting limits in cases involving settled property), in paragraph 2(7), for “section 660G(1) and (2) of the Taxes Act” substitute “section 620 of ITTOIA 2005”.
450 In paragraph 13(7)(h) of Schedule 5B (enterprise investment scheme: re-investment)—
(a) in sub-paragraph (i) after “trade or profession” insert “carried on wholly or partly in the United Kingdom”, and
(b) in sub-paragraph (ii) for the words from “in computing” to the end substitute “in calculating for tax purposes the profits of that trade or profession”.
451 (1) Amend Schedule 8 (leases) as follows.
(2) In paragraph 5—
(a) in sub-paragraph (1) after “that Act)” insert “or by virtue of any of sections 277 to 281 of ITTOIA 2005 as a receipt of a UK property business (within the meaning of that Act)”,
(b) in sub-paragraph (2) after “that Act)” insert “or by virtue of any of sections 277 to 281 of ITTOIA 2005 as a receipt of a UK property business (within the meaning of that Act)”,
(c) in sub-paragraph (3) after “that Act)” insert “or by virtue of section 284 or 285 of ITTOIA 2005 (sale of land with right to reconveyance or leaseback) as a receipt of a UK property business (within the meaning of that Act),” and
(d) for sub-paragraph (5) substitute—
“(5) References in sub-paragraphs (1) and (2) above to a premium include references to—
(a) a premium deemed to have been received under subsection (4) or (5) of section 34 of the Taxes Act (which correspond to paragraph 3(2) and (3) of this Schedule),
(b) a sum that becomes payable by the tenant under the terms subject to which a lease is granted in lieu of the whole or a part of the rent for any period,
(c) a sum that becomes payable by the tenant under the terms subject to which a lease is granted as consideration for the surrender of the lease, and
(d) a sum that becomes payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of any of the terms of a lease.”
(3) In paragraph 6—
(a) for sub-paragraph (1) substitute—
“(1) If—
(a) under section 37(4) of the Taxes Act (allowance where, by the grant of a sublease, a lessee has converted a capital amount into a right to income) a person is to be treated as paying additional rent in consequence of having granted a sublease, or
(b) under section 292 of ITTOIA 2005 a person is to be treated as incurring expenses in consequence of having granted a sublease,
the amount of any loss accruing to the person on the disposal by way of the grant of the sublease shall be reduced by the total amount of rent which the person is thereby treated as paying, or the total amount of expenses which the person is thereby treated as incurring, over the term of the sublease (and without regard to whether relief is thereby effectively given over the term of the sublease), but not so as to convert the loss into a gain, or to increase any gain.”,
(b) in sub-paragraph (2) at the end insert “or by virtue of section 282 of ITTOIA 2005 (assignments for profit of lease granted at undervalue) as a receipt of a UK property business (within the meaning of that Act)”, and
(c) in sub-paragraph (3) after “that paragraph” insert “or under section 301 or 302 of ITTOIA 2005 on a claim under that section,”.
(4) For paragraph 7 substitute—
“7 If—
(a) under section 34(2) and (3) of the Taxes Act any amount is brought into account by virtue of section 34(2) and (3) of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act) which is or is treated as carried on by any person, or
(b) under section 277 of ITTOIA 2005 any amount is brought into account by virtue of section 278 of that Act as a receipt of a UK property business (within the meaning of that Act) which is carried on by any person,
that person shall be treated for the purposes of the computation of any gain accruing to him as having incurred at the time the lease was granted expenditure of that amount (in addition to any other expenditure) attributable to the asset under section 38(1)(b).”
(5) In paragraph 7A after “Schedule A business” insert “or UK property business”.
452 The Finance (No. 2) Act 1992 is amended as follows.
453 (1) Amend section 40A (revenue nature of expenditure on master versions of films) as follows.
(2) In subsection (1)—
(a) for “the purposes of the Tax Acts” substitute “corporation tax purposes”, and
(b) after “section 40D below” insert “or section 143 of ITTOIA 2005 (corresponding income tax provision)”.
(3) In subsection (2) for “the purposes of the Tax Acts” substitute “corporation tax purposes”.
(4) In the definition of “expenditure of a revenue nature” in subsection (4)(a) after “chargeable to” insert “corporation”.
454 (1) Amend section 40B (allocation of expenditure to periods) as follows.
(2) In subsection (1) for “person” substitute “company within the charge to corporation tax”.
(3) In subsection (2) after “section 40D below” insert “or section 143 of ITTOIA 2005”.
(4) In subsection (3)(b) for “up for a period—” to the end substitute “up for a period, the accounting period of the company.”
(5) In subsection (6) for “made—” to the end substitute “made not later than two years after the end of the relevant period to which the claim relates.”
(6) In subsection (7)(b) at the end insert “or section 135 of ITTOIA 2005 (income tax provision corresponding to this section)”.
455 In section 40C(1) (cases where section 40B does not apply) after “section 42 below” insert “or under any of sections 138 to 140 of ITTOIA 2005 (corresponding income tax provisions)”.
456 (1) Amend section 40D (election for sections 40A and 40B not to apply) as follows.
(2) In subsection (1)(a) after “this section” insert “or under section 143 of ITTOIA 2005”.
(3) In subsection (2)(a)(i) for “a person who carries” substitute “a company within the charge to corporation tax carrying”.
(4) In subsection (4) for “given—” to the end substitute “given not later than two years after the end of the relevant period in which the master version of the film is completed.”
(5) In subsection (7) at the end insert “or any of that expenditure is deducted under any of sections 137 to 140 of ITTOIA 2005 (corresponding income tax provisions)”.
457 (1) Amend section 41 (relief for preliminary expenditure) as follows.
(2) In subsection (1)—
(a) for “tax purposes”, in the first place where it occurs, substitute “the purposes of corporation tax”,
(b) for “a person” substitute “a company within the charge to corporation tax”,
(c) for “that person” substitute “the company”,
(d) for “him” substitute “it”, and
(e) after “section 40D above” insert “or section 143 of ITTOIA 2005”.
(3) In subsection (6) for “made—” to the end substitute “made not later than two years after the end of the relevant period in which the expenditure to which it relates becomes payable.”
(4) In subsection (7)—
(a) after “this section” insert “or section 137 of ITTOIA 2005 (corresponding income tax provision)”, and
(b) for “tax purposes” substitute “the purposes of corporation tax”.
458 (1) Amend section 42 (relief for production or acquisition expenditure) as follows.
(2) In subsection (1)—
(a) for “tax purposes” substitute “the purposes of corporation tax”,
(b) for “a person” substitute “a company”,
(c) for “that person” substitute “the company”,
(d) after “section 40B above” insert “or section 135 of ITTOIA 2005”, and
(e) after “section 40D above” insert “or section 143 of ITTOIA 2005”.
(3) In subsection (4)—
(a) in paragraph (b) after “section 41 above” insert “or section 137 of ITTOIA 2005”,
(b) in paragraph (c) after “this section” insert “or any provision of Chapter 9 of Part 2 of ITTOIA 2005”.
(4) In subsection (6) for “shall be made—” to the end substitute “—
(a) shall be made not later than two years after the end of the relevant period to which the claim relates, and
(b) shall be irrevocable.”
(5) In subsection (7) after “section 40B above” insert “or section 135 of ITTOIA 2005”.
459 In section 43(1) after the definition of “expenditure of a revenue nature” insert—
““ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,”.
460 Omit section 59 (furnished accommodation).
461 Omit Schedule 10 (furnished accommodation).
462 The Finance Act 1993 is amended as follows.
463 In section 112(7) (employers' pension contributions) in the definition of “basis period” after “Schedule D” insert “or under Part 2 of the Income Tax (Trading and Other Income) Act 2005”.
464 (1) Amend section 171 (Lloyd’s underwriters etc: taxation of income tax profits) as follows.
(2) In subsection (2) for paragraphs (a) and (b) substitute—
“(a) the aggregate of those profits shall be chargeable to tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 as the profits of a trade carried on in the United Kingdom; and
(b) accordingly, no part of those profits shall be treated as relevant foreign income, or be charged to tax under any other Part of that Act or any Part of the Income Tax (Earnings and Pensions) Act 2003;”.
(3) In subsection (2B) for “section 231(1) of the Taxes Act 1988” substitute “section 397(1) of the Income Tax (Trading and Other Income) Act 2005”.
465 In paragraph 13(4) of Schedule 19 (Lloyd’s underwriters etc: repayment of tax deducted etc. from investment income) after “others)” insert “and section 749 of the Income Tax (Trading and Other Income) Act 2005 (exemption of interest paid under repayment supplements) so far as it relates to interest paid under section 824 of the Taxes Act 1988”.
466 (1) Amend Schedule 20A (Lloyd’s underwriters: conversion to limited liability underwriting) as follows.
(2) In paragraph 2(2) for “Schedule D” substitute “Part 2 of the Income Tax (Trading and Other Income) Act 2005”.
(3) In paragraph 7(2) for “Schedule D” substitute “Part 2 of the Income Tax (Trading and Other Income) Act 2005”.
467 The Pension Schemes Act 1993 is amended as follows.
468 In section 158(4) (disclosure of information between government departments etc.)—
(a) after “carrying on or have carried on” insert “wholly or partly in the United Kingdom”, and
(b) after “chargeable to tax under” insert “Part 2 of the Income Tax (Trading and Other Income) Act 2005 or”.
469 The Pension Schemes (Northern Ireland) Act 1993 is amended as follows.
470 In section 154(4) (disclosure of information between government departments etc.)—
(a) after “carrying on or have carried on” insert “wholly or partly in the United Kingdom”, and
(b) after “chargeable to tax under” insert “Part 2 of the Income Tax (Trading and Other Income) Act 2005 or”.
471 The Finance Act 1994 is amended as follows.
472 (1) Amend Schedule 20 (changes for facilitating self-assessment: transitional provisions and savings) as follows.
(2) Omit paragraphs 1 to 10.
(3) In paragraph 11—
(a) in sub-paragraph (1) omit “Subject to paragraph 12(2) below,”,
(b) in sub-paragraph (3) for “under Case VI of Schedule D” substitute “to income tax”, and
(c) in sub-paragraph (3) at the end insert “, and the person shall be liable for any tax so chargeable”.
(4) Omit paragraphs 12 and 13.
473 In paragraph 26 of Schedule 24 (vesting in successor company of the British Railways Board of liability for loans to that Board not to affect directions by the Treasury under section 581 of ICTA) for “section 581 of the Taxes Act 1988” substitute “section 755 of the Income Tax (Trading and Other Income) Act 2005”.
474 In paragraph 17(1) of Schedule 4 to the Coal Industry Act 1994 (vesting in successor company of liability for loans not to affect directions by the Treasury under section 581 of ICTA) for “section 581 of the 1988 Act” substitute “section 755 of the Income Tax (Trading and Other Income) Act 2005”.
475 The Finance Act 1995 is amended as follows.
476 Omit section 56 (foreign life policies etc).
477 In section 73(1)(a) (venture capital trusts: regulations) after “1992” insert “or Chapter 5 of Part 6 of the Income Tax (Trading and Other Income) Act 2005”.
478 In section 123 (prevention of exploitation of transitional provisions) for “2(2) and (4), 4(2) and 6(2)(a) and (4) of Schedule 20 to the Finance Act 1994” substitute “52 and 53 of Schedule 2 to the Income Tax (Trading and Other Income) Act 2005”.
Income Tax (Trading and Other Income) Act 2005