Office of Public Sector Information

(3) Omit subsection (5).

539 (1) Amend section 115 (prohibited allowances: connected persons) as follows.

(2) In subsection (1) for paragraph (c) and the word “and” at the end of that paragraph substitute—

“(c) the transaction (or each of the transactions) is one—

(i) which involved all of the persons carrying on the qualifying activity before the transaction permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity carried on by the person making the disposal was not treated as continuing under section 114(1) or 343(2) of ICTA (effect of partnership changes involving companies or of company reconstructions), and”.

(3) Omit subsection (3).

540 (1) Amend section 122 (short-term leasing by buyer, lessee etc) as follows.

(2) In subsection (2) for paragraph (c) substitute—

“(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which—

(i) there was a change in the persons carrying on the qualifying activity which did not involve all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was treated as continuing under section 114(1) of ICTA (effect of partnership changes involving companies);”.

(3) Omit subsection (3).

541 (1) Amend section 125 (other qualifying purposes) as follows.

(2) In subsection (3) for paragraph (c) substitute—

“(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which—

(i) there was a change in the persons carrying on the qualifying activity which did not involve all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was treated as continuing under section 114(1) of ICTA (effect of partnership changes involving companies).”

(3) Omit subsection (5).

542 In section 154(3) (further registration requirement) for paragraph (b) substitute—

“(b) the only changes in the persons carrying it on between the time that B does so and the time that A or a person connected with A does so are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

543 In section 155(1) (changes in the persons carrying on qualifying activity) for paragraph (b) substitute—

“(b) the only changes in the persons carrying on the qualifying activity since the shipowner carried it on are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

544 In section 156 (connected persons) for subsection (2) substitute—

“(2) The condition is that the only changes in the persons carrying on the qualifying activity since A carried it on are changes—

(a) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(b) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

545 In section 162(2) (ring fence trade a separate qualifying activity)—

(a) in paragraph (a), after “fall within” insert “the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within”, and

(b) in paragraph (b), after “as a result of” insert “section 16(1) of ITTOIA 2005 or”.

546 In section 248 (ordinary Schedule A businesses)—

(a) for “Schedule A” substitute “property”, and

(b) in the side-note for “Schedule A” substitute “property”.

547 In section 252 (mines, transport undertakings etc)—

(a) after “is a concern listed in” insert “section 12(4) of ITTOIA 2005 or”, and

(b) after “the profits of the concern under” insert “Chapter 2 of Part 2 of ITTOIA 2005 or, as the case may be, under”.

548 In section 258(4) (special leasing: income tax) for “taxed under Case VI of Schedule D” substitute “assessed to income tax”.

549 (1) Amend section 263 (qualifying activities carried on in partnership) as follows.

(2) In subsection (1) for paragraph (c) substitute—

“(c) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

(a) the change does not involve all of the partners permanently ceasing to carry on the qualifying activity, or

(b) the change does not result in the qualifying activity being treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.).”

550 (1) Amend section 265 (successions: general) as follows.

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

“(b) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

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

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

551 In 268(1) (successions by beneficiaries) for paragraph (b) and the word “and” at the end of that paragraph substitute—

“(b) all of the persons carrying on the qualifying activity before the succession permanently cease to carry it on, and”.

552 In section 282 (buildings outside the United Kingdom) for “applicable to Case I of Schedule D” substitute “that apply in calculating trade profits for income tax purposes or that apply to Case I of Schedule D for corporation tax purposes”.

553 In section 326(1) (interpretation of section 325) in the definition of “premium”—

(a) after “corresponds to” insert “—

(a)”, and

(b) at end insert “, or

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

554 In section 331(1)(b) (capital value provisions: interpretation)—

(a) after “corresponds to” insert “—

(i)”, and

(b) at end insert “, or

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

555 (1) Amend section 353 (lessors and licensors) as follows.

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

(3) After subsection (3) insert—

“(3A) If the person is within the charge to income tax in respect of the allowance or charge and his interest in the building is not an asset of any property business carried on by him at any time in the relevant period, the allowance or charge is to be given effect by treating him as if he had been carrying on a UK property business in that period and as if—

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

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

(4) In subsection (4)—

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

(b) for “him”, in the first place where it occurs, substitute “it”,

(c) for “him”, in the second place where it occurs, substitute “the company”, and

(d) for “he” substitute “it”.

556 (1) Amend section 354 (buildings temporarily out of use) as follows.

(2) In subsection (3)—

(a) after “as may be made under” insert “section 254 of ITTOIA 2005 or”, and

(b) after “chargeable to tax under” insert “Chapter 18 of Part 2 of ITTOIA 2005 or, as the case may be, under”.

(3) In subsection (5) for “section 113(1)” to the end substitute “section 18 of ITTOIA 2005 or section 337(1) of ICTA (effect of company ceasing to trade etc).”

557 In section 390(1) (interpretation of section 389) in the definition of “premium”—

(a) after “corresponds to” insert “—

(a)”, and

(b) at end insert “, or

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

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

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

(3) After that subsection insert—

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

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

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

(4) In subsection (3)—

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

(b) for “him” substitute “the company”, and

(c) for “he” substitute “it”.

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

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

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

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

(3) After that subsection insert—

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

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

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

(4) In subsection (3)—

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

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

(c) for “he” substitute “it”.

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

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

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

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

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

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

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

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

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

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

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

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

(3) After that subsection insert—

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

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

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

(4) In subsection (2)—

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

(b) for “him” substitute “the company”, and

(c) for “he” substitute “it”.

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

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

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

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

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

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

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

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

“(b) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

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

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

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

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

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

(3) In Part 2—

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

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

(c) in the appropriate place insert—

Finance Act 2002 (c. 23)

575 The Finance Act 2002 is amended as follows.

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

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

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

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

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

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

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

(4) For paragraph 4 substitute—

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

(5) In paragraph 9—

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

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

(c) omit sub-paragraph (3),

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

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

(6) Omit paragraphs 11 and 12.

(7) In paragraph 13—

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

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

(8) Omit paragraph 14.

(9) For paragraph 15 substitute—

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

(10) In paragraph 17—

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

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

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

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

(3) After sub-paragraph (8) insert—

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

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

(b) in those sub-paragraphs—

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

• “transfer” has the same meaning as in that Chapter.”

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

Proceeds of Crime Act 2002 (c. 29)

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

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

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

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

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

(a) for “relevant” substitute “deeply”, and

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

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

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

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

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

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

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

(6) In paragraph 11 (trading stock)—

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

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

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

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

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

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

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

(a) in paragraph (c)—

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

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

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