Office of Public Sector Information
SCHEDULE 2 continued PART 3 continued
39 Chapter 10 of Part 2 does not apply to an indefeasible right to use a telecommunications cable system (“IRU”) acquired before 21st March 2000.
40 (1) That Chapter also does not apply to an IRU acquired by a person on or after that date (directly or indirectly) from an associate or an associated company if the associate or associated company acquired the IRU before that date.
(2) In sub-paragraph (1)—
“associate” has the meaning given by section 417(3) and (4) of ICTA, and
“associated company”—
in relation to another company, has the meaning given by section 416(1) of that Act, and
in relation to any other person, means a company of which that person has control within the meaning of subsections (2) to (6) of that section.
41 (1) Section 149 does not apply in relation to periods of account beginning before 1st January 2005.
(2) But, in the case of a company required to prepare accounts—
(a) under the Companies Act 1985 (c. 6), or
(b) under the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)),
that section does apply in relation to a period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.
42 Section 156 does not apply if the purchase mentioned in subsection (2) of that section was made under a contract entered into before 1st May 1963.
43 (1) This paragraph applies if—
(a) expenses have been incurred, but not borne, by a minister of a religious denomination on any of the matters mentioned in section 159(3),
(b) the expenses were incurred in a period of account no part of which falls in the basis period for the tax year 2005-06 or a subsequent tax year, and
(c) the part of the expenses corresponding to the amount under section 159(4) has not been taken into account in calculating the profits of the profession or vocation of the minister of any tax year.
(2) A deduction is allowed under section 159(3) for that part of the expenses in calculating the profits of the period of account in which the expenses are borne.
44 If the predecessor ceased to carry on the trade carried on by the trader, or ceased to carry on a trade so far as relating to the site, before 21st March 2000, section 165 applies as if—
(a) “, or a predecessor,” in subsection (1) were omitted, and
(b) subsections (3) and (4) were omitted.
45 If the trade carried on by the trader was started before 1st April 1993, the definition of “waste disposal licence” in section 167(1) applies for the purposes of sections 165 and 166 as if paragraphs (d) and (e) of the definition were omitted (radioactive waste and nuclear site authorisations or licences).
46 Section 167(2) does not apply for the purposes of sections 165 and 166 if the trade was started before 1st April 1993.
47 (1) This paragraph applies if—
(a) a period of account of a trade begins before 6th April 2004 and ends on or after 6th April 2005 (“the straddling period of account”), and
(b) as a result of paragraph 48, the profits or losses of the period of account are to be calculated in accordance with Part 2 of this Act.
(2) Subsection (2) of section 173 (valuation of trading stock on cessation) does not apply in relation to the part of the period of account which—
(a) begins with the straddling period of account, and
(b) ends with 5th April 2004,
and the profits or losses of the trade are to be calculated accordingly.
48 (1) This paragraph applies if—
(a) a period of account of a trade, profession or vocation begins before 6th April 2005 and ends on or after that date,
(b) the period of account, or part of the period of account, falls in the basis period for the tax year 2005-06,
(c) part of the period of account also falls in the basis period (or periods) for an earlier tax year (or years), and
(d) in order to arrive at the profits or losses of the basis period for any earlier tax year it is necessary to apportion the profits or losses of the period of account to any part of the period of account falling in that basis period.
(2) The profits or losses of the period of account—
(a) are calculated in accordance with Part 2 of this Act (and therefore, to that extent, that Part has effect for tax years before the tax year 2005-06), and
(b) may be apportioned in accordance with section 203 to any part of the period of account falling in a basis period for a tax year before the tax year 2005-06.
49 (1) There is an exception to the rule that, subject to Part 8, the charge to tax under Chapter 2 of Part 2 on the profits of a trade, profession or vocation of a tax year operates by reference to the profits of the basis period for the tax year (which may include a period falling before 6th April 2005).
(2) The exception is that section 207 does not apply to payments received before 6th April 2005.
50 (1) This paragraph applies if—
(a) a person carries on a trade, profession or vocation wholly outside the United Kingdom, and
(b) the trade, profession or vocation was chargeable to income tax in accordance with section 65(1) of ICTA (Case IV and V assessments: general) for a tax year before 2005-06.
(2) If the trade, profession or vocation was so chargeable for the tax year 2004-05, the person is treated for the purpose of determining the basis period for the tax year 2005-06 and subsequent tax years as if the person started to carry on the trade, profession or vocation on 6th April 2005.
(3) For the purposes of section 391 of ICTA (as substituted by Schedule 1 to this Act), no account is to be taken of any loss made in any tax year before tax year 2005-06 if the trade, profession or vocation was chargeable to income tax in accordance with section 65(1) of ICTA for that tax year.
51 (1) This paragraph applies if any profits or losses arising out of land in the case of any concern specified in section 55(2) of ICTA—
(a) arose in the tax year 2004-05, and
(b) were calculated for that tax year otherwise than by reference to a basis period.
(2) For the purpose of determining the basis period for the tax year 2005-06 and subsequent tax years, the concern is treated as if it were a trade which was started to be carried on by a person on 6th April 2005.
(3) Paragraph 48 of this Schedule applies in relation to any case to which this paragraph applies as if references to a basis period for a tax year (an “earlier tax year”) before the tax year 2005-06 were references to that earlier tax year.
52 (1) This paragraph applies in the case of a trade, profession or vocation which was—
(a) set up and commenced by a person before 6th April 1994, and
(b) continued by the person after 5th April 1997,
and the profits of which were chargeable to income tax under Case I or II of Schedule D for the tax year 1997-98.
(2) For the purposes of Chapter 15 of Part 2 “overlap profit” includes the amount of profits or gains of the basis period for the tax year 1997-98 which—
(a) arose after the end of the basis period for the tax year 1996-97 or, in the case of a trade or profession carried on by a firm, the basis period of the firm for that year, and
(b) arose before 6th April 1997.
(3) In calculating the amount of the profits or gains of the basis period for the tax year 1997-98 which arose as mentioned above—
(a) any deduction of a capital allowance, and
(b) any addition of a balancing charge,
are ignored.
(4) But sub-paragraph (3) does not apply in the case of a trade or profession carried on by a firm which included both an individual and a company.
(5) For the purposes of this paragraph the basis period for the tax year 1996-97 is determined in accordance with paragraph 1 of Schedule 20 to FA 1994 despite the repeal by this Act of that paragraph.
(6) This paragraph is subject to Schedule 22 to FA 1995 (prevention of exploitation of the transitional rules facilitating self-assessment).
53 (1) This paragraph applies in the case of income which—
(a) was immediately derived from the carrying on of a trade, profession or vocation set up and commenced by a person before 6th April 1994 and continued by the person after 5th April 1998, and
(b) was chargeable to income tax under Case IV or V of Schedule D for the tax year 1997-98.
(2) But, in the case of income which was chargeable to tax by reference to the amounts of income received in the United Kingdom, this paragraph applies only if the date on which the first amount of income was received in the United Kingdom was before 6th April 1994.
(3) For the purposes of Chapter 15 of Part 2 “overlap profit” includes the amount of profits or gains of the basis period for the tax year 1997-98 which arose before 6th April 1997.
(4) This paragraph is subject to Schedule 22 to FA 1995 (prevention of exploitation of the transitional rules facilitating self-assessment).
54 The repeal by this Act of paragraphs 2, 6 and 10 of Schedule 20 to FA 1994 (changes for facilitating self-assessment: transitional provisions and savings) does not affect the continuing application of the assumptions mentioned in paragraph 11(4) of that Schedule (double taxation relief).
55 (1) The first tax years which may be the subject of an averaging claim under section 222 are the tax years 2004-05 and 2005-06.
(2) If—
(a) an individual carries on a trade of farming or market gardening in the United Kingdom in partnership, and
(b) but for the repeal by this Act of section 96 of ICTA the individual could have made a claim under that section in relation to the profits of that trade for the tax years 2004-05 and 2005-06,
the individual may make an averaging claim under section 222 of this Act in relation to those profits for those tax years (despite anything in Chapter 16 of Part 2 of this Act to the contrary).
56 (1) Chapter 17 of Part 2 applies to a change of basis taking effect for a period of account which ends on or after 6th April 2005.
(2) For this purpose the period of account for which a change of basis takes effect is the first period of account for which the new basis is adopted.
57 (1) Subject to sub-paragraph (3), section 232 applies before 6th April 2006 with the following amendment.
(2) In subsection (4)—
(a) before paragraph (a) insert—
“(aa) relevant earnings within section 623(2)(c) or 644(2)(c) of ICTA, or”,
(b) omit paragraph (b) and the word “or” before it, and
(c) for “earned income or relevant UK earnings” substitute “relevant earnings or earned income”.
(3) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 232(4) of this Act for that subsection as amended by sub-paragraph (2) above.
58 If—
(a) an individual has made an election under paragraph 12 of Schedule 22 to FA 2002 (election by barrister or advocate to accelerate adjustment charge),
(b) as a result of the election sub-paragraph (4) of that paragraph applies in relation to the tax year 2004-05, and
(c) the election is in force immediately before 6th April 2005,
the election continues to apply in relation to the tax year 2005-06 and subsequent tax years (despite paragraph 3 of this Schedule).
59 Section 104(4) of ICTA (which, despite its repeal, applies in relation to any change of accounting basis occurring before 6th April 1999) does not apply if the person who would be liable to tax as a result of the change was born before 6th April 1917.
60 (1) Subject to sub-paragraph (4), section 256 applies before 6th April 2006 with the following amendments.
(2) In subsection (1)(b)—
(a) after “from the trade was” insert “relevant earnings within section 623(2)(c) or 644(2)(c) of ICTA or”, and
(b) omit “or relevant UK earnings within section 189(2)(b) of FA 2004”.
(3) In subsection (2) for “earned income or relevant UK earnings” substitute “relevant earnings or earned income”.
(4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 256 of this Act for that section as amended by sub-paragraphs (2) and (3) above.
61 Chapter 18 of Part 2 does not apply in relation to a post-cessation receipt if—
(a) the person who would be liable to tax on the receipt was born before 6th April 1917, and
(b) the cessation of the trade occurred before 6th April 2000.
62 (1) This paragraph applies if—
(a) a period of account of a property business begins before 6th April 2005 and ends on or after that date, and
(b) in order to arrive at the profits or losses of a tax year before the tax year 2005-06 it is necessary to apportion the profits or losses of the period of account to any part of that period falling in a tax year before the tax year 2005-06.
(2) The profits or losses of the period of account—
(a) are calculated in accordance with Part 3 of this Act (and therefore, to that extent, that Part has effect for tax years before the tax year 2005-06), and
(b) may be apportioned in accordance with section 275 to any part of the period of account falling in a tax year before the tax year 2005-06.
63 Section 277 does not apply in relation to a lease granted pursuant to a contract entered into before 4th April 1963.
64 Section 279 does not apply in relation to a lease granted—
(a) before 6th April 1963, or
(b) pursuant to a contract entered into before 4th April 1963.
65 Section 280 does not apply in relation to a lease granted—
(a) before 6th April 1963, or
(b) pursuant to a contract entered into before 4th April 1963.
66 Section 282 does not apply in relation to a lease granted —
(a) before 6th April 1963, or
(b) pursuant to a contract entered into before 4th April 1963.
67 (1) This paragraph relates to the operation of sections 287 to 298 where, in respect of a lease—
(a) there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, or
(b) there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
In this paragraph and paragraphs 68 and 69 such a receipt is referred to as a “pre-commencement receipt”.
(2) For the purposes of Chapter 4 of Part 3—
(a) the lease is treated as a taxed lease, and
(b) the pre-commencement receipt is treated as a taxed receipt.
(3) For the purposes of that Chapter, the “receipt period” of a taxed receipt which is a pre-commencement receipt is—
(a) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(b) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(4) For the purposes of that Chapter the “unreduced amount” of a taxed receipt which is a pre-commencement receipt is the amount of the pre-commencement receipt as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or (3) of ICTA.
(5) Sub-paragraph (6) applies to a taxed receipt which is a pre-commencement receipt arising as a result of section 34(2) of ICTA (obligation on tenant to carry out work under lease).
(6) If the obligation to carry out work included the carrying out of work which gave or will give rise to expenditure for which an allowance has been, or may be, made under the enactments relating to capital allowances, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.
68 (1) This paragraph applies if—
(a) in calculating the amount of a pre-commencement receipt, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(b) as a result of paragraph 67 the amount chargeable on the superior interest is the taxed receipt for the purposes of Chapter 4 of Part 3.
(2) References to a reduction under section 37(2) or (3) of ICTA in a pre-commencement receipt by reference to the amount chargeable on the superior interest are to the difference between—
(a) the amount of the pre-commencement receipt before the operation of section 37(2) or (3) of ICTA, and
(b) the amount of the receipt after the operation of that subsection,
so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.
(3) In sections 290(5)(a) (meaning of “unused amount”) and 295(1)(a) (limit on reductions and deductions) references to reductions under section 288 by reference to the taxed receipt include references to reductions under section 37(2) or (3) of ICTA in pre-commencement receipts by reference to the amount chargeable on the superior interest.
(4) Sections 292 to 294 apply as follows—
(a) the pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 293 and 294,
(b) references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
(c) for the purposes of those sections the receipt period of the pre-commencement receipt is—
(i) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(ii) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
69 (1) Sub-paragraph (2) applies if—
(a) in calculating the profits of a trade, profession or vocation for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, a person is treated as paying rent under section 87(2) of ICTA by reference to the amount chargeable for the purposes of that section, and
(b) as a result of paragraph 67 the amount chargeable is the taxed receipt for the purposes of Chapter 4 of Part 3.
(2) References in sections 290(5)(b) and 295(2)(b) to the deductions allowed for expenses under section 61 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the trade, profession or vocation for the rent that the person is treated as paying under section 87(2) of ICTA by reference to the amount chargeable.
(3) Sub-paragraph (4) applies if—
(a) in calculating the profits of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, a person is treated as paying rent as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(b) as a result of paragraph 67 the amount chargeable on the superior interest is the taxed receipt for the purposes of Chapter 4 of Part 3.
(4) References in sections 290(5)(c) and 295(1)(b) to the deductions allowed for expenses under section 292 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the Schedule A business or overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) for the rent that the person is treated as paying as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest.
70 (1) In relation to a lease granted after 12th June 1969 and before 25th August 1971, for sections 303 and 304 substitute—
(1) The following rules apply for determining the effective duration of a lease for the purposes of this Chapter.
Rule 1: Where the terms of a lease include provision for the determination of the lease by notice given by the landlord, the lease is not to be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice so given.
Rule 2: A lease is not to be treated as having been granted for a term longer than one ending on a date before the end of the term for which the lease was granted, if the terms of the lease or any other circumstances make it unlikely that the lease will continue beyond that date.
Rule 3: Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant, account may be taken of any circumstances making it likely that the lease will be so extended.
(2) Rule 2 applies by reference to the facts known or ascertainable at the time of the grant of the lease.
(3) In applying the rules, it is assumed that all parties concerned, whatever their relationship, act as if they were at arm’s length.
(4) In this section, in relation to Scotland, “term”, where referring to the duration of a lease, means period.”
(2) This paragraph does not apply if the determination is for the purposes of section 281 (sums payable for variation or waiver of term of lease).
71 (1) In relation to a lease granted before 13th June 1969, for sections 303 to 305 substitute—
(1) The following rules apply for determining the effective duration of a lease for the purposes of this Chapter.
Rule 1: Where the effective duration of a lease is being determined after the date on which the lease has for any reason come to an end, the duration is taken to have extended from its commencement to that date.
Rule 2: Where the terms of the lease include provision for the determination of the lease by notice given either by the landlord or by the tenant, the lease is not to be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice.
Rule 3: A lease is not to be treated as having been granted for a term longer than one ending on a date before the end of the term for which the lease was granted, if the terms of the lease or any other circumstances make it unlikely that the lease will continue beyond that date.
(2) Rules 2 and 3 are subject to rule 1.
(3) Rules 2 and 3 apply in accordance with circumstances prevailing at the time of the determination.
(4) In this section, in relation to Scotland, “term”, where referring to the duration of a lease, means period.”
(2) This paragraph does not apply if the determination is for the purposes of section 281 (sums payable for variation or waiver of term of lease).
72 (1) Section 311 does not apply to a reverse premium—
(a) which was received before 9th March 1999, or
(b) to which the recipient was entitled immediately before that date.
(2) In determining whether a reverse premium was one to which the recipient was entitled immediately before 9th March 1999, no account is to be taken of any arrangements made on or after that date.
73 Sections 312 to 314 do not apply to expenditure incurred before 6th April 2004.
74 (1) Subject to sub-paragraph (4), Chapter 6 of Part 3 applies before 6th April 2006 with the following amendments.
(2) In section 322(2)—
(a) after paragraph (b) insert—
“(ba) section 623(2)(c) or 644(2)(c) of ICTA (income regarded as relevant earnings for pension purposes: see section 504A of that Act),”,
(b) at the end of paragraph (d) insert “and”, and
(c) omit paragraph (f) and the word “and” before it.
(3) In section 328(2)—
(a) before paragraph (a) insert—
“(aa) income regarded as relevant earnings for pension purposes under section 623(2)(c) or 644(2)(c) of ICTA, or”, and
(b) omit paragraph (b) and the word “or” before it.
(4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained amendments substituting sections 322(2) and 328(2) of this Act for those subsections as amended by sub-paragraphs (2) and (3) above.
75 (1) Subject to sub-paragraph (3), section 504A of ICTA (as inserted by Schedule 1 to this Act) applies before 6th April 2006 with the following amendment.
(2) In subsection (2)—
(a) after paragraph (a) insert—
“(ab) section 623(2)(c) or 644(2)(c) (income regarded as relevant earnings for pension purposes), and”, and
(b) omit paragraph (c) and the word “and” before it.
(3) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 504A of ICTA (as inserted by Schedule 1 to this Act) for that section as amended by sub-paragraph (2) above.
76 (1) Chapter 7 of Part 3 applies to a change of basis taking effect for a period of account which ends on or after 6th April 2005.
(2) For this purpose the period of account for which a change of basis takes effect is the first period of account for which the new basis is adopted.
77 The definition of “mineral royalties” in section 341(2) does not include any rent receivable before 6th April 1970.
78 (1) Despite the enactment by this Act in the OEIC sections of provisions previously contained in regulations made under section 152 of FA 1995, the Treasury may continue to make regulations under that section for achieving any purpose that could be achieved by such regulations before the coming into force of the OEIC sections.
(2) Accordingly—
(a) regulations under that section may make provision for securing, in relation to the matters mentioned in subsection (1)(a) to (c) of that section, that the provision made by the OEIC sections corresponds, subject to such modifications as the Treasury consider appropriate, to the provision made by the enactments mentioned in subsection (2) of that section in relation to—
(i) unit trusts,
(ii) rights under, and the assets subject to, such trusts, and
(iii) transactions for purposes connected with such trusts, and
(b) that section has effect with such modifications as are required for the purposes of this paragraph.
(3) In this paragraph—
“the OEIC sections” means—
sections 373 to 375 of this Act (under which certain amounts are treated as interest paid by open-ended investment companies), and
sections 386 to 388 of this Act (under which certain amounts are treated as dividends paid by open-ended investment companies), and
“unit trust” has the same meaning as in section 152 of FA 1995 (see subsection (7)).
Income Tax (Trading and Other Income) Act 2005