Part 17: Definitions for purposes of Act and final provisions
Overview
3099.This Part sets out definitions which are specific to this Act and a number of other supplementary and general provisions.
Section 1017: Abbreviated references to Acts
3100.This section lists the abbreviated references to other Acts. It is new.
Section 1018: “Act” to include Scottish and Northern Ireland legislation in some cases
3101.This section defines “Act” for the purposes of certain provisions of this Act. It is based on section 832(1) of ICTA.
3102.The definition means that “Act” includes Scottish and Northern Ireland legislation in the provisions concerned. See Change 152 in Annex 1.
3103.See also section 990 and the commentary on that section, in relation to the meaning of “Act”, and in particular the updating of references to Northern Ireland legislation, in other provisions of the Income Tax Acts.
Section 1019: Meaning of “certificate of deposit”
3104.This section defines “certificate of deposit” for the purposes of this Act. It is based on sections 56(5), 349(4) and 482(6) of ICTA and section 552(2) of ITTOIA.
Section 1020: Claims and elections
3105.This section provides a general rule concerning the making of claims and elections. It is based on section 42(11) of TMA and paragraphs 1 and 2 of Schedule 1A to TMA.
3106.In the source legislation some provisions specify that a claim or election has to be in writing while others are silent. But the effect of paragraph 2(3) to (5) of Schedule 1A to TMA is that a claim or election has to be in writing (unless a specific provision says otherwise).
Section 1021: Application of definitions of “connected” persons and “control”
3107.This section applies these definitions for the purposes of the Act. It is based on a variety of provisions in the source legislation.
3108.The application of the definition of control in section 995 in relation to section 560(8) is new and arises as a consequence of including detailed provisions on approved charitable investments in Part 10. See Change 100 in Annex 1 and the commentary on section 560.
Section 1022: Meaning of “debenture”
3109.This section defines “debenture” for the purposes of certain provisions of this Act. It is based on sections 312(1) and 481(5) of, and paragraph 13(1) of Schedule 28B to, ICTA.
Section 1023: Meaning of “double taxation arrangements”
3110.This section defines “double taxation arrangements”. It is new.
Section 1024: Meaning of “gilt-edged securities”
3111.This section defines “gilt-edged securities”. It is based on sections 50(7) and 722A(5) of, and paragraph 3A(2) of Schedule 23A to, ICTA.
Section 1025: Meaning of “modified net income”
3112.This section explains how the amount of a person’s “modified net income” is calculated for the purposes of certain provisions of this Act. It is based on sections 348(1) and (2) and 349(1) of ICTA.
3113.The provisions concerned are those providing for:
certain adjustments in calculating gift aid relief under Chapter 2 of Part 8;
the deduction allowed for annual payments and patent royalties under Chapter 4 of Part 8; and
the similar deduction allowed to the trustees of an unauthorised unit trust for payments treated as made by them, under Chapter 9 of Part 9.
3114.The way in which tax deducted from payments within Chapter 4 of Part 8 is recovered sometimes depends on whether the payer has any modified net income in the year in which the payment is made. See Change 82 in Annex 1.
3115.Subsections (2) to (4) provide the details of the calculation of the amount of a person’s modified net income. Starting with net income, the following items are to be excluded:
any non-qualifying income included in the person’s charged income. See section 1026, which details the types of income that in the source legislation are to be regarded as being paid “out of” income not brought into charge to income tax;
any relief due under Chapter 4 of Part 8 (annual payments and patent royalties); and
reliefs or adjustments that, under Schedule 1B to TMA, are stated to “relate to a later year”.
See Change 154 in Annex 1.
3116.Similar calculations also must be made for the purposes of gift aid. See section 427 (meaning of “charged amount”). Gift aid is not given as a deduction from total income, so the deduction for annual payments and patent royalties takes priority. So for those purposes subsection (2)(c) is ignored (subsection (3)).
3117.Trustees of unauthorised unit trusts are treated under the source legislation as making annual payments equal to the grossed-up amount of their income. In this Act this is a separate relief under Chapter 9 of Part 9. So in this case that relief is substituted for the relief for annual payments and patent royalties (subsection (4)).
Section 1026: Meaning of “non-qualifying income” for the purposes of section 1025
3118.This section sets out the types of income that are “non-qualifying income” for the purposes of section 1025. It is based on sections 348(4) and 804(6) of ICTA. See Change 82 in Annex 1.
Section 1027: Minor and consequential amendments
3119.This section gives effect to Schedule 1.
Section 1028: Power to make consequential provision
3120.This section confers power on the Treasury to make consequential amendments, additional to those contained in Schedule 1 to this Act. It is new.
3121.The scope of the power is in substance the same as that in section 882 of ITTOIA.
3122.As with that power, it is intended that this power will not be exercised without the agreement of the Tax Law Rewrite project’s Consultative and Steering Committees.
3123.Subsection (2) provides that the power may not be used after 5 April 2010. There was no provision of this kind in section 882 of ITTOIA, but it is sensible to enable additional consequential amendments to be made in this way only over a limited period, and it would in any case become progressively more difficult to do so accurately as subsequent Finance Bills are enacted. The date of 5 April 2010 takes account of this while giving a reasonable amount of time for missed consequential amendments to come to light.
3124.Subsection (4) provides that the power may contain provision having retrospective effect, making explicit something which was implicit in relation to the power in section 882 of ITTOIA. As the power can be used only to make provision in consequence of this Act, any retrospective effect is limited to provision having effect from the date the Act comes into force.
Section 1029: Power to undo changes
3125.This section confers power on the Treasury to undo changes in the law made by the Act, for the purpose of restoring the effect of the law to what it was immediately before 6 April 2007 (the date on which this Act will come into effect). It is new.
3126.The power will make it possible for any errors made in rewriting the source legislation to be corrected without recourse to a Finance Bill.
3127.The power provided by this section will, in particular, enable errors in making consequential amendments to be corrected.
3128.For example, had ITEPA contained such a power, it would have been possible to use it to reverse its mistaken repeal of section 108 of FA 1995. In the absence of such a power, it was necessary for the error made by ITEPA to be corrected in a Finance Act (see paragraph 6 of Schedule 17 to FA 2004).
3129.Depending on the nature of the error, corrections made to restore the effect of the pre-6 April 2007 law could be taxpayer-favourable or taxpayer-adverse.
3130.Subsection (2) provides that the power may not be used after 5 April 2010. It is sensible to enable errors to be corrected in this way only over a limited period, and it would in any case become progressively more difficult to do so accurately as subsequent Finance Bills are enacted. The date of 5 April 2010 takes account of this while giving a reasonable amount of time for errors to come to light.
3131.Subsection (4) provides that the power may contain provision having retrospective effect. Whether that was appropriate would need to be considered on a case-by-case basis.
3132.As with the power in section 1028, it is intended that this power will not be exercised without the agreement of the Tax Law Rewrite project’s Consultative and Steering Committees.
Section 1030: Transitional provisions and savings
3133.This section gives effect to Schedule 2 and confers power on the Treasury to make transitional or saving provisions additional to those contained in that Schedule.
3134.Subsection (2) is in substance the same as section 883(5) of ITTOIA.
3135.Subsection (3) provides that the power may contain provision having retrospective effect. As there is likely to be only a short period between the date on which the Act receives Royal Assent and the date on which it comes into force, it is possible that the need for additional transitional provision will not have come to light before the Act comes into force. Subsection (3) therefore ensures that the power can be exercised after the Act comes into force.
3136.As with the power in section 883(5) of ITTOIA, it is intended that this power will not be exercised without the agreement of the Tax Law Rewrite project’s Consultative and Steering Committees.
Section 1031: Repeals and revocations
3137.This section gives effect to Schedule 3.
Section 1032: Index of defined expressions
3138.This section gives effect to, and introduces, Schedule 4.
Section 1033: Extent
3139.This section ensures that the Act applies to the whole of the United Kingdom.
Section 1034: Commencement
3140.This section provides for the commencement of the Act.
3141.Subsection (1) deals with the position both for income tax and corporation tax. This Act is in substance an income tax only Act. But it makes many consequential amendments to corporation tax legislation. Those consequential amendments also require a commencement provision.
3142.Subsection (3) deals with the enterprise investment scheme (EIS). EIS has some distinctive features which could result in very complicated transitional and savings provisions. In contrast to venture capital trusts (VCTs) where there are two sorts of investments, those made in the VCT and those made by the VCT, in EIS there is no intermediate investor. This makes it possible for EIS to have the different commencement basis, expressed in terms of “shares issued”, provided in this subsection.
3143.These features are:
many of the conditions on which eligibility for relief hinge need to be met for the whole of the period prescribed for that particular requirement;
the commencement date for that period is dependent on the date when shares are issued; and
EIS relief is given in the tax year in which the shares are issued and, if the relief is reduced or withdrawn, it is that year which is affected.
3144.It may not be clear in relation to all the sections in Part 5, that the commencement provision in section 1034(1) applies only to new share issues. So section 1034(3) provides that Part 5 does not have effect in relation to shares issued before 6 April 2007.
3145.This means, for instance, that it will be necessary to refer to the provisions of ICTA to determine whether and to what extent relief is to be withdrawn or reduced on a disposal on or after 6 April 2007 of shares acquired before that date.
3146.Section 1034(3) also extends to consequential amendments and repeals. For this reason both Schedules 1 and 3 have a separate Part which has effect in relation to EIS shares issued on or after 6 April 2007.
3147.Section 1034(3) is subject to the general provisions in Part 1 of Schedule 2 (Transitionals and savings). Also there is a specific transitional provision in Part 7 of Schedule 2 which preserves the effect of the FA 2006 amendment of section 293(6A) of ICTA.
Section 1035: Short title
3148.This section specifies the short title of the Act.
