Part 2: Other enactments.
Taxes Management Act 1970
Section 17
3231.The amendments made to section 17 of TMA effectively enact regulation 12(1) of the building society regulations (SI 1990/2231) so that references to building societies are explicitly included in section 17. See Change 126 in Annex 1.
3232.The enactment of regulation 12(1) ensures that the legislation which deals with deduction of income tax in respect of building societies is split between primary and secondary legislation in the same way as for deposit-takers.
Section 37A
3233.The amendments made to section 37A of TMA extend it to civil partners. See Change 159 in Annex 1.
Section 55(1)(c)
3234.Assessments made under Chapter 15 of Part 15 of this Act will always be due on the date mentioned in section 951 (ie either 14 days after the return period or 14 days after the date of payment, in accordance with sections 949 and 950). So the reference in section 55(1)(c) of TMA to assessments other than those due under paragraphs 4(1) or 9 of Schedule 16 to ICTA is unnecessary since there can be no such assessments. See the commentary on paragraph 10(2) of Schedule 16 to ICTA above.
Section 87
3235.Section 87 has been replaced with a new section as part of the consequential amendments made in conjunction with Chapter 15 of Part 15 of this Act.
Section 98
3236.Under section 1034(3), Part 5 of this Act which deals with the enterprise investment scheme (EIS) does not have effect in relation to shares issued before 6 April 2007. Instead the EIS provisions in ICTA continue to have effect for these shares.
3237.The consequential amendments to the Table in section 98 include the addition of references to the applicable provisions in Part 5 of this Act. At the end of the Table a sentence is inserted explaining that these references are to provisions that apply only in relation to shares issued after 5 April 2007.
Section 99B
3238.New section 99B imposes a penalty of up to £3,000 where a person fraudulently or negligently gives an incorrect non-UK resident declaration under any of sections 858 to 861 of this Act. It is based on section 98(2) of TMA and the reference to section 482(2) of ICTA in the second column of the Table in section 98 of TMA.
3239.The reference to section 482(2) is omitted from the second column of the Table in section 98 of TMA and is not being replaced with a reference to sections 858 to 861 (which rewrite sections 481(5)(k), 482(2) and (2A) of ICTA and regulation 4(1)(a) to (c) of the Income Tax (Building Societies) (Dividends and Interest) Regulations 1990 (SI 1990/2231)).
3240.The reason for not replacing the reference to section 482(2) is that it will not be possible to raise a penalty under section 98(1) of TMA in respect of sections 858 to 861. This is because Change 130 in Annex 1 means that all non-UK resident declarations will have to be in a prescribed or authorised format in order for a gross payment to be made. If the declaration is not in the prescribed or authorised format the payment will be made under deduction of tax.
3241.But this new section ensures that fraudulent or negligent non-UK resident declarations will continue to be subject to a penalty, as is currently the case under section 98(2) of TMA.
Finance Act 1988
Section 130
3242.Section 130(7)(a) of FA 1988 has been amended to refer to section 684 of ITEPA 2003 and a specific provision has been included in section 130(9A) of FA 1988 to cover PAYE regulations made under ICTA. (When section 203 of ICTA was repealed by section 722 of, and paragraph 30 of Schedule 6 to, ITEPA, section 130(7)(a) of FA 1988 should have been amended.)
3243.Section 130(7)(b) of FA 1988 has been amended to refer to section 946 of this Act. And now that section 130(7)(b) covers tax which a company is liable to pay in respect of payments to which Chapter 15 of Part 15 of this Act applies, section 130(7)(c)(i) and (ii) will be repealed.
3244.Section 130(7)(c)(i) and (ii) referred to sections 476(1) and 479 of ICTA. But these references should have been replaced with references to sections 477A and 480A of ICTA (rewritten in Chapter 15 of Part 15 of this Act) when sections 476 and 479 were repealed. The amendments made by this Act update the legislation accordingly.
Finance Act 1989
Section 151
3245.As a result of the amendment made by this Schedule to section 467 of ITTOIA, any gain arising to trustees under Chapter 9 of Part 4 of ITTOIA is treated as income of the trustees. It follows that it is not necessary to provide separately for such gains in section 151(2)(b) of FA 1989. Accordingly section 151(2)(a) is amended and section 151(2)(b) is omitted.
Finance Act 1991
Section 53
3246.Section 53 has not been rewritten as it is redundant. It was originally enacted to validate an ultra vires transitional provision in the Income Tax (Building Societies) Regulations 1986 (SI 1986/482). This provision purported to require deduction in respect of sums paid or credited before 6 April 1986, the date of commencement of the regulations. SI 1986/482 was revoked with effect from 1991-92 following the repeal of section 476 ICTA by FA 1990. So section 53 is no longer necessary.
Taxation of Chargeable Gains Act 1992
Sections 4 and 6
3247.The amendments to references to “total income” operate by reference to “Step 3 income”, defined by reference to section 23 of this Act, to reflect the standardised meaning of the phrase “total income”. See the commentary on that section.
Section 11
3248.This new section replaces the former section 11 of TCGA.
3249.New subsection (1) replaces section 11(1) of TCGA and corresponds to section 833 of this Act relating to the residence status of visiting forces and others for income tax purposes.
3250.Section 833 is based on section 323(2) of ICTA which refers to “a period during which a member of a visiting force to whom section 303(1) of ITEPA 2003…applies”. Section 11(1) of TCGA makes the same reference. Section 833 avoids the reference to section 303(1) of ITEPA and includes a full description of the persons to whom it applies.
3251.The new section 11(1) of TCGA, accordingly, links directly to section 833 of this Act and applies to the persons to whom section 833 applies.
3252.New subsections (2) and (3) replace section 11(3) and (4) of TCGA and correspond to the income tax exemption in section 841 of this Act. As explained in the commentary on section 841, the income tax exemption for Agents-General in section 320(1) of ICTA is repealed as it duplicates an exemption given elsewhere. For the same reason, the capital gains tax exemption in section 11(2) of TCGA is omitted.
Section 105A
3253.Under section 1034(3), Part 5 of this Act which deals with the enterprise investment scheme (EIS) does not have effect in relation to shares issued before 6 April 2007. Instead the EIS provisions in ICTA continue to have effect for these shares.
3254.The consequential amendments which relate to the EIS scheme in TCGA provide that there are alternative references to the applicable provisions in ICTA and to the applicable provisions in Part 5 of this Act.
3255.Where it may not be clear which of the provisions apply, the amendment includes an explanation that references to Part 5 of this Act or any provision of that Part are to a Part or provision that applies only in relation to shares issued after 5 April 2007. In the case of the amendments to section 105A, this explanation is included in a new subsection (9).
Section 119
3256.This section excludes from the computation of a capital gain or loss on the disposal of securities the amounts taken into account under the accrued income scheme. It deploys provisions from sections 710 to 727A of ICTA for this purpose.
3257.The extensive amendments are necessary to ensure that section 119 of TCGA continues to apply by reference to terms and provisions in Part 12 of this Act exactly as it does by reference to terms and provisions in sections 710 to 727A of ICTA.
3258.See also Change 101 in Annex 1.
Section 125A
3259.This new section of TCGA is based on the provisions of sections 573(4), 574(1) and 576(2) and (3) of ICTA which have effect for the purposes only of capital gains tax or corporation tax on chargeable gains.
3260.Subsections (1) and (3) make clear that relief can only be obtained once for the loss, either by way of share loss relief or as a deduction in computing chargeable gains.
Sections 150A and 150B
3261.See the commentary on section 105A of TCGA about the consequential amendments which relate to the EIS scheme in TCGA. The amendment to section 150A inserts a new subsection (13) which explains the references to Part 5 of this Act. This is applied to section 150B by the amendment to section 150B(6).
Sections 151BA to 151BC
3262.These three new sections of TCGA are based on those provisions of Schedule 16 to FA 2002 (community investment tax relief - CITR) which have effect for the purposes of capital gains tax or corporation tax on chargeable gains.
Section 151BA
3263.This new section of TCGA sets out the special rules for identifying securities and shares disposed of where a holding includes securities or shares to which CITR is attributable. It is based on paragraph 47 of Schedule 16 to FA 2002.
3264.Subsections (1) to (5), (8) and (9) replace sub-paragraphs (1) to (4), (7) and (8) of that paragraph so far as they have effect for the purposes of capital gains tax or corporation tax on chargeable gains. Those sub-paragraphs continue to apply for the purposes of relief against corporation tax for companies. Section 377 of this Act, based on those sub-paragraphs, applies for the purposes of relief against income tax for individuals.
3265.Subsections (6) and (7) replace sub-paragraphs (5) and (6) of paragraph 47 of Schedule 16 to FA 2002, which have effect only for the purposes of capital gains tax or corporation tax on chargeable gains.
Section 151BB
3266.This new section of TCGA disapplies the no disposal treatment in sections 116(10) and 127 to 130 of that Act in the case of rights issues and other reorganisations in respect of shares to which CITR is attributable. It is based on paragraph 40 of Schedule 16 to FA 2002.
Section 151BC
3267.This new section of TCGA disapplies the no disposal treatment in sections 135 and 136 of that Act in relation to a reconstruction or amalgamation affecting a holding of shares or debentures to which CITR is attributable. It is based on paragraphs 41 and 48(2) of Schedule 16 to FA 2002.
3268.Subsections (1) to (4) correspond to and replace each of the sub-paragraphs of paragraph 41 of Schedule 16 to FA 2002 which has effect only for the purposes of capital gains tax or corporation tax on chargeable gains.
3269.Subsection (5) is based on paragraph 48(2) of Schedule 16 to FA 2002 and replaces it so far as it has effect for the purposes of capital gains tax or corporation tax on chargeable gains. That sub-paragraph continues to apply for the purposes of relief against corporation tax for companies. Section 379(2) of this Act, based on that sub-paragraph, applies for the purposes of relief against income tax for individuals.
Section 231
3270.The amendments to section 231(1) and (3) of TCGA add a reference to Part 5 of this Act (EIS). Although relief under section 229 of TCGA is not available for disposals after 5 April 2001 (section 54 of FA 2000), section 231 of TCGA could still have some application where there is an unconditional contract to acquire a replacement asset under section 227(5) of TCGA.
Sections 256 to 256B
3271.The amendment to section 256 and new sections 256A and 256B are based on section 505(4) and (7) of ICTA and result from the need to separate the capital gains tax aspects of those provisions from the income tax aspects rewritten in this Act in sections 541 and 542. In the same way as in section 542 of this Act, new section 256B of TCGA refers to officers of Revenue and Customs, rather than the Board. See Change 5 and the commentary on section 542.
Section 257
3272.The amendment to section 257 of TCGA is based on section 587B(3) of ICTA. This material is located within section 257 of TCGA because section 587B(3) of ICTA deals only with the capital gains base cost to the charity receiving the gift; it does not apply to the relief available to the person making the gift. The amendment applies only if relief is available to a company under section 587B or to an individual under Chapter 3 of Part 8 of this Act. See also the commentary on section 434.
3273.New subsection (2B)(c) deals with the case where a qualifying interest in land is disposed of by persons with a joint tenancy or with tenancies in common. See the commentary on section 442.
Sections 261B and 261C
3274.These sections replace section 72 of FA 1991 with a rewritten version of the rules for claiming to treat losses of a trade etc as allowable losses for the purposes of capital gains tax.
3275.The unused part of the loss (which extends to the whole of it if none of it has been used) may be used for capital gains tax purposes even if no claim for trade loss relief has been made. This could arise in circumstances where the person has no income in respect of which to make a claim. This reflects HMRC practice. See Change 160 in Annex 1 and the commentary on section 71.
Sections 261D to 261E
3276.These sections replace section 90(4) and (5) of FA 1995 with a rewritten version of the rules for claiming to treat post-cessation expenditure of a trade etc as allowable losses for the purposes of capital gains tax.
3277.The unused part of the expenditure (which extends to the whole of it if none of it has been used) may be used for capital gains tax purposes even if no claim for trade loss relief has been made. This could arise in circumstances where the person has no income in respect of which to make a claim. This reflects HMRC practice. See Change 160 in Annex 1 and the commentary on section 101 of this Act.
Section 263ZA
3278.This section concerns a claim made to treat a deduction which cannot be allowed under section 555 of ITEPA because of an insufficiency of income as an allowable loss for capital gains tax purposes. The amendments clarify the meaning of “total income” in section 263ZA(1) and (2) and explain how the excess deduction is calculated when there are other deductions which may be due under Step 2 of the calculation in section 23 of this Act.
Section 271
3279.New subsections (7A), (7B) and (7C) rewrite the exemption in section 516 of ICTA to the extent that it relates to capital gains tax.
Section 285A
3280.This new section rewrites section 510A of ICTA to the extent that it relates to capital gains tax.
Schedule 5B
Paragraph 13C
3281.The substituted sub-paragraph (4) has the effect of combining part of the provision in this paragraph with material from section 300A(10) of ICTA. This is also noted in the commentary on section 223 of this Act.
Paragraph 19
3282.See the commentary on section 105A of TCGA about the consequential amendments which relate to the enterprise investment scheme (EIS) in TCGA. The amendment to paragraph 19(3) of Schedule 5B to TCGA inserts a new paragraph (d) which explains the references to Part 5 of this Act in Schedule 5B.
Schedule 5C
Paragraph 3
3283.Part 2 of Schedule 19 to FA 2004 provides that postponement of chargeable gains cannot be made under Schedule 5C to TCGA (venture capital trusts: deferred charge on re-investment) by reference to shares issued after 5 April 2004. There is therefore no need to make a consequential amendment to the reference in paragraph 3(1)(g) of Schedule 5C to relief having been given under Part 1 of Schedule 15B to ICTA.
3284.But, as withdrawal of approval of a venture capital trust may take place after 5 April 2007, the reference in paragraph 3(1)(f) to “section 842AA(8) of the Taxes Act” is replaced with a reference to the corresponding provision in this Act.
Finance Act 1994
Schedule 20
Paragraph 11
3285.This provision has been amended so that the clawback of excess double taxation relief operates in terms of tax rather than by reference to an amount of income. See Change 158 in Annex 1.
Finance Act 1998
Section 161
3286.This amendment substitutes equivalent references to terms and provisions in Part 12 of this Act for the references to terms and provisions in sections 710 to 727A of ICTA. See also Change 101 in Annex 1.
Finance Act 2000
Section 44
3287.This section requires the apportionment of trustees’ expenses in a case where any income of a trust would be treated as the income of a settlor but for the fact that it is given to or arises to a charity. The amended section 44 of FA 2000 applies to the calculation of a beneficiary’s income for corporation tax purposes. New section 646A of ITTOIA makes corresponding provision for income tax.
Schedule 15
3288.Under section 1034(3), Part 5 of this Act which deals with the enterprise investment scheme (EIS) does not have effect in relation to shares issued before 6 April 2007. Instead the EIS provisions in ICTA continue to have effect for these shares.
3289.The consequential amendments to the corporate venturing scheme provide that there are alternative references to the applicable provisions in ICTA and to the applicable provisions in Part 5 of this Act.
3290.In case it is not clear which of the provisions apply, the amendment inserts a new sub-paragraph (9) in paragraph 102 of Schedule 15 explaining that references to Part 5 of this Act or any provision of that Part are to a Part or provision that applies only in relation to shares issued after 5 April 2007.
Capital Allowances Act 2001
Section 570B
3291.This section is inserted as a consequence of section 1014.
Sections 575 and 575A
3292.These sections set out the definition of “connected” in full in place of the cross-reference to section 839 of ICTA. See the commentary on section 993.
Finance Act 2002
Schedule 16
3293.Part 7 of this Act, based on Schedule 16 to FA 2002, provides for individuals to obtain income tax reductions for investments in community development finance institutions (CDFIs). That Schedule continues in force so far as it provides for companies to obtain relief against corporation tax for such investments. The relief is referred to as CITR.
Paragraphs 4 to 7
3294.This amendment substitutes for paragraphs 4 to 7 a new paragraph 4 applying Chapter 2 (accredited community development finance institutions) of Part 7 of this Act for the purposes of Schedule 16 to FA 2002. This amendment ensures that accreditation in accordance with that Chapter applies for the purposes of both CITR for individuals under Part 7 of this Act and CITR for companies under Schedule 16 to FA 2002.
Paragraph 12
3295.This amendment substitutes for paragraph 12(2) new sub-paragraphs (2), (2A) and (2B). These new sub-paragraphs ensure that the limit on the value of investments made in the CDFI in any accreditation period in respect of which it may issue tax relief certificates applies to the aggregate value of investments made by companies under Schedule 16 to FA 2002 and of investments made by individuals under Part 7 of this Act.
Paragraphs 40 and 41
3296.This amendment omits paragraphs 40 and 41 which have effect only for the purposes of capital gains tax or corporation tax on chargeable gains. Sections 151BB and 151BC(1) to (4) of TCGA, introduced by this Schedule, are based on those paragraphs. See the commentary on those new sections of TCGA.
Paragraph 47
3297.There are two amendments to paragraph 47.
3298.The first omits the references to capital gains tax and corporation tax on chargeable gains in paragraph 47(3) and (4). Section 151BA(2) and (3) of TCGA, introduced by this Schedule, are based on those sub-paragraphs so far as they have effect for those purposes (see the commentary on that new section of TCGA). Those sub-paragraphs continue to apply for the purposes of CITR for companies. Section 377(2) and (3), based on those sub-paragraphs, apply for the purposes of CITR for individuals.
3299.The second omits paragraph 47(5) and (6). Those sub-paragraphs have effect only for the purposes of capital gains tax or corporation tax on chargeable gains. Section 151BA(6) and (7) of TCGA, introduced by this Schedule, are based on those sub-paragraphs. See the commentary on that new section of TCGA.
Paragraph 48
3300.This amendment omits the reference to capital gains tax and corporation tax on chargeable gains in paragraph 48(2). Section 151BC(5) of TCGA, introduced by this Schedule, is based on that sub-paragraph so far as it has effect for those purposes (see the commentary on that new section of TCGA). That sub-paragraph continues to apply for the purposes of CITR for companies. Section 379(2), based on that sub-paragraph, applies for the purposes of CITR for individuals.
Proceeds of Crime Act 2002
Schedule 10
Paragraph 4
3301.This amendment substitutes equivalent references to terms and provisions in Part 12 of this Act for the references to terms and provisions in sections 710 to 727A of ICTA. In particular, the indirect disapplication of those provisions by references to sections 713 and 716 of ICTA has been replaced by a direct disapplication of the whole of Part 12 to the transfer in question. This has the same net effect.
Income Tax (Earnings and Pensions) Act 2003
Section 48
3302.Section 48(2)(b) of ITEPA excludes payments subject to deduction under section 555 of ICTA (payments to non-UK resident entertainers and sportsmen) from the scope of Chapter 8 of Part 2 of ITEPA. This section has been extended to exclude transfers as well as payments. See Change 161 in Annex 1.
Section 404A
3303.This new section in ITEPA specifies that an amount counting as employment income under section 403 of that Act is treated as the highest part of total income. It is based on section 833(3) of ICTA. See also the commentary on section 1012 of this Act.
Section 476
3304.New subsection (5A) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act.
Schedule 5
Paragraph 11(10)
3305.From 2007-08 it is the definition of a company in administration or receivership in Part 5 of this Act rather than the definition in section 312(2A) of ICTA which applies in relation to enterprise management incentives (EMI). This includes the reference to the Northern Ireland legislation as amended by the Insolvency (Northern Ireland) Order 2005. See Change 56 in Annex 1.
3306.Unlike other consequential amendments that stem from the rewrite of the enterprise investment scheme (EIS), the impact of this amendment is not affected by when the EIS shares in question are issued.
Finance Act 2004
Section 102
3307.Section 102 of FA 2004 provides that where a payee has suffered deduction on a payment that was in fact exempt under section 758 of ITTOIA, a claim for relief can be made to the Board. This provision has not been rewritten. As a result such claims will be made to an officer of Revenue and Customs. See Change 5 in Annex 1.
Section 189
3308.Section 189(2) of FA 2004 defines “relevant UK earnings” for the purpose of determining the maximum amount of relief for certain pension contributions. The source definition includes income within section 833(5B) of ICTA (certain patent income). As section 833 is being repealed, this amendment expressly includes patent income in section 189(2) through a new subsection (2A). Furthermore, as a simplification measure, the revised provision does not reproduce the restrictions to section 833(5B) in section 833(5C) and (5E) of ICTA. See Change 125 in Annex 1.
3309.The amendment also directly incorporates income from a UK furnished holiday lettings business in the definition of UK relevant earnings. That part of the amendment is based on section 504A(2)(c) of ICTA.
Income Tax (Trading and Other Income) Act 2005
Section 13
3310.Following the House of Lords decision in Agassi v Robinson [2006 UKHL 23](16), section 13 of ITTOIA has been amended to make clear that when a payment or transfer of the type referred to in section 555 of ICTA is made, a liability to income tax will arise regardless of whether there is a duty to deduct income tax under section 555 of ICTA. See Change 156 in Annex 1.
Section 51
3311.Section 51 of ITTOIA is repealed under the new approach to charges on income and patent royalties. See Change 81 in Annex 1.
Section 108
3312.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430 of this Act.
Section 272
3313.This section is consequentially amended as a result of the repeal of section 51 of ITTOIA. See Change 81 in Annex 1.
Section 457
3314.Subsection (3) is repealed as it is no longer necessary. It deemed the profit on the disposal of deeply discounted securities to be income of the trustees for the purposes of applying the trust rate. It is already income of the trustees for other purposes by virtue of sections 429 and 437 of ITTOIA. And the liability of the trustees at the trust rate is now provided for directly by sections 481 and 482 of this Act (see Type 6).
3315.The substituted subsection (5) makes more explicit the requirement that the scheme’s accounts show the amount as income available for payment to unit holders or for investment. It also continues to ensure that the effect of section 3 of ICTA is preserved in the case of unauthorised unit trusts (UUTs). If the income referred to in subsection (1) is treated as income in the trust’s accounts, it is then treated as being paid out to unit holders (see section 469(3) of ICTA and section 547(2) of ITTOIA). So the trustees of the UUT are charged at the basic rate of income tax rather than the trust rate. See the commentary on section 504 of this Act.
Section 465A
3316.This new section specifies that an amount taxed under Chapter 9 of Part 4 of ITTOIA is treated as the highest part of total income. It is based on section 833(3) of ICTA. See also the commentary on section 1012 of this Act.
Section 467
3317.New subsection (1A) ensures that the amount charged forms part of “total income” of trustees in Step 1 of section 23 of this Act. This was expressly stated to be the case prior to ITTOIA (see section 547(9) of ICTA as it applied until 5 April 2005) and the position is now made explicit in line with the similar rule for individuals (section 465(5) of ITTOIA) and personal representatives (section 466(1) of ITTOIA).
3318.The amendment to subsection (7) omits the rule that the amount is charged at the trust rate (except for charitable trusts). It is unnecessary because gains within section 467 of ITTOIA are included in the list in section 482 of this Act (see Type 7).
Section 535
3319.This amendment addresses the provisions relating to chargeable event gains within Chapter 9 of Part 4 of ITTOIA. Relief under Chapters 2 (gift aid) and 3 (gifts of shares etc to charities) of Part 8 of this Act is not taken into account in computing top slicing relief. In the source legislation these provisions were in section 25(6) of FA 1990 (gift aid) and section 587B(2) of ICTA (gifts of assets etc). They are now located with the top slicing provisions themselves.
Section 539
3320.This section has been rewritten to clarify that relief for a deficiency is given as a tax reduction. A formal claims requirement has also been introduced. See Change 3 in Annex 1.
Section 619A
3321.This new section in ITTOIA replaces section 660C(3) of ICTA. It ensures that income under section 619(1)(a) and (b) of ITTOIA is treated as the highest part of the settlor’s income for the purposes of Chapter 2 of Part 2 of this Act.
Section 620
3322.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430.
Section 624
3323.New subsection (1A) makes it explicit that trustees’ expenses are not taken into account in measuring the income of a settlor under section 624 of ITTOIA. This follows from the fact that it is the income arising that is deemed to be the settlor’s and the income arising is the gross amount out of which the trustees may pay expenses.
Section 628
3324.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430 of this Act.
Section 646A
3325.This new section in ITTOIA is based on section 44 of FA 2000. It requires the apportionment of trustees’ expenses in a case where any income of a settlement would be treated as the income of a settlor but for the fact that it is given to or arises to a charity. Expenses are allocated rateably between charitable income and other income. The rule applies both in cases where expenses affect the amount of income liable at the special trust rates, and in cases where expenses affect the amount of income of a beneficiary liable to income tax. Section 44 of FA 2000 is being amended to provide for the position of a beneficiary within the charge to corporation tax. For the treatment of expenses generally see Change 91 in Annex 1.
Section 680A
3326.This new section is based on section 698A of ICTA. It ensures that payments by personal representatives to beneficiaries out of income retain the character of the underlying income. The opportunity has been taken to clarify a point of doubt in the source legislation. See Change 162 in Annex 1.
3327.It may be noted that section 698A(1) and (2) of ICTA apply only where income is treated under “this Part” in a particular way. In fact, following ITTOIA, the income tax cases to which “this Part” previously applied are now in Chapter 6 of Part 5 of ITTOIA. But paragraph 5 of Schedule 2 to ITTOIA enables the reference to “this Part” to be read as embracing the ITTOIA provisions now in Chapter 6 of Part 5 of ITTOIA.
Section 682
3328.New subsection (4A) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act. If exceptionally the relief being recovered under section 682(4)(b) was a relief given as a tax reduction, then the recovery is a charge to an amount of income tax instead (see section 32 of this Act).
Schedule 2
Paragraph 109
3329.Amendment to this transitional provision is necessary because section 539 of ITTOIA has been rewritten. See the commentary on Schedule 1 (section 539 of ITTOIA). Relief for a deficiency within this provision is given as a deduction from total income instead of as a tax reduction.
Finance Act 2005
Schedule 2
3330.As part of the alignment of the building society and deposit-taker regimes on deduction of tax, paragraphs 5 and 6 of Schedule 2 to FA 2005 have been replaced with a new paragraph, paragraph 11, of Schedule 2 to FA 2005.
3331.In respect of qualifying time deposits (see section 866 of this Act) there was some doubt about whether relevant arrangements (as defined in paragraph 1 of Schedule 2 to FA 2005) with deposit-takers would be paid gross. This was because, under the source legislation, paragraph 6 of Schedule 2 to FA 2005 treats relevant arrangements as if they are deposits rather than deposits made by way of loan. (For building societies, paragraph 5 of Schedule 2 to FA 2005 treats relevant arrangements as a deposit or loan.)
3332.But it was clearly the intention that all the deposit-taker rules applied to relevant arrangements. New paragraph 11(b) treats relevant arrangements as if they were deposits consisting of a loan in order to put the matter beyond doubt.
3333.As part of Change 126 in Annex 1 (enactment of regulations) regulation 2(4) of the Income Tax (Building Societies) (Dividends and Interest) Regulations 1990 (SI 1990/2231) (as amended by SI 2005/3474) has been enacted so that references to interest in Chapter 2 of Part 15 of this Act include returns on relevant arrangements (as defined in paragraph 1 of Schedule 2 to FA 2005).
Finance (No 2) Act 2005
Section 7
3334.The amendments to references to “total income” operate by reference to “Step 3 income”, defined by reference to section 23 of this Act. See the commentary on that section.
[2006] STC 1056
