Overview
2444.Section 9 of ICTA applies income tax law and practice to the charge and calculation of corporation tax and has been amended by ITEPA, ITTOIA and ITA in the course of the separation of corporation tax from income tax. (See the commentary on Chapter 1 of Part 2.)
2445.The only context in which the principle underlying section 9 of ICTA continues to be relevant is the charge to corporation tax on income from the holding of an office: this corporation tax charge still operates by reference to income tax.
Section 969: Charge to tax on income from holding an office
2446.This section applies “the charge to corporation tax on income” to income from an office. It is based on section 9 of ICTA. The charge on income is explained in section 2.
2447.Section 9(3)(b) of ICTA was amended by ITEPA and refers to employment, pension and social security income. Previously section 9(3) referred to “the like Schedules and Cases”. As a company cannot be an employee and cannot receive pension and social security income, these aspects of section 9(3)(b) have not been rewritten. Employment income however includes income from holding an office. A company can hold an office - a common example is as a company secretary - so this section rewrites that aspect of the source legislation.
2448.Under subsection (2) the amount of income from an office charged to tax is determined in accordance with income tax law and practice and under subsection (4) the provisions of ITEPA govern the calculation of the income from this source. The section uses “calculated” for “computed”.
2449.Subsection (3) provides that subsection (2) is subject to provisions of the Corporation Tax Acts. The Corporation Tax Acts are defined in section 831(1)(a) of ICTA as “enactments relating to the taxation of the income and chargeable gains of companies and of company distributions (including provisions relating also to income tax)”. In section 9(1) of ICTA the reference is to “the Tax Acts”. The reference has been narrowed since the qualifications to subsection (2) of this section only occur in corporation tax enactments.
2450.Section 9(2A) of ICTA which provides that for corporation tax purposes no income shall be computed under ITTOIA is repealed.
2451.Section 9(4) of ICTA expands upon section 9(1). The part of this subsection that applies an exemption in an Income Tax Act (other than ITTOIA and ITA) has been rewritten in subsection (4)(b), since it is not absolutely certain that exemptions are covered by subsections (1) to (3) of this section.
2452.The other part of section 9(4) that provides for any provision of the Income Tax Acts (again other than ITTOIA and ITA) which charges any amount to income tax to have like effect for corporation tax has not been rewritten since the determination of the charge is covered by subsections (1) to (2) of this section (and in the context of employment income in ITEPA free standing charges are not believed to be an issue).
2453.Section 9(5) of ICTA applies “where, by virtue of this section or otherwise” any enactment applies to both corporation tax and income tax. This provision is amended by this Act but is not repealed since it could have an application to an enactment that is not being rewritten.
2454.Section 9(6) of ICTA is repealed since it no longer serves a useful purpose.
2455.The interpretation of “office” in subsection (6) is based on section 5(3) of ITEPA. The ITEPA provision derives from the cases of Great Western Railway Company v Bater (1922), 8 TC 231 and Edwards v Clinch (1981), 56 TC 367. This accords with the application of income tax principles in subsection (2) based on section 9(1) of ICTA.
Section 970: Rule restricting deductions for bad debts
2456.This section deals with bad debts arising from the holding of an office. It is based on section 88D of ICTA.
2457.The corresponding rule about trade debts is in section 55.
2458.This section is needed because section 88D(4) of ICTA imports the extended meaning of “trade” in section 6(4) of ICTA. So the ICTA rule applies to a vocation and also to an office or employment. In this Act, for corporation tax purposes a company cannot carry on a vocation or be employed.
2459.Subsection (1) excludes from the rule any debts that are dealt with by the loan relationship rules in Parts 5 and 6 of the Act. Section 88D(1) of ICTA also excludes debts that are dealt with by the rules for derivative contracts and intangible fixed assets. Those rules are not relevant to an office-holder and so are not mentioned in the section.