Section 20(1) paragraph 1 of ICTA – the Schedule F charging provision
3357.Section 20(1) paragraph 1 of ICTA is an income tax only provision. It therefore applies directly to persons subject to income tax (unless they are dealers or certain individual members of Lloyd’s in which case they are taxed under Schedule D Case I or II).
3358.As an income tax only provision, section 20(1) paragraph 1 of ICTA does not directly apply to persons subject to corporation tax. This is clear from the wording of section 20(1) paragraph 1 of ICTA itself but confirmation of this is also given by section 6 of ICTA.
3359.Therefore, section 20(1) paragraph 1 of ICTA could only apply to corporation tax indirectly, that is, via section 9 of ICTA.
3360.However, section 9 of ICTA is subject to exceptions. On one interpretation of the legislation section 208 of ICTA is one such exception.
3361.Applying this interpretation, where section 208 of ICTA applies section 9 of ICTA does not and so section 20(1) paragraph 1 of ICTA cannot apply.
3362.An alternative interpretation is that section 208 of ICTA is not an exception to section 9 of ICTA but an exemption from corporation tax on dividends and other distributions charged under Schedule F.
3363.Applying this interpretation, section 9 of ICTA applies and so section 20(1) paragraph 1 of ICTA applies, but section 208 of ICTA prevents the dividend or other distribution from being chargeable to corporation tax.
3364.On either interpretation, if section 208 of ICTA applies there is no liability under section 20(1) paragraph 1 of ICTA. Conversely, if section 208 of ICTA does not apply, there is.
3365.There are three exceptions to section 208 of ICTA. These are:
section 95(1A)(c) of ICTA (dealers);
section 219(4A) of FA 1994 (Lloyd’s underwriters); and
section 434(1) of ICTA (franked investment income and life assurance profits).
3366.However, in each case Schedule F does not apply. Instead, dividends and other distributions are taxed under Schedule D Case I or Schedule D Case VI.
3367.There are therefore no instances where a body corporate acting in a beneficial capacity is chargeable to corporation tax under section 20(1) paragraph 1 of ICTA.
