Chapter 18: Other regimes involving the deduction of income tax at source
Overview
2951.This Chapter deals with three further deduction of income tax at source regimes.
2952.The first provides for a duty to deduct and account for “sums representing income tax” from certain prescribed payments and transfers to non-UK resident entertainers, sportsmen and sportswomen. It is based on sections 555 and 558 of ICTA. The Income Tax (Entertainers and Sportsmen) Regulations 1987 in SI 1987/530 have been made under these sections.
2953.The second enables the Commissioners for Her Majesty’s Revenue and Customs to make regulations providing for the collection, assessment and recovery of “prescribed amounts of income tax” in respect of Schedule A and UK property business income of persons whose usual place of abode is outside the United Kingdom. It is based on section 42A of ICTA. The Taxation of Income from Land (Non-residents) Regulations 1995 (SI 1995/2902) have been made under this section.
2954.The third enables the Treasury to make regulations providing for the assessment, collection and recovery of income tax from distributions made by a Real Estate Investment Trust in respect of a property rental business. It is based on sections 105, 122, 134 and 144 of, and paragraphs 3, 19 and 32 of Schedule 17 to, FA 2006. The Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (SI 2006/2867) were made on 1 November 2006 and are effective for accounting periods beginning on or after 1 January 2007.
Section 965: Overview of sections 966 to 970
2955.This section gives an overview of sections 966 to 970, which provide for the payment of sums representing income tax to the Commissioners for Her Majesty’s Revenue and Customs where certain payments and transfers are made in connection with United Kingdom performances by non-UK resident entertainers, sportsmen and sportswomen (visiting performers).
2956.Following the House of Lords decision in Agassi v Robinson [2006 UKHL 23](14), Schedule 1 to this Act amends section 556 of ICTA and section 13 of ITTOIA to make explicit that these sections will have effect regardless of whether there is a duty to deduct income tax under section 555 of ICTA. See Change 156 in Annex 1.
2957.Section 48(2)(b) of ITEPA has been amended by Schedule 1 to this Act to make it explicit that a transfer which is subject to deduction under the rules about visiting performers, is not also subject to the rules about the provision of services through intermediaries in Chapter 8 of Part 2 of ITEPA. See Change 161 in Annex 1.
Section 966: Duty to deduct and account for sums representing income tax
2958.This section sets the general duty to deduct and account for sums representing income tax where a payment or transfer is made in connection with a “relevant activity” carried out by a prescribed visiting performer. It is based on section 555(1), (2), (3) and (6) of ICTA.
Section 967: Calculation of sums representing income tax
2959.This section sets out how to calculate the sums which are required to be deducted and or accounted for under section 966. It is based on sections 555(4) and 558(2) and (3) of ICTA.
2960.Subsection (2) provides that the sums cannot exceed a maximum proportion equivalent to basic rate income tax.
2961.Subsections (3) and (4) allow the Treasury to make regulations in order to calculate the value of a transfer to which section 966 applies. In particular, the regulations may provide for that amount to be treated as a net amount corresponding to a gross amount from which income tax at the basic rate has been deducted.
Section 968: Treatment of sums representing income tax
2962.This section sets out the income tax treatment of any sums paid to the Commissioners for Her Majesty’s Revenue and Customs under section 966(3) or (4). It is based on section 555(8) to (11) of ICTA.
2963.Subsections (2) and (3) confirm that any payment made to the Commissioners is treated as made on account of the liability of another person to income tax or corporation tax and that the liability and the other person are to be found in accordance with prescribed rules.
2964.The regulations (regulation 12(1) of SI 1987/530) provide that the other person is the recipient of the payment or transfer. But where the recipient is of a “prescribed description” (for example the recipient is connected with the performer, see regulation 7 of SI 1987/530) then, under section 13(5) of ITTOIA, the other person will be the performer.
2965.Subsection (4) confirms that if the sum paid to the Commissioners exceeds the liability of the other person, then the Commissioners will repay so much of the amount as is appropriate to the other person. Again, the regulations provide that the other person is the recipient of the payment or transfer or, if the recipient is connected with the performer, the other person is the performer.
2966.Subsections (5) and (6) confirm that if there is no liability to make a payment under section 966 then the Commissioners will repay the sum to the recipient of the payment or transfer.
Section 969: Regulations
2967.This section provides that the Treasury may make various regulations regarding the sums to be paid, in particular provision for information, collection, assessment and recovery. It is based on sections 555(7) and 558(5) of ICTA.
Section 970: Supplementary
2968.This section sets out various supplementary provisions and is based on sections 555(5) and 558(1), (4), and (6) of ICTA.
2969.Subsections (2) and (3) state that an officer of Revenue and Customs may disclose certain information to others, without being precluded from doing so by any obligation as to secrecy.
2970.Under the source legislation (section 558(4) of ICTA) it is “the Board” who must decide whether to make any disclosure. But in practice it is an officer of Revenue and Customs who takes the decision. The references in section 558(4) of ICTA to “the Board” (and to “authorised” officer) have therefore been omitted. See Change 5 in Annex 1.
Section 971: Income tax due in respect of income of non-resident landlords
2971.This section enables regulations to be made about the collection of “prescribed amounts of income tax” in relation to “non-resident landlord income”. It is based on section 42A(1) to (3) of ICTA.
2972.Subsection (1) allows the Commissioners for Her Majesty’s Revenue and Customs to make regulations for the collection, assessment and recovery of “prescribed amounts of income tax” from “non-resident landlord representatives” in respect of “non-resident landlord income”. Regulation 8 of SI 1995/2902 provides that the amount is to be calculated at the basic rate of tax.
2973.Subsection (2) defines “non-resident landlord income” as income of a person whose usual place of abode is outside the United Kingdom, which is or may be chargeable to corporation tax under Schedule A or to income tax as profits of a UK property business under Chapter 3 of Part 3 of ITTOIA. This section applies regardless of whether any payment is actually made to the non-resident landlord.
2974.As the tax deducted will, in all cases, be income tax, all these regulation-making powers have been rewritten together, in this Act.
2975.Currently the regulations in SI 1995/2902 do not provide for payments to be made to the Commissioners in respect of Schedule A income (see regulations 8(3) and 9(3)). If in the future regulations were to be made, requiring amounts to be paid to the Commissioners in respect of Schedule A income, the amount paid would be a “prescribed amount of income tax” and would be capable of being set off against the non-resident landlord’s corporation tax liability by virtue of section 11(3) of ICTA.
2976.The source legislation makes reference to the charging of prescribed amounts. This reference to charging is removed to bring the rewritten version of section 42A of ICTA into line with other collection mechanisms. See Change 147 in Annex 1 and the commentary on section 963.
2977.For discussion of “usual place of abode”, see the commentary on section 874.
Section 972: Regulations under section 971
2978.This section makes further provisions about the regulations which can be made. It is based on section 42A(4) to (7) of ICTA.
2979.Subsection (3)(b) has been aligned to the wording of similar provisions. In particular it now includes a reference to savings.
Section 973: Income tax due in respect of distributions
2980.This section enables the Treasury to make regulations about the assessment, collection and recovery of income tax where a distribution is made by Real Estate Investment Trusts in respect of property rental business. It is based on sections 105, 122 and 134 of, and paragraphs 2, 3, 19 and 32(8) of Schedule 17 to, FA 2006.
Section 974: Regulations under section 973
2981.This section makes further provision about the regulations which can be made under section 973. It is based on sections 122 and 144 of, and paragraph 19 of Schedule 17 to, FA 2006.
2982.Subsection (1)(a) provides that regulations may be made requiring Real Estate Investment Trusts to deduct sums representing income tax at the basic rate.
2983.Paragraph 19(2) of Schedule 17 to FA 2006 has not been rewritten as it is unnecessary. Paragraph 19(2) modifies section 122(2) of FA 2006. Since this section is purely illustrative of the extent of the powers provided by section 973 (based on section 122(1) of FA 2006) it is not necessary to expand the provisions in this section.
2984.Previously, the power to make regulations in respect of a principal company was in Schedule 17 to FA 2006 (not in section 122). But as all the regulation making powers have been rewritten in one place (in section 973) it is not necessary to have a specific reference to a principal company of a group in this section. By not including a specific reference to the principal company (in this section), the power to make regulations in respect of such principal companies (under section 973) will not be limited.
[2006] STC 1056