Income Tax (Trading and Other Income) Act 2005

Part 5 U.K. Savings and investment income: general

Open-ended investment companies: saving for powers to make provision corresponding to provisions applicable to unit trusts U.K.

78 (1) Despite the enactment by this Act in the OEIC sections of provisions previously contained in regulations made under section 152 of FA 1995, the Treasury may continue to make regulations under that section for achieving any purpose that could be achieved by such regulations before the coming into force of the OEIC sections. U.K.

(2) Accordingly—

(a) regulations under that section may make provision for securing, in relation to the matters mentioned in subsection (1)(a) to (c) of that section, that the provision made by the OEIC sections corresponds, subject to such modifications as the Treasury consider appropriate, to the provision made by the enactments mentioned in subsection (2) of that section in relation to—

(i) unit trusts,

(ii) rights under, and the assets subject to, such trusts, and

(iii) transactions for purposes connected with such trusts, and

(b) that section has effect with such modifications as are required for the purposes of this paragraph.

(3) In this paragraph—

• “the OEIC sections” means—

  (a)

  sections 373 to 375 of this Act (under which certain amounts are treated as interest paid by open-ended investment companies), and

  (b)

  sections 386 to 388 of this Act (under which certain amounts are treated as dividends paid by open-ended investment companies), and

• “unit trust” has the same meaning as in section 152 of FA 1995 (see subsection (7)).

[F1 Stock dividends issued in respect of shares issued before 6 April 1975 U.K.

Textual Amendments

F1 Sch. 2 para. 78A and cross-heading inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 471(3) (with Sch. 2)

78A (1) This paragraph applies if— U.K.

(a) share capital is issued by a UK resident company in respect of shares in the company issued before 6 April 1975 (“the old shares”),

(b) the old shares confer on the holder a right to convert them into, or exchange them for, shares of a different class, and

(c) as a result of the issue of the share capital, income would (apart from this paragraph) be treated as arising under section 410(2), (3) or (4) (stock dividend income).

(2) Section 410 does not apply to the protected part of any bonus share capital issued by the company in connection with an exercise of that right.

(3) For the purposes of sub-paragraph (2), the protected part of the bonus share capital is however much of it (if any) would have been issued if the right had been exercised so as to bring about the conversion or exchange of the shares on the earliest possible date after 5 April 1975.

(4) In this paragraph “share” includes stock, and any other interest of a member in a company

(5) Section 1113 of CTA 2010 (meaning of “in respect of shares”) applies in relation to this paragraph as it applies in relation to Part 23 of CTA 2010.]

Deeply discounted securities issued in accordance with qualifying earn-out right U.K.

79 U.K. Despite the repeal by this Act of section 104(4) of FA 2002, sections 430(5) and 442 (securities issued in accordance with qualifying earn-out right) apply whenever the security was issued.

Deeply discounted securities: deemed transfers of strips on 5th April U.K.

80 (1) Despite the repeal by this Act of paragraph 14(4) of Schedule 13 to FA 1996, a person who was deemed under that paragraph to have transferred a strip on 5th April 2005 is treated for the purposes of Chapter 8 of Part 4 (profits from deeply discounted securities) as if the person had re-acquired the strip under that paragraph on 6th April 2005 for an amount equal to the amount for which it was deemed to have been transferred. U.K.

(2) That Chapter and this Part of this Schedule apply to a deemed transfer and reacquisition under that paragraph (including a reacquisition within sub-paragraph (1)) as if it were a transfer and reacquisition under section 445(2) and (3).

(3) Section 452 (power to modify that Chapter for strips) applies as if this paragraph were in that Chapter.

Deeply discounted securities: restriction of profits and losses on strips U.K.

81 (1) Sections 447 and 448 (restriction of profits and losses on strips by reference to original acquisition cost) do not apply to a strip acquired before 15th January 2004. U.K.

(2) For the purposes of paragraph (1) any deemed acquisitions under paragraph 14(4) of Schedule 13 to FA 1996 or section 445(3) of this Act are ignored.

Deeply discounted securities: saving for charities' losses U.K.

82 U.K. The references in section 454(4) and (5) to trustees include any person who, had the loss been a profit—

(a) would have been eligible for relief from tax for the tax year in which the loss is sustained as a result of [F2 any of sections 521(4), 522(5), 523(5), 524, 529 to 533, 536 and 537 of ITA 2007 (certain exemptions: special rules about charitable trusts)] , or

(b) would have been so eligible but for section [F3 541 of that Act (restrictions on exemptions: attributing items of income to the non-exempt amount)] .

Textual Amendments

F2 Words in Sch. 2 para. 82(a) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 589(2) (with transitional provisions and savings in Sch. 2)

F3 Words in Sch. 2 para. 82(b) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 589(3) (with transitional provisions and savings in Sch. 2)

Deeply discounted securities: saving for pension trustees' losses U.K.

83 U.K. The references in section 454(4) and (5) to trustees include any person who, had the loss been a profit, would have been eligible for relief from tax for the tax year in which the loss is sustained as a result of—

(a) section 592(2) of ICTA (exemption from income tax for income from investments or deposit held for exempt approved pension schemes),

(b) section 608(2)(a) of ICTA (corresponding exemption for superannuation funds approved before 6th April 1980),

(c) section 613(4) of ICTA (corresponding exemption for parliamentary pension funds),

(d) section 614(2), (3), (4) or (5) of ICTA (corresponding exemption for certain overseas pension funds),

(e) section 620(6) of ICTA (corresponding exemption for retirement annuity funds), or

(f) section 643(2) of ICTA (corresponding exemption for approved personal pension schemes).

Exclusion of deeply discounted securities from section 711 to 728 of ICTA (accrued income profits) U.K.

84 U.K. F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 Sch. 2 para. 84 repealed (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1031, 1034, Sch. 3 Pt. 1 (with transitional provisions and savings in Sch. 2)

Gains from contracts for life insurance etc: foreign policies of life insurance U.K.

85 (1) This paragraph modifies the application of— U.K.

(a) section 474(4) (foreign policies of life insurance which are not qualifying policies),

(b) section 531(6) (foreign policies of life insurance to which section 530 applies), and

(c) section 532 (relief for policies and contracts with European Area Insurers),

in relation to a policy of life insurance which meets conditions A and B.

(2) Condition A is that the policy is a foreign policy of life insurance by virtue of paragraph (a) of the definition of that term in section 476(3).

(3) Condition B is that the income of the company which issued the policy was charged to corporation tax under section 445 of ICTA for an accounting period ending on or after the day on which the policy was issued.

(4) The policy is treated as having been a qualifying policy for any part of the chargeable period when—

(a) it would have been treated as a qualifying policy apart from section 474(4), and

(b) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met.

(5) The policy meets condition B in section 531(6) if—

(a) the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met throughout the chargeable period, and

(b) the conditions in sub-paragraph (3) of that paragraph are met throughout the period—

(i) beginning immediately after the end of the chargeable period, and

(ii) ending with the date on which the gains mentioned in section 531(1) arise.

(6) Despite the definition of “policy period” in section 532(5), for the purposes of determining whether conditions A to C in that section have been met in relation to the policy or contract throughout the policy period, that period is to be taken not to include—

(a) any part of the chargeable period when the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 to ICTA (as it then had effect) were met, and

(b) any subsequent period when the conditions in sub-paragraph (3) of that paragraph are met.

(7) In this paragraph “the chargeable period” means the period—

(a) beginning with the date on which the policy was issued, and

(b) ending with the last day of the last accounting period for which the company which issued the policy was liable to tax under section 445 of ICTA.

Gains from contracts for life insurance etc: exclusion of pension policies U.K.

86 (1) Subject to sub-paragraph (4), before 6th April 2006 Chapter 9 of Part 4 applies with the following amendments. U.K.

(2) For section 479 (exclusion of pension policies) substitute—

“479 Exclusion of pension policies

(1) This Chapter does not apply to a pension policy.

(2) In this section “pension policy” means—

(a) a policy of life insurance issued in connection with an approved scheme,

(b) a policy of insurance which is, or is evidence of, a contract for the time being approved under section 621 of ICTA (contracts to provide for surviving spouses [F5 and surviving civil partners] and dependants), or

(c) a policy of life insurance held in connection with an approved personal pension scheme.

(3) In this section—

• “approved scheme” has the meaning given by section 612(1) of ICTA, and

• “personal pension scheme” and “approved”, in relation to such a scheme, have the meaning given by section 630(1) of ICTA.”

F6 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained amendments—

(a) substituting section 479 of this Act for that section as substituted by sub-paragraph (2), and

(b) substituting “ non-registered occupational pension ” for “sponsored superannuation” in section 486 of this Act.

Textual Amendments

F5 Words in Sch. 2 para. 86(2) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1, 199

F6 Sch. 2 para. 86(3) omitted (with effect in accordance with Sch. 14 para. 18 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 14 para. 17(n)

Gains from contracts for life insurance etc: rights partially assigned U.K.

87 U.K. Section 505 (assignments involving co-ownership) does not have effect in relation to any transaction which—

(a) took place in relation to a policy or contract in an insurance year beginning on or before 5th April 2001, and

(b) would otherwise and by reason only of the application of that section fall to be taken into account as an assignment of a part of or a share in the rights conferred by the policy or contract in a calculation under—

(i) section 507 (periodic calculations in part surrender and assignment cases), or

(ii) section 511 (transaction-related calculations in part surrender and assignment cases).

88 (1) This paragraph applies if a calculation under section 507 or 511 in relation to a policy or contract requires account to be taken of any part of or share in the rights conferred by the policy or contract which has been assigned for money or money's worth in an insurance year beginning on or before 5th April 2001. U.K.

(2) Section 508 (the value of rights partially assigned) applies for the purposes of the valuation of each such part or share as if—

(a) in subsection (1) after “surrendered” (in both places where it occurs) there were inserted “ or assigned ”,

(b) in that subsection after “surrender” there were inserted “ or assignment ”, and

(c) subsection (4) were omitted.

Gains from contracts for life insurance etc: regulations providing for relief where foreign tax chargeable U.K.

89 U.K. Regulations made under section 534 by virtue of paragraph 4 of this Schedule may apply—

(a) in relation to gains arising on or after 29th November 1994, and

(b) in relation to any gain arising before that date the income tax on which has not been the subject of an assessment that became final and conclusive before that date.

Gains from contracts for life insurance etc: pure protection group life policies U.K.

90 (1) For the purposes of Chapter 9 of Part 4, any event occurring before 9th April 2003 in relation to a policy of life insurance which, at the time of the event, was a pure protection group life policy is deemed not to be a chargeable event. U.K.

(2) For the purposes of this paragraph a policy of life insurance is at any time a pure protection group life policy if at that time it is a group life policy whose terms do not provide for any sums or other benefits to be paid or conferred except on death or disability.

Gains from contracts for life insurance etc: assessment of trustees etc U.K.

F7 91 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F7 Sch. 2 para. 91 repealed (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 62, Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

Transactions in deposits U.K.

92 U.K. Section 551 (charge to income tax on profits from disposal of deposit rights) does not apply if the person disposing of the rights acquired them before 7th March 1973.

93 (1) This paragraph applies if— U.K.

(a) a right falling within the definition of “uncertificated right” in section 552(2) is a right under an arrangement made on or before 16th July 1992, and

(b) the right to call for the issue of a certificate of deposit (as defined in that section) is a right under that arrangement.

(2) Chapter 11 of Part 4 (transactions in deposits) applies with the omission of section 552(1)(c) and (d)(i).

Disposals of futures and options involving guaranteed returns: certain pre-6th February 1998 transactions U.K.

94 (1) A transaction consisting in the running of a future to delivery or the exercise of an option is not treated as a disposal for the purposes of Chapter 12 of Part 4 if it took place before 6th February 1998. U.K.

(2) Sub-paragraph (1) is to be read as if it were part of section 564 (deemed disposal where futures run to delivery or options are exercised) (see, in particular, section 565).

Disposals of futures and options involving guaranteed returns: rates of tax for pension trustees U.K.

F8 95 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F8 Sch. 2 para. 95 omitted (with effect in accordance with Sch. 12 para. 18(1) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 12 para. 13(5)