3151.The amendments ensure that section 9 will not operate on the provisions in this Act to convert them into provisions of the Corporation Tax Acts. They mirror parallel amendments made by ITTOIA.
3152.Section 118 of ICTA has been substantially amended to incorporate definitions formerly included in section 117 of ICTA. Section 117 sets out the rules for the restriction of certain loss relief for individuals who carry on a trade as a limited partner while section 118 sets out similar rules for companies. Section 117 has been rewritten (see sections 104 to 106 of this Act) and repealed, so various definitions from that section need to be incorporated directly into section 118.
3153.The amendments to this section, and other provisions of Chapter 1 of Part 7 of ICTA, have the effect that entitlement to personal reliefs for individuals who, under the source legislation, were able to claim the reliefs only by virtue of meeting the condition in section 278(2)(a) of ICTA is provided for by these provisions, as amended, rather than by the provisions of Part 3 of this Act. See the overview commentary on Part 3.
3154.Subsection (3) is repealed because that rule is now in Part 2 of this Act.
3155.This new section corresponds to section 58 of this Act. The same oversight corrected there is corrected here also. See Change 8 in Annex 1.
3156.This new section corresponds to section 43 of this Act.
3157.One effect of these amendments is that transfers of blind person’s allowances or married couple’s allowances claimed under these provisions can be made only to other individuals whose entitlement to those allowances arises under these provisions, rather than under the provisions in Part 3 of this Act. See Change 7 in Annex 1.
3158.Section 266(6) and (6A) of ICTA are repealed, as they are obsolete. The Association of Friendly Societies have confirmed that no such policies have been written for many years and that all such existing policies have been converted to “paid-up”. They agree that the provision is no longer needed.
3159.This section will now govern entitlement to personal reliefs for a non-UK resident individual who is a Commonwealth citizen or an EEA national and does not meet the requirements of section 56(2) of this Act. It also applies to all individuals who are entitled to mainstream life insurance relief under section 266 of ICTA.
3160.Section 1034(3) of this Act provides that the enterprise investment scheme (EIS) sections in Part 5 of this Act do not have effect in relation to shares issued before 6 April 2007. Since it is helpful to apply Change 56 in Annex 1 to such shares when this Act comes into effect, there is a consequential amendment to section 312(2A) of ICTA. This applies the new interpretation of an administration reflected in section 252(2) of this Act to shares issued before 6 April 2007. The amendment will have effect where the administration commences on or after 6 April 2007 in accordance with the commencement provision in section 1034(1).
3161.References to qualifying deposit right in sections 349(3A) and (4) of ICTA have not been rewritten as they are obsolete. See Change 133 in Annex 1.
3162.The only interest relief remaining in ICTA is for interest payments on a loan to buy a life annuity by virtue of section 365 of ICTA. The relief is given under section 353 and the amendment makes clear that relief is given as a tax reduction.
3163.Section 368 is not being retained. It is very unlikely that interest would qualify for relief by virtue both of section 365 of ICTA and of some other provision. See Change 155 in Annex 1.
3164.Before the introduction of corporation tax in 1965, friendly societies were within the scope of the charge to income tax and were provided with an exemption from income tax. Since 1965 they have been within the scope of the charge to corporation tax and are not within the charge to income tax and so an exemption from income tax is not needed.
3165.Sections 459 to 466 provide exemptions for friendly societies. These provisions have their origin in FA 1966 (one year after the introduction of corporation tax) which provided for the taxation of profits of registered friendly societies above the exemption limit as if the society were a mutual insurance company (see section 463).
3166.Section 459 exempts unregistered societies from income and corporation tax if their income does not exceed £160. The low exemption for unregistered societies was maintained.
3167.Section 460(1) provides a similar exemption from income tax and corporation tax for registered friendly societies.
3168.Section 461 is concerned with exemption from profits, other than those arising from life or endowment business principally for societies registered before 1 June 1973. Accordingly, redundant references to income tax have been removed.
3169.Section 461B is concerned with exemption from profits, other than those arising from life or endowment business for qualifying societies and contains similar redundant references to income tax in subsections (1) and (5). Accordingly these have been removed.
3170.Section 467(1) provides tax exemptions for trade unions and employers’ associations. It contains a reference to income tax which is redundant and which has therefore been removed.
3171.Before the introduction of corporation tax in 1965, trade unions and employers associations were within the scope of the charge to income tax and were provided with an exemption from income tax. Since 1965 they have been within the scope of the charge to corporation tax.
3172.This section’s application to the trustees of an unauthorised unit trust is rewritten in this Act. Some provisions have been retained and new provisions inserted to set out the treatment of payments to unit holders liable to corporation tax.
3173.References to a qualifying deposit right in section 477A(1A) and (10) of ICTA have not been rewritten as they are obsolete. See Change 133 in Annex 1.
3174.Section 481(5A) of ICTA (deposit rights) has not been rewritten as it is obsolete. See Change 133 in Annex 1.
3175.The International Maritime Satellite Organisation (INMARSAT) have confirmed that the exemptions provided have become otiose. The opportunity has been taken to repeal the income tax and corporation tax exemptions at the same time.
3176.The references to income tax have been removed from section 519A of ICTA. These are not needed because, were it not for the exemption, all health service bodies would be subject to corporation tax, rather than income tax.
3177.Following the House of Lords decision in Agassi v Robinson [2006 UKHL 23](15), section 556 of ICTA has been amended to make clear that when a payment or transfer of the type referred to in section 555 of ICTA is made, no liability to corporation 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.
3178.New subsection (1A) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act.
3179.This section provides relief for an investment company which incurs an allowable loss for the purposes of corporation tax on chargeable gains on the disposal of shares in a qualifying trading company. If the conditions of the section are met, the amount of the allowable loss may be set off against income for the purposes of corporation tax. This section is supplemented by sections 575 and 576 of ICTA.
3180.Section 573(4) provides in part that, if relief for an allowable loss is obtained by a company under the section by set off against income for corporation tax purposes, no deduction is to be made for the loss for the purposes of corporation tax on chargeable gains.
3181.This amendment omits that provision. The equivalent provision in section 574(1) of ICTA has not been included in Chapter 6 of Part 4. Instead section 125A(1) of TCGA, introduced by this Schedule, contains both provisions.
3182.This amendment inserts a new subsection (4) defining “new consideration”. This definition was formerly in section 576(5) of ICTA which is repealed.
3183.This section supplements sections 573 to 575 of ICTA. The provisions of section 576(1) to (1B) and (4) to (5) are included in Chapter 6 of Part 4 so far as they supplement sections 574 and 575 of ICTA, but in the case of section 575 only so far as that section applies for the purposes of section 574.
3184.Section 576(1) and (1C) continue in force with necessary amendments so far as they supplement section 573 of ICTA.
3185.This amendment inserts a new subsection (1D) defining “holding”. This definition was formerly in subsection (5) which is repealed.
3186.Section 576(2) and (3) have effect for the purposes of corporation tax on chargeable gains where relief is obtained against income for corporation tax purposes under section 573 of ICTA and for the purposes of capital gains tax where share loss relief is obtained under section 574 of that Act. Those subsections have been omitted and their provisions are contained for both purposes in section 125A(2) and (3) of TCGA introduced by this Schedule.
3187.Section 576(4) defines a “qualifying trading company” in terms of its being an “eligible trading company” and having been such for a specified continuous period. Section 576(4A) defines an “eligible trading company” by applying the requirements of section 293 and other provisions of Chapter 7 of Part 3 of ICTA (enterprise investment scheme) with modifications. Section 134 of this Act avoids the double layer of definition in section 576(4) and omits the concept of an “eligible trading company”.
3188.The same approach has been taken in making consequential amendments to section 576(4) to (4B) for corporation tax purposes. Those subsections have been omitted and replaced by new sections 576A to 576K of ICTA, which, together with sections 573, 575, 576 and 576L, form new Chapter 5A of Part 13 of ICTA.
3189.Section 576(5) has been omitted and the terms defined in it which are relevant for corporation tax purposes are to be found in sections 575(4), 576(1D), and 576L of ICTA.
3190.This new section of ICTA mirrors section 134 of this Act. It replaces section 576(4) of ICTA.
3191.This new section of ICTA mirrors section 137 of this Act, which corresponds to section 181 with modifications.
3192.Subsection (2) corresponds to section 181(3) and subsection (6) corresponds to section 181(7). For the reason for the introduction of subsections (3) and (7) of section 181 see Change 42 in Annex 1 and the commentary on section 181.
3193.Subsection (5) corresponds to section 181(6), including the change made in section 181(6)(d) by Change 41 in Annex 1.
3194.The definition of “non-qualifying activities” in subsection (7) includes the change affecting the definition of that term for the purposes of section 181(8) made by Change 43 in Annex 1.
3195.This new section of ICTA mirrors section 138 of this Act.
3196.This new section of ICTA mirrors section 139 of this Act, which corresponds to section 185 with modifications. Change 44 in Annex 1 made to section 185(1)(a) is replicated in subsection (1)(a).
3197.These new sections of ICTA mirror sections 140, 141, 142, 143 and 144 of this Act respectively.
3198.This new section of ICTA mirrors section 145 of this Act. See Change 25 in Annex 1 and the commentary on section 145(1).
3199.It does not, however, include in subsection (3) any cross-reference to section 575(2) of ICTA as it is beyond the scope of this Act to make an amendment to section 575(2) of ICTA for corporation tax purposes corresponding to the amendment to the provisions of that subsection made for income tax purposes in section 136(2) of this Act. See Change 24 in Annex 1.
3200.This new section of ICTA mirrors section 146 of this Act.
3201.This new section of ICTA contains definitions formerly in section 576(5) of ICTA. Subsections (2) to (4) contain provisions to reflect that, in the new sections 576B to 576K of ICTA, the definition of “shares” in most cases either applies in a modified form or does not apply at all.
3202.The amendments to sections 587B and 587C of ICTA mean that they deal only with relief given to companies subject to corporation tax.
3203.The amendment to the definition of “charity” in section 587B(9) removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430.
3204.A new section 587BA replaces, for corporation tax, section 587C(2) and (3) of ICTA. The new section clarifies that, in cases where land is held by owners as joint tenants or as tenants in common, the fact that one or more owners may not be eligible for relief under section 587B of ICTA does not deny relief to other eligible owners. See Change 80 in Annex 1.
3205.The repeal of sections 710 to 727A of ICTA (together with the repeal of words in section 728(2) of ICTA) also omits the transitional corporation tax application of the provisions in those sections by section 710(1A) of ICTA. That transitional application of corporation tax is redundant. The provisions of Chapter 2 of Part 4 of FA 1996 (loan relationships) apply for corporation tax to such transfers as are dealt with for income tax by sections 710 to 727A of ICTA.
3206.The omission of the references to section 727A of ICTA removes what would otherwise have been the only income tax application of section 737E of ICTA. The income tax application of that section has been rewritten in Part 12 of this Act. See in particular sections 654 to 658.
3207.Section 742(9)(c) of ICTA, which defines “benefit” for the purposes of sections 739 to 741, is redundant. It is repealed without replacement.
3208.Section 746 of ICTA (persons resident in the Republic of Ireland) is obsolete. It is repealed without replacement.
3209.New subsection (3C) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act.
3210.New subsection (1A) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act.
3211.The amendments clarify how references to surtax in old double taxation arrangements are to be treated in relation to dividend income. See Change 157 in Annex 1.
3212.This section is being amended to make it clear that relief is given in computing income from the relevant source (in the same way as relief under section 811 of ICTA) rather than as a deduction from total income.
3213.This section is 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.
3214.In addition to substituting 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, this amendment also omits redundant corporation tax references for the reasons given in the commentary on the amendments made by this Schedule to sections 710 to 728 of ICTA.
3215.This section is being repealed without being rewritten, as it is unnecessary.
3216.This provision was enacted in 1927 on the introduction of surtax and was intended to meet the situation where deductions were allowed at different times and impacted on other reliefs (especially earned income relief). With today’s mechanisms for tax compliance and Self Assessment procedures, this provision is unnecessary.
3217.Section 832(5) is repealed as it has been overtaken by the Adoption and Children Act 2002 (if it was not redundant before). See Change 151 in Annex 1 and the commentary on section 989.
3218.Some provisions of these sections are not being rewritten.
3219.Section 835(2) and section 836 are obsolete in the context of Self Assessment.
3220.Section 835(6)(b) concerned charges on income, and has been replaced by rules providing that the relevant payments are deductions from income (if appropriate) in the year in which they are paid. See Change 138 in Annex 1.
3221.Section 835(7)(b) and (8) are unnecessary now that the structure of the tax calculation has been made more explicit.
3222.The inclusion of the European Investment Bank follows the approach in section 991 of this Act. See Change 135 in Annex 1 and the commentary on section 991.
3223.Paragraph 8 of Schedule 16 to ICTA has not been rewritten as it is obsolete following the abolition of Advance Corporation Tax (ACT) in April 1999.
3224.Prior to April 1999, paragraph 8 of Schedule 16 applied only to payments which “should have been included in a return under Schedule 13” (ie ACT payments). Following the abolition of ACT, section 91 of FA 1999 (which amended paragraph 8 of Schedule 16), did not simply repeal paragraph 8 of Schedule 16 but instead amended it to apply whenever a payment was included when it “should not have been so included”. This goes beyond the original intention of paragraph 8 and is unnecessary.
3225.Assessments made under Chapter 15 of Part 15 of this Act will always be due on the date mentioned in section 951 of this Act (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 paragraph 10(2) of Schedule 16 to ICTA to payments being “due within 14 days after the issue of the notice of assessment” has not been rewritten.
3226.The background is as follows.
3227.Paragraph 10(2) had its origin in paragraph 10(2) of Schedule 20 to FA 1972. Both paragraphs were identically written as follows:
“Income tax assessed on a company under this Schedule shall be due within 14 days after the issue of the notice of assessment (unless due earlier under paragraph 4(1) or 9 above).”
3228.The opening words of paragraph 4(1) of Schedule 20 to FA 1972 stated that paragraph 4(1) was subject to paragraph 4(4) of that Schedule.
3229.Paragraph 4(4) stated that where a payment was erroneously included on a return under Schedule 14 to FA 1972 (advance corporation tax (ACT)) and should have been included on a return under Schedule 20 (later Schedule 16 to ICTA), the Inland Revenue would raise an assessment. Under paragraph 10(2), the due date for such a payment was 14 days after the issue of the notice of assessment, this being an assessment other than one raised under either paragraph 4(1) or 9.
3230.Since the abolition of ACT by FA 1998 and the repeal of paragraph 4(3) of Schedule 16 to ICTA (paragraph 4(4) of Schedule 20 to FA 1972) by FA 1999 it is no longer possible to raise such an assessment. So all assessments raised under the source legislation will be due at the time the return is due under either paragraph 4(1) or 9.
[2006] STC 1056