Income Tax (Trading and Other Income) Act 2005
Section 13
3310.Following the House of Lords decision in Agassi v Robinson [2006 UKHL 23](16), section 13 of ITTOIA has been amended to make clear that when a payment or transfer of the type referred to in section 555 of ICTA is made, a liability to income 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.
Section 51
3311.Section 51 of ITTOIA is repealed under the new approach to charges on income and patent royalties. See Change 81 in Annex 1.
Section 108
3312.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430 of this Act.
Section 272
3313.This section is consequentially amended as a result of the repeal of section 51 of ITTOIA. See Change 81 in Annex 1.
Section 457
3314.Subsection (3) is repealed as it is no longer necessary. It deemed the profit on the disposal of deeply discounted securities to be income of the trustees for the purposes of applying the trust rate. It is already income of the trustees for other purposes by virtue of sections 429 and 437 of ITTOIA. And the liability of the trustees at the trust rate is now provided for directly by sections 481 and 482 of this Act (see Type 6).
3315.The substituted subsection (5) makes more explicit the requirement that the scheme’s accounts show the amount as income available for payment to unit holders or for investment. It also continues to ensure that the effect of section 3 of ICTA is preserved in the case of unauthorised unit trusts (UUTs). If the income referred to in subsection (1) is treated as income in the trust’s accounts, it is then treated as being paid out to unit holders (see section 469(3) of ICTA and section 547(2) of ITTOIA). So the trustees of the UUT are charged at the basic rate of income tax rather than the trust rate. See the commentary on section 504 of this Act.
Section 465A
3316.This new section specifies that an amount taxed under Chapter 9 of Part 4 of ITTOIA is treated as the highest part of total income. It is based on section 833(3) of ICTA. See also the commentary on section 1012 of this Act.
Section 467
3317.New subsection (1A) ensures that the amount charged forms part of “total income” of trustees in Step 1 of section 23 of this Act. This was expressly stated to be the case prior to ITTOIA (see section 547(9) of ICTA as it applied until 5 April 2005) and the position is now made explicit in line with the similar rule for individuals (section 465(5) of ITTOIA) and personal representatives (section 466(1) of ITTOIA).
3318.The amendment to subsection (7) omits the rule that the amount is charged at the trust rate (except for charitable trusts). It is unnecessary because gains within section 467 of ITTOIA are included in the list in section 482 of this Act (see Type 7).
Section 535
3319.This amendment addresses the provisions relating to chargeable event gains within Chapter 9 of Part 4 of ITTOIA. Relief under Chapters 2 (gift aid) and 3 (gifts of shares etc to charities) of Part 8 of this Act is not taken into account in computing top slicing relief. In the source legislation these provisions were in section 25(6) of FA 1990 (gift aid) and section 587B(2) of ICTA (gifts of assets etc). They are now located with the top slicing provisions themselves.
Section 539
3320.This section has been rewritten to clarify that relief for a deficiency is given as a tax reduction. A formal claims requirement has also been introduced. See Change 3 in Annex 1.
Section 619A
3321.This new section in ITTOIA replaces section 660C(3) of ICTA. It ensures that income under section 619(1)(a) and (b) of ITTOIA is treated as the highest part of the settlor’s income for the purposes of Chapter 2 of Part 2 of this Act.
Section 620
3322.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430.
Section 624
3323.New subsection (1A) makes it explicit that trustees’ expenses are not taken into account in measuring the income of a settlor under section 624 of ITTOIA. This follows from the fact that it is the income arising that is deemed to be the settlor’s and the income arising is the gross amount out of which the trustees may pay expenses.
Section 628
3324.This amendment removes redundant references to the British Museum and the Natural History Museum. See Change 79 in Annex 1 and the commentary on section 430 of this Act.
Section 646A
3325.This new section in ITTOIA is based on section 44 of FA 2000. It requires the apportionment of trustees’ expenses in a case where any income of a settlement would be treated as the income of a settlor but for the fact that it is given to or arises to a charity. Expenses are allocated rateably between charitable income and other income. The rule applies both in cases where expenses affect the amount of income liable at the special trust rates, and in cases where expenses affect the amount of income of a beneficiary liable to income tax. Section 44 of FA 2000 is being amended to provide for the position of a beneficiary within the charge to corporation tax. For the treatment of expenses generally see Change 91 in Annex 1.
Section 680A
3326.This new section is based on section 698A of ICTA. It ensures that payments by personal representatives to beneficiaries out of income retain the character of the underlying income. The opportunity has been taken to clarify a point of doubt in the source legislation. See Change 162 in Annex 1.
3327.It may be noted that section 698A(1) and (2) of ICTA apply only where income is treated under “this Part” in a particular way. In fact, following ITTOIA, the income tax cases to which “this Part” previously applied are now in Chapter 6 of Part 5 of ITTOIA. But paragraph 5 of Schedule 2 to ITTOIA enables the reference to “this Part” to be read as embracing the ITTOIA provisions now in Chapter 6 of Part 5 of ITTOIA.
Section 682
3328.New subsection (4A) ensures that the amount charged forms part of “total income” in Step 1 of section 23 of this Act. If exceptionally the relief being recovered under section 682(4)(b) was a relief given as a tax reduction, then the recovery is a charge to an amount of income tax instead (see section 32 of this Act).
Schedule 2
Paragraph 109
3329.Amendment to this transitional provision is necessary because section 539 of ITTOIA has been rewritten. See the commentary on Schedule 1 (section 539 of ITTOIA). Relief for a deficiency within this provision is given as a deduction from total income instead of as a tax reduction.
[2006] STC 1056
