Section 817: Priority of other tax provisions
2434.This section is based on section 777(10) of ICTA. It replicates exactly section 754 of ITA.
2435.Paragraph (a) gives Chapter 5 of Part 5 of ITTOIA (which is an income tax provision) priority over this Part (which is a corporation tax provision). This is necessary because without it there might be the possibility of a double charge. The possibility arises because the company liable to corporation tax under this Part is not necessarily the person to whom the gain has accrued; see section 821.
2436.Chapter 5 of Part 5 of ITTOIA treats any capital sum paid directly or indirectly by the trustees of a settlement to the settlor as the settlor’s income. If such a capital sum became available for payment because a gain of a capital nature had accrued, and the gain was derived from value provided by a company, then (but for paragraph (a)) the company and the settlor could both be taxed by reference to the same income.
2437.It may well be that such a case would be unlikely to arise in practice. But omitting paragraph (a) would remove a potential safeguard against double taxation and so it has been retained.
2438.Similarly, paragraph (b) refers to “the Tax Acts” (ie both the Corporation Tax Acts and the Income Tax Acts) both to ensure that there is no unintended change and for the sake of consistency with section 754(b) of ITA.
