Schedule 1: Minor and consequential amendments
Overview
3359.This Schedule makes minor and consequential amendments.
3360.The commentary on this Schedule makes specific points about certain of the amendments made.
Part 1: Income and Corporation Taxes Act 1988
Section 342: Tax on company in liquidation
3361.Section 342(9) of ICTA applies to an assessment made by virtue of section 8(4) of that Act. It should have been repealed when sections 206(1) and 213 of, and Schedule 23 to, FA 1993 repealed section 8(4) of ICTA. Section 8(4) dealt with a situation where rates of tax were uncertain. Section 342(9) is obsolete and is repealed without replacement.
Section 343: Company reconstructions without a change of ownership
3362.Section 343(11) of ICTA predates Corporation Tax Self Assessment and is now redundant. It is repealed without replacement.
3363.Section 343(12) of ICTA is a saving for the amendments made to the predecessor of section 343(9) and (10) of that Act by FA 1986. It is now spent, and is repealed without replacement.
Section 505: Charitable companies: general
3364.Section 505(1AA) defines “relevant foreign distribution” for section 505(1)(c)(iib). Subsection (1)(c) was repealed by paragraph 4(3) of Schedule 14 to FA 2009 leaving the definition otiose. The repeal of section 505(1AA) was overlooked by FA 2009 and that is now being corrected.
Section 511: The Electricity Council and Boards, the Northern Ireland Electricity Service and the Gas Council
3365.The section deals with the Electricity Council and Boards, the Northern Ireland Electricity Service and the Gas Council. None of these bodies now exists. The only part of the section that has not so far been repealed is subsection (7). This deals with the application of the Corporation Tax Acts to the Gas Council. It is obsolete and is repealed without replacement.
Section 513: British Airways Board and National Freight Corporation
3366.The section ensures continuity of tax treatment for the successor company of the British Airways Board and the successor company of the National Freight Organisation. The section is obsolete and is repealed without replacement.
Section 767B: Change of company ownership: supplementary
3367.Section 767B(1) and (3) of ICTA refer to section 86 of TMA (interest on overdue tax) in so far as it has effect in relation to accounting periods ending on or before 30 September 1993. These references are spent and are repealed without replacement.
Section 768A: Change in ownership: disallowance of carry back of trading losses
3368.Section 768A(3) of ICTA is the commencement provision for that section. It is spent and is repealed without replacement.
Section 768B: Change in ownership of company with investment business: deductions generally
3369.Under paragraph 6(b) of Schedule 28A to ICTA, the amounts to be apportioned between notional accounting periods in section 768B(4)(c) of ICTA include excess business charges.
3370.Paragraph 7(1)(aa) of Schedule 28A to ICTA states how the apportionment of excess business charges is to be made.
3371.Section 768B(7) and (9)(b) of ICTA states how the apportioned charges are to be treated for the purposes of sections 75 and 338 of that Act.
3372.Paragraphs 13(1)(c) and 16(1)(aa) of Schedule 28A to ICTA are the provisions corresponding to paragraphs 6(b) and 7(1)(aa) of that Schedule which apply in a case which comes within section 768C, rather than section 768B, of that Act.
3373.The “charges” in section 768B(7) and (9)(b) of ICTA and paragraphs 6(b), 7(1)(aa), 13(1)(c) and 16(1)(aa) of Schedule 28A to that Act are charges on income. The scope of corporation tax relief for “charges on income” has been progressively cut down, and nowadays only charitable donations can rank as charges: see section 338A of ICTA, which is rewritten in Part 6 of this Act.
3374.To come within paragraph 6(b) or paragraph 13(1)(c) of Schedule 28A to ICTA, a payment must meet three conditions.
It must be a charitable donation within section 338A(2)(b) or (c) of that Act.
It must be wholly and exclusively for the purposes of the company’s business.
It must not be deductible in computing profits or any description of profits for the purposes of corporation tax (for example, as an expense of management within Part 16 of CTA 2009). See section 338A(3) of ICTA.
3375.It is not possible for a payment to meet all three of those conditions. Section 768B(7) and (9)(b) of ICTA and paragraphs 6(b), 7(1)(aa), 13(1)(c) and 16(1)(aa) of Schedule 28A to that Act are therefore obsolete, and are repealed without replacement.
Section 774: Transactions between dealing company and associated company
3376.Section 774 of ICTA is not rewritten, as it is obsolete. This Schedule consequentially amends it, because its repeal is outside the scope of this Act. HMRC will refer section 774 of ICTA to the Law Commission for inclusion in a future Statute Law (Repeals) Bill.
Section 776: Transactions in land: taxation of capital gains
3377.Like section 772 of ITA, section 833 does not rewrite the second limb of the definition of “land” in section 776(13)(a) of ICTA. That limb is repealed without replacement.
3378.In Schedule 1 to the Interpretation Act 1978 land is defined as including “buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land”. Although the Interpretation Act 1978 was largely a consolidation, the definition of land was new and only applies from the commencement of that Act.
3379.The origin of section 776(13)(a) of ICTA is section 32(12)(a) of FA 1969. This definition therefore predates the definition of land in Schedule 1 to the Interpretation Act 1978.
3380.The definition of “land” in force in 1969 was that contained in the Interpretation Act 1889. In section 3 of that Act land was defined as including “messuages, tenements, and hereditaments, houses and buildings of any tenure”. This section was derived from section 4 of Lord Brougham’s Act of 1850. The definition was never appropriate for Scotland, where messuages and hereditaments were unknown to the law.
3381.There is nothing in the definition of “land” in the Interpretation Act 1978 which is not also within the definition of “land” in section 776(13)(a) of ICTA.
3382.The Interpretation Act 1978 refers to “buildings and other structures”. Section 776(13)(a) of ICTA merely refers to “buildings”. But this cannot be read as excluding “structures”, because what is a building is a question of degree and circumstance and case law makes it clear that virtually any kind of structure is capable of being a building.
3383.Adopting the Interpretation Act definition of “land” for the purposes of this Chapter would only be a change in the law if a “structure” (a) was not, a matter of normal English usage, “land”, (b) was not a “building” (and was therefore not brought within “land” by the second limb of section 776(13)(a) of ICTA), and (c) was nevertheless brought within “land” by the provision in the Interpretation Act that “land” includes buildings and other structures. There is no reason to believe that there are such “structures”.
3384.The Interpretation Act 1978 refers to “land covered with water”; section 776(13)(a) of ICTA does not. But there is no doubt that for legal purposes land includes every species of ground as well as waters and marshes. The term “land covered with water” has been used in legislation to distinguish, for rating purposes, land covered by artificial bodies of water such as reservoirs, filter beds belonging to water companies, canals, dry docks etc; no such distinction would be appropriate in the context of section 776 of ICTA, and therefore none is made.
3385.Finally, section 776(13)(a) of ICTA refers to “any estate or interest in land or buildings”, whereas the Interpretation Act 1978 is more specific, referring to “any estate, interest, easement, servitude or right in or over land” (emphasis added). Nonetheless, the section 776(13)(a) definition of land includes the rights italicised above. It is couched in generic terms and does not need to mention specific interests in land, including those particular to Scots law.
3386.It is therefore a matter of historical accident that section 776 of ICTA includes its own non-exhaustive definition of “land”, rather than using the standard non-exhaustive definition in the Interpretation Act 1978. This Act therefore omits the second limb of section 776(13)(a) of ICTA as redundant.
3387.This Act does not rewrite the first limb of section 776(13)(a) of ICTA as a Chapter-wide definition. Instead, references to “the land” are expanded to “all or part of the land” where appropriate.
3388.See also the commentary on the amendments made by this Schedule to paragraph 21A of Schedule 15 to FA 2000 and paragraph 11A of Schedule 5 to ITEPA.
Section 777: Provisions supplementary to section 776
3389.Section 777(4) of ICTA provides (to summarise) that documents are not conclusive evidence of persons’ intentions. It is repealed without replacement, because it merely declares what the courts would hold anyway.
Schedule 23A: Manufactured dividends and interest
3390.Paragraph 7A(9) of Schedule 23A to ICTA is repealed without replacement. Following paragraph 5 of Schedule 13 to FA 2007 and the repeal of section 737A of ICTA, it is not possible for a deemed manufactured payment to give rise to “relevant tax relief” within the meaning of paragraph 7A(10) of Schedule 23A to ICTA. So it is not necessary to extend the disallowance of relief in paragraph 7A(2) to deemed manufactured payments.
3391.Paragraph 8(3)(a) of Schedule 23A to ICTA is repealed without replacement, as it is unnecessary. See Change 51 in Annex 1.
Schedule 28A: Change in ownership of company with investment business: deductions
3392.Paragraphs 6(b), 7(1)(aa), 13(1)(c) and 16(1)(aa) of Schedule 28A to ICTA are repealed without replacement, on the ground that they are obsolete. See the commentary on the repeal by this Schedule of section 768B(7) and (9)(b) of ICTA.
3393.Paragraph 11(4) of Schedule 28A to ICTA defines “post-change accounting period” for the purposes of that paragraph. This expression no longer appears in that paragraph, therefore paragraph 11(4) of that Schedule is now otiose. It is repealed without replacement.
Part 2: Other enactments
Inheritance Tax Act 1984
Section 23: Gifts to charities
3394.This amendment extends the relief given by section 23 (gifts to charity) to gifts to a registered club. See the commentary on Chapter 9 of Part 13. It is based on paragraph 9(2) of Schedule 18 to FA 2002.
Finance Act 1989
Section 102: Surrender of company tax refund etc within group
3395.Section 102(3)(c) of FA 1989 refers to the payment of the tax credit comprised in franked investment income. This reference is obsolete, and section 102(3)(c) of FA 1989 is repealed without replacement.
Schedule 12: Close companies: consequential provisions
3396.The provisions mentioned in paragraph 1(a) of Schedule 12 to FA 1989 are rewritten in the Act. Paragraph 1(a) of that Schedule is rewritten with paragraphs 3 and 4 of that Schedule in sections 31, 465 and 1102 (companies with small profits, close companies and company distributions: powers to obtain information). Paragraph 1(c) and (d) of that Schedule are rewritten with paragraphs 3 and 4 of that Schedule in sections 401B and 421A of ITTOIA, which are inserted by this Schedule. Paragraph 1(b) of Schedule 12 to FA 1989 is spent and is not rewritten. Paragraph 1 of Schedule 12 to FA 1989 is therefore repealed.
Taxation of Chargeable Gains Act 1992
Section 190: Tax recoverable from another group company or controlling director
3397.The definition of “director” in section 190(13) of TCGA refers to section 168(8) of ICTA, which has been rewritten and repealed. Accordingly, the amendment to that subsection refers not only to section 452, which is based on section 417(5) of ICTA, but also to section 67(1) and (2) of ITEPA, which are based on section 168(8) of ICTA.
Section 217D: Industrial and provident societies and co-operatives
3398.Section 217D of TCGA rewrites and relocates the provisions in section 486(8), (9) and (12) of ICTA which are about corporation tax on chargeable gains.
Sections 256, 256A, 256B, 256C, 256D: Charities and gifts of non-business assets etc
3399.The separation between income tax and corporation tax also results in a separation of the legislation giving relief from tax for charities. Bodies constituted as charitable trusts are within the charge to income tax and capital gains tax while those constituted as companies or other forms of body corporate are within the charge to corporation tax.
3400.ITA amended section 256 of TCGA and inserted sections 256A and 256B to make specific provision for charitable trusts. This Act completes the process by making specific provision for charitable companies by amendment to section 256 and by the insertion of sections 256C and 256D. See the commentary on section 493.
Section 257: Gifts to charities etc
3401.This amendment extends the relief given by section 257 of TCGA to gifts to a registered club. See commentary on Chapter 9 of Part 13. It is based on paragraph 9(3) of Schedule 18 to FA 2002.
Charities Act 1993
Section 10: Disclosure of information to Commission
3402.Section 10(2) of the Charities Act 1993 allows institutions, undertakings or bodies listed in paragraphs (a) to (e) to disclose Revenue and Customs information to the Charity Commission.
3403.The exclusions in new subsection (2A) of section 10 of the Charities Act 1993 are necessary because Part 11 also rewrites claims under sections 507 and 508 of ICTA which, although exempting income under section 505(1) of ICTA, are not claims for exemption made under that section. See Change 36 in Annex 1.
Section 25A: Meaning of “Scottish recognised body” and “Northern Ireland charity”
3404.For these amendments see Changes 32, 35, 36and37 in Annex 1.
Finance Act 2000
Schedule 15: The corporate venturing scheme
3405.Schedule 15 applies only in relation to shares issued on or after 1 April 2000 but before 1 April 2010 (see section 63(4) of FA 2000). For that reason, Schedule 15 is not being rewritten.
Paragraph 21A
3406.In paragraph 21A of Schedule 15 to FA 2000, this Schedule omits the reference to the second limb of section 776(13)(a) of ICTA, for the reason given in the commentary on this Schedule in relation to that provision.
3407.For the definition of “property deriving its value from land” in paragraph 21A of Schedule 15 to FA 2000, this Schedule substitutes a suitable reference to section 833 of this Act, which, like that paragraph, is a corporation tax provision.
Paragraph 46(2)
3408.Part 6 of Schedule 15 provides for the withdrawal or reduction of investment relief on the disposal of “relevant shares” (as defined in paragraph 2). For the purposes of that Part, paragraph 46(2) lists four types of disposal including:
“(a)by way of a bargain made at arm’s length for full consideration.”
3409.One of the requirements for relief to be available under Part 7 of Schedule 15 on the disposal of shares to which investment relief is attributable is set out in paragraph 67(3):
“(3)The second requirement is that the disposal on which the loss is incurred must be a disposal of the kind described in paragraph (a), (b), (c) or (d) of paragraph 46(2).”
3410.Change 11 in Annex 1 omits the words “for full consideration” from section 244(4)(a) rewritingparagraph 29(4)(a) of Schedule 16 to FA 2002. Section 68(2)(a) also omits those words when rewriting section 575(1)(a) of ICTA for the purposes of share loss relief in this Act.
3411.Paragraph 46(2)(a) of Schedule 15 to FA 2000 is the only other place in the Tax Acts where those words qualify the words “bargain made at arm’s length”. Change 11, therefore, also omits them from paragraph 46(2)(a) for the purposes of both Part 6 and Part 7 of Schedule 15.
Capital Allowances Act 2001
Section 63: Cases in which disposal value is nil
3412.This amendment provides that section 63(2) of CAA, which provides that the disposal value of plant and machinery disposed of by way of gift to a charity or certain other bodies is nil, also applies to a gift to a registered club. See the commentary on Chapter 9 of Part 13. It is based on paragraph 9(3) of Schedule 18 to FA 2002.
Section 99: The monetary limit
3413.The monetary limit for the purpose of expenditure by a company on long-life assets depends on the number of associated companies the company has. The changes in the rules for companies with small profits apply also to this rule. See Change 3in Annex 1.
Section 253: Companies with investment business
3414.The amendment to section 253(7) of CAA amends an error in the source legislation: the reference to section 768C(11) of ICTA should be to section 768C(5) of that Act. These provisions are rewritten in sections 682(13) and 699(3) of the Act.Since the provision being amended is merely a subjection, this correction does not change the law.
Schedule A1: First-year tax credits
3415.`For the amendments to Schedule A1 see Changes 32, 35, 36and37 in Annex 1.
Finance Act 2002
Schedules 34 and 35: Stamp duty: withdrawal of group relief and withdrawal of relief for company acquisitions: supplementary provisions
3416.The definitions of “director” in paragraph 8(4) of Schedule 34 to FA 2002 and paragraph 9(4) of Schedule 35 to that Act both refer to section 168(8) of ICTA, which has been rewritten and repealed. Accordingly, the amendments to those sub-paragraphs refer not only to section 452, which is based on section 417(5) of ICTA, but also to section 67(1) and (2) of ITEPA, which are based on section 168(8) of ICTA.
Income Tax (Earnings and Pensions) Act 2003
Section 68: Meaning of “material interest” in a company
3417.This provision amends section 68(2) and (3) of ITEPA for the sake of consistency with section 457. See the commentary on that section. This amendment is a drafting clarification, and does not change the law.
Schedule 2: Approved share incentive plans
3418.This Schedule amends paragraph 80 of Schedule 2 to ITEPA in line with the rewrite of section 234A of ICTA in the Act. See Change 58 in Annex 1.
Schedule 5: Enterprise management incentives
3419.In paragraph 11A of Schedule 5 to ITEPA, this Schedule omits the reference to the second limb of section 776(13)(a) of ICTA, forthe reasons given in the commentary on this Schedule in relation to that provision, and substitutes a suitable reference to section 188(3) of ITA. Paragraph 11A of Schedule 5 to ITEPA and section 188 of ITA are very similar provisions.
Companies (Audit, Investigations and Community Enterprise) Act 2004
Section 54: Becoming a charity or a Scottish charity: requirements
3420.This amendment replaces a reference to section 505(1) of ICTA with a reference to the sections of this Act which rewrite that section. See Changes 32, 35, 36 and 37 in Annex 1.
Income Tax (Trading and Other Income) Act 2005
Section 148D: Lessor under long funding operating lease: periodic deduction
3421.This amendment substitutes for section 148D new sections 148D to 148DB in the same terms as sections 363 to 365 of this Act. Those sections of this Act are based on section 502E of ICTA which corresponds, for corporation tax purposes, to section 148D of ITTOIA.
Section 148E: long funding operating lease: lessor’s additional expenditure
3422.This amendment substitutes for section 148E new sections 148E to 148EB in the same terms as sections 366 to 368 of this Act. Those sections of this Act are based on section 502F of ICTA which corresponds, for corporation tax purposes, to section 148E of ITTOIA.
Section 148F: Lessor under long funding operating lease: termination of lease
3423.This amendment substitutes a revised section 148F in the same terms as section 369 of this Act. That section of this Act is based on section 502G of ICTA which corresponds, for corporation tax purposes, to section 148F of ITTOIA.
Chapter 3 of Part 4: Dividends etc. from UK resident companies and tax credits etc. in respect of certain distributions
3424.These provisions insert a number of sections and make other amendments in this Chapter (and inserts paragraph 78A in Schedule 2) to achieve the separation of the income tax effect of sections 249 and 252 of ICTA and related provisions from the equivalent corporation tax effect rewritten in this Act.
Section 415: Charge to tax under Chapter 6
3425.This provision replaces the reference to section 419 of ICTA with a reference to section 455 for the sake of consistency with section 460.
Finance Act 2005
Section 84: Taxation of securitisation companies
3426.Subsection (7) is not rewritten. That subsection set out conditions relating to the first regulations to be made under the section. The first regulations have been made (SI 2006/3296) and the subsection no longer has any application.
Income Tax Act 2007
Section 151: Losses on disposal of shares: interpretation of Chapter
3427.This amendment provides a stand alone definition of “investment company” in place of the definition by cross–reference to and modification of the definition in section 130 of ICTA. References to savings banks and banks for savings are omitted. The amended definition is the same as that in section 90(1) of this Act. See Change 21in Annex 1.
Sections 346, 348(7), 356, 361, 363, 365, 368, 369 and 373: Community investment tax relief
3428.These provisions amend sections 346, 348(7), 356, 361, 363, 365, 368, 369 and 373 of ITA to conform those provisions to the corresponding provisions of this Act (see the commentary on sections 227, 229, 238, 244, 246, 248, 251, 252 and 260).
Sections 340 and 341: Application and criteria for accreditation and terms and conditions of accreditation
3429.Section 219(1)(a) of this Act provides that accreditation under the powers in Chapter 2 of Part 7 of ITA has effect for the purposes of Part 7 of this Act. The new subsections introduced by these amendments complete the picture by clarifying in ITA that the powers in Chapter 2 of Part 7 of that Act can be exercised for corporation tax purposes as well as income tax purposes. They make explicit something that is already implicit.
Section 355: Securities or shares: no claim after disposal or excessive receipts of value
3430.This minor textual amendment corrects a typographical error in the description of section 364(1) of that Act.
Section 364: Value received by investor during 6 year period: securities or shares
3431.This minor textual amendment removes words from section 364(1)(d) of ITA which are unnecessary and have, accordingly, not been included in the corresponding section 247(1)(d) of this Act.
Chapter 6 of Part 13: Avoidance involving leases of plant and machinery
3432.These amendments amend sections 809ZA and 809ZC and replace section 809ZB with new sections 809ZE and 809ZF. The effect of these amendments is to conform the structure of Chapter 6 of Part 13 of ITA with that of Chapter 2 of Part 20 of this Act. That Chapter of this Act is based on sections 785B to 785E of ICTA which correspond for corporation tax purposes to sections 809ZA to 809ZD of ITA.
Section 991: Meaning of “bank”
3433.This provision amends the definition of “bank” to bring the income tax and corporation tax rewrite of the source legislation into line. See Change 65 in Annex 1.
Section 999: Meaning of “local authority”
3434.This provision amends the definition of “local authority”, in relation to Northern Ireland, to bring the income tax and corporation tax rewrite of the source legislation into line. See Change 60 in Annex 1.
Section 1000: Meaning of “local authority association”
3435.This provision amends the definition of “local authority association” to bring the income tax and corporation tax rewrite of the source legislation into line.
Schedule 2 Part 6: Transitionals and savings: losses on disposal of shares
3436.New paragraph 57A inserted in Schedule 2 to ITA clarifies the application of the transitional provisions in Part 6 of that Schedule (losses on disposal of shares) in cases where bonus shares have been issued. It ensures that the provisions in the form that they apply to the original shares also apply in the same form to the corresponding bonus shares whenever issued. Part 5 of Schedule 2 to this Act (losses on disposals of shares) contains a paragraph in the same terms. See Change 20 in Annex 1.
Finance Act 2008
Schedule 19: Reduction of basic rate of income tax: transitional relief for gift aid charities
3437.This Schedule to FA 2008 provides additional relief for gift aid donations. Paragraph 1(3)(a) of Schedule 19 refers to section 505(1)(c)(ii) of ICTA as the section under which a charitable company claims exemption for the donation. Before amendment by CTA 2009 section 505(1)(c)(ii) referred to tax under Case III of Schedule D. CTA 2009 amended section 505(1)(c)(ii) to refer to those parts of CTA 2009 which replaced Schedule D Case III. Paragraph 1(3)(a) of Schedule 19 was not amended, however, leaving that statutory reference to refer only to non-trading profits on loan relationships (section 299 of CTA 2009). The reference in Schedule 19 should instead have referred to section 505(1)(c)(iizb), exemption from tax under Part 7 of CTA (annual payments), since gift aid payments are treated as annual payments under section 25 of FA 2002. This amendment substitutes for the implied reference to section 505(1)(c)(iizb) a reference to a claim for exemption by virtue of section 472 or 475 of this Act.
3438.It is not considered that this changes the law since the current reference to section 505(1)(c)(ii) does not make proper sense and Parliament cannot have intended to change the effect of Schedule 19. Accordingly paragraph 1(3)(a) must be interpreted to refer to section 505(1)(c)(iizb).
Charities Act (Northern Ireland) 2008
Section 45: Meaning of “Scottish recognised body” and “England and Wales charity” in sections 43 and 44
3439.For these amendments see Changes 32, 35, 36and 37 in Annex 1.
Company Tax Act 2009
Section 221A: Sums to which sections 217 to 221 do not apply
3440.Section 774G(7) of ICTA provides, to summarise, that if section 774A or 774C of that Act applies then sections 277 to 281 of ITTOIA and sections 217 to 221 of CTA 2009 (lease premiums) do not. In consequence of the rewrite of sections 774A to 774G of ICTA for corporation tax purposes in this Act, section 774G(7) of ICTA is rewritten for corporation tax purposes as new section 221A of CTA 2009.
Section 520: Provision not at arm’s length: non-deductibility of relevant return
3441.The reference to any deduction against total profits in subsection (2)(b) is amended to refer to any deduction from total profits. This is for consistency with the terminology used in the Act to describe the way in which effect is given to reliefs which operate against total profits. See Step 2 of section 4(2).
Section 1219: Expenses of management of a company’s investment business
3442.See the commentary on section 4 for an explanation of this amendment.
Schedule 2: Transitionals and savings etc
Part 1: General provisions
3443.These paragraphs ensure continuity of the law, despite the fact that this Act repeals and rewrites provisions.
3444.Paragraph 2 makes clear that the proposition about the continuity of the law in paragraph 1 does not apply to changes in the law made by this Act.
3445.The paragraphs in this Part stand instead of section 17(2) of the Interpretation Act 1978 and provide a comprehensive set of transitional arrangements.
Part 3: Currency
3446.A number of changes were made to the currency provisions in Schedule 18 to FA 2009. They took effect for accounting periods beginning on or after 29 December 2007. This Part of the Schedule ensures that the old rules continue to apply where a loss is carried back to an accounting period that commenced before 29 December 2007.
3447.The Schedule also enables a company to elect that the new rules only take effect for accounting periods beginning on or after the date of Royal Assent to FA 2009.
Part 5: Losses on disposal of shares
Disposals of new shares
3448.See the commentary on section 74 and Change 19 in Annex 1.
Relief after an exchange of shares for shares in another company
3449.See the commentary on section 87 and Change 19 in Annex 1.
Interpretation of Chapter
3450.This paragraph preserves the application of the definition of “investment company” in the source legislation in relation to shares issued before 1 April 2010. See Change 21 in Annex 1.
Application in relation to corresponding bonus shares
3451.This paragraph clarifies the application of the transitional provisions in this Part in cases where bonus shares have been issued. It ensures that the provisions in the form that they apply to the original shares also apply in the same form to the corresponding bonus shares whenever issued. See Change 20 in Annex 1.
Part 11: Close companies
3452.The saving for certain exceptions to the charge under section 455 (close companies: charge to tax in case of loan to participator) is based on section 420(2) of ICTA. It includes a minor change to bring the law into line with practice. See the commentary on section 456 and Change 30 in Annex 1.
Part 12: Charitable companies etc
Transactions in deposits
3453.The exemption under section 56(3)(c) of ICTA in relation to transactions in deposits is preserved to take account of any relevant matters still in existence that pre-date the loan relationships legislation of FA 1996. See the commentary to section 486.
Exemption for investment income and exemption for certain miscellaneous income
3454.These provisions reflect changes made FA 2009 to the taxation of distributions. Dividends of non-United Kingdom resident companies paid before 1 July 2009 were chargeable to tax but not dividends of United Kingdom resident companies.
Transactions with substantial donors and non-charitable expenditure
3455.The treatment of non-charitable expenditure was amended and the rules in relation to substantial donors were introduced in FA 2006. This Part of the Schedule preserves the previous treatment where relevant (see in particular the commentary on sections 496 and 516).
3456.Section 508, which rewrites section 506B(9) of ICTA, incorporates a prospective amendment to that subsection made by paragraph 15 of Schedule 9 to the Housing and Regeneration Act 2008. Under this saving provision section 508 reflects unamended section 506B(9) until the Order bringing in the amendment has been made and paragraph 15 comes into force.
Part 14: Co-operative housing associations and self-build societies
Concurrent exercise of functions
3457.Sections 644 and 653 provide a clear separation of powers between the Secretary of State and the Welsh Ministers for bodies in England and Wales. However, where the body is a “cross-border body”, that is a body which operates both in England and Wales, these provisions preserve the concurrent exercise of functions by the Secretary of State and the Welsh Ministers. See article2(c) of SI 1999/672 in relation to concurrent exercise, and paragraph 3(2) of Schedule 3 to the Government of Wales Act 1998 for the definition of “cross-border body”.
Delegation of functions to the Regulator of Social Housing
3458.This provision concerns the delegation of functions to the Regulator of Social Housing. Paragraphs 13 and 14 of Schedule 9 to the Housing and Regeneration Act 2008 amend sections 488(7A) and 489(5A) of ICTA respectively from a day to be appointed. Until that day is appointed, the provision in this Schedule preserves the existing arrangements. See also, in Schedule 1 to this Act, the amendments of the Transfer of Housing Corporation Functions (Modification and Transitional Provisions) Order 2008 (SI 2008/2839), which enable this provision to operate as if the substituted references to the Housing Corporation were references to the Regulator of Social Housing, in accordance with that Order.
Part 15: Transactions in securities
Transactions in securities: general
3459.This paragraph makes transitional provision for transactions in securities. It concerns corporation tax cases straddling 1 April 2010.
3460.Sub-paragraph (1) lays down the general rule that Part 15 supersedes Chapter 1 of Part 17 of ICTA. Most of the differences between that Chapter and Part 15 of this Act are verbal and not substantive. See the commentary on that Part. The only change in the law made in that Part is the replacement of references to “the Board” with references to officers of Revenue and Customs. See Change5 in Annex 1 and the commentary on section 740.
3461.Sub-paragraph (2) ensures that the six-year time limit for making assessments is not disturbed.
3462.Sub-paragraph (3) requires preliminary notifications commencing counteraction to be given under section 743 of this Act (and not under section 703(9) of ICTA) after 31 March 2010. Once HMRC have started counteraction under the new law, everything falls to be done under the new law.
3463.Sub-paragraph (4) provides that, if preliminary notification has been given under section 703(9) of ICTA before 1 April 2010, the old law (including, for example, the appeal provisions) continues to apply after 31 March 2010.
3464.Paragraph 129 of Schedule 2 to ITA also makes transitional provision for transactions in securities. It concerns income tax cases straddling 6 April 2007. The drafting of that paragraph was criticised by the First-Tier Tribunal in Grogan v Commissioners for HMRC.(8) HMRC do not agree with the First Tier-Tribunal’s view of that paragraph. But, in this paragraph, the opportunity has been taken to forestall future disputes over the validity of counteraction notices by making different transitional provision for corporation tax cases.
Part 16: Factoring of income etc
Application of section 771 (finance arrangements: exceptions)
3465.Section 771 is based on section 774E of ICTA.
3466.Sub-paragraph (1) of this paragraph is a saving for the second sentence of section 774E(1) of ICTA, which was repealed by paragraph 9(3)(b) of Schedule 25 to FA 2009. This saving applies in relation to transfers before 22 April 2009 in accounting periods which begin before that date and end on or after 1 April 2010.
3467.Section 774E(4)(b) of ICTA originally read as follows:
“(4)Section 774B or 774D does not apply so far as the structured finance arrangement is an arrangement in relation to which –
(b)paragraph 15 of Schedule 9 to the Finance Act 1996 (repo transactions and stock-lending) applies, or …”
3468.Paragraph 9 of Schedule 14 to FA 2007 substituted a new section 774E(4)(b) reading as follows:
“(b)Schedule 13 to the Finance Act 2007 (sale and repurchase of securities) applies, …”
3469.In that substituted version, CTA 2009 inserted before “applies” the words “or Chapter 10 of Part 6 of CTA 2009 (repos).”
3470.The amendment made by paragraph 9 of Schedule 14 to FA 2007 applied with effect in relation to an arrangement that comes into force on or after 1 October 2007: see article 3 of the Finance Act 2007 (Schedules 13 and 14) Order 2007 (SI 2007/2483).
3471.Furthermore, because of article 5 of that instrument, the pre-FA 2007 version of paragraph 15 of Schedule 9 to FA 1996 is still in force in relation to arrangements which would have been within Schedule 13 to FA 2007 but for having come into force before 1 October 2007.
3472.Section 774E(4)(b) of ICTA, as amended by FA 2007 and CTA 2009, is rewritten to section 771(5)(b) and new section 809BZN(5)(b) of ITA (which is inserted by Schedule 5 to TIOPA). Sub-paragraph (2) of this paragraph accordingly makes transitional provision for arrangements which came into force before 1 October 2007. See also paragraph 78 of Schedule 2 to CTA 2009 for modifications with which paragraph 15 of Schedule 9 to FA 1996 (as it stood before the substitution made by paragraph 18 of Schedule 14 to FA 2007) has effect.
Application of section 779 (income-transfer under loan or credit transaction)
3473.This paragraph is a saving for the words in section 786 of ICTA omitted by paragraph 9(1)(d) of Schedule 25 to FA 2009. This saving applies in relation to transfers before 22 April 2009 in accounting periods which begin before that date and end on or after 1 April 2010.
Part 17: Manufactured payments and repos
Manufactured dividends and manufactured overseas dividends: distributions paid before 1 July 2009
3474.This is a saving for provisions repealed by paragraphs 11 and 12 of Schedule 14 to FA 2009. These savings applyin relation to distributions paid before 1July 2009 in accounting periods which begin before that date and end on or after 1 April 2010.
Manufactured overseas dividends: overseas dividends paid before 22 April 2009
3475.The paragraph headed “Manufactured overseas dividends: overseas dividends paid before 22 April 2009” is a saving for provisions repealed by paragraph 1 of Schedule 29 to FA 2009. This saving applies in relation to overseas dividends paid before 22 April 2009 in accounting periods which begin before that date and end on or after 1 April 2010.
Part 21: Transfers of trade without a change in ownership
3476.These savings preserve the effect of the closing sentences of section 343(2) and (4) of ICTA.
Part 22: Use of different accounting practices within a group
3477.It is possible – although in practice very unlikely – that there could be companies with periods of account which (a) began before 1 January 2005 but (b) have not ended before the entry into force of this Act. Accordingly, the Schedule contains a saving for section 51(6)(a) of FA 2004.
Part 23: Company distributions
3478.The paragraphs in this Part primarily rewrite date-related rules in the source legislation for Part 23 of the Act or the commencement rules for amendments of that source legislation.
Exempt distributions
3479.This paragraph switches off paragraph 8(1) of this Schedule (which preserves the effect of a transitional or savings provision repealed by this Act) in respect of the repeal by this Act of the Corporation Tax (Implementation of the Mergers Directive) Regulations 2009 (SI 2009/2797), which amended section 213(4) of ICTA. It does so to allow the rule in section 1081(1) to apply to the whole of the first accounting period of a company to which this Act applies (that is, the first accounting period to end on or after 1 April 2010) rather than only to the part of that accounting period that follows the effective date of those regulations (distributions made on or after 11 November 2009). See Change 66 in Annex 1.
Schedule 3: Repeals and revocations
3480.This Schedule contains repeals and revocations of enactments, including some spent enactments.
3481.The repeals and revocations in Part 2 of this Schedule have effect only for the purposes of corporation tax (and in one case also PRT).
Schedule 4: Index of defined expressions
3482.This Schedule provides an index of defined expressions used in this Act. Nearly all of the definitions appear in this Act, but a few are contained in other Acts.
SC/3184/2008.
