Legalize / United Kingdom / Public General Act

Income Tax (Trading and Other Income) Act 2005

Type Public General Act

Publication 2005-03-24

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(646A) (1) No liability to income tax arises in respect of foreign pension income of a consular officer or employee in the United Kingdom for a foreign state if— (a) Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and (b) the officer or employee meets conditions A to C. (2) Condition A is that the officer or employee is not— (a) a British citizen, (b) a British overseas territories citizen, (c) a British National (Overseas), or (d) a British Overseas citizen. (3) Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question. (4) Condition C is that the officer or employee— (a) is a permanent employee of that state, or (b) was not ordinarily resident in the United Kingdom immediately before becoming a consular officer or employee in the United Kingdom of that state. (5) In this section— - “consular officer or employee” includes any person employed for the purposes of the official business of a consular officer at— 1. any consulate, 2. any consular establishment, or 3. any other premises used for those purposes, - “foreign pension income” means— 1. income to which section 573 or 629 applies, and 2. income arising from a source outside the United Kingdom to which section 609, 610, 611 or 633 applies; and - “reciprocal agreement” has the same meaning as in section 302. (6) Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302.

612

In section 655(2) (structure of Part 10) for the entries relating to sections 84 and 85 of FA 2000 substitute—

section 781 of ITTOIA 2005 (exemption from income tax for payments under New Deal 50plus); section 782 of ITTOIA 2005 (exemption from income tax for payments under employment zone programmes).

613

(1) Amend section 679 (taxable social security income: foreign benefits) as follows.

(2) In subsection (1) for the words “the amount” onwards substitute “ the full amount of the social security income arising in the tax year, but subject to subsection (2). ”

(3) For subsection (2) substitute—

(2) That income is treated as relevant foreign income for the purposes of Chapters 2 and 3 of Part 8 of ITTOIA 2005 (relevant foreign income: remittance basis and deductions and reliefs). (3) See also Chapter 4 of that Part (unremittable income).

614

After section 681 insert—

(681A) (1) No liability to income tax arises in respect of any benefit to which section 678 applies of a consular officer or employee in the United Kingdom for a foreign state if— (a) Her Majesty by Order in Council directs that this section applies to the foreign state for the purpose of giving effect to a reciprocal arrangement with that state, and (b) the officer or employee meets conditions A to C. (2) Condition A is that the officer or employee is not— (a) a British citizen, (b) a British overseas territories citizen, (c) a British National (Overseas), or (d) a British Overseas citizen. (3) Condition B is that the officer or employee is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as a consular officer or employee of the state in question. (4) Condition C is that the officer or employee— (a) is a permanent employee of that state, or (b) was not ordinarily resident in the United Kingdom immediately before becoming a consular officer or employee in the United Kingdom of that state. (5) In this section— - “consular officer or employee” includes any person employed for the purposes of the official business of a consular officer at— 1. any consulate, 2. any consular establishment, or 3. any other premises used for those purposes, and - “reciprocal agreement” has the same meaning as in section 302. (6) Section 302(5) to (7) apply to an Order under subsection (1) and the operation of this section as they apply to an Order under section 302(1) and the operation of section 302.

615

After section 716 (alteration of amounts by Treasury order) insert—

(716A) Any income, so far as it falls within— (a) Part 2, 9 or 10 of this Act, and (b) Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.), is dealt with under Chapter 3 of Part 4 of ITTOIA 2005.

616

(1) Amend Schedule 1 (abbreviations and defined expressions) as follows.

(2) In Part 1 in the appropriate place insert—

ITTOIA 2005	The Income Tax (Trading and Other Income) Act 2005

(3) In Part 2 in the appropriate place insert—

UK property business	section 832(1) of ICTA and Chapter 2 of Part 3 of ITTOIA 2005

617

(1) Amend Schedule 2 (approved share incentive plans) as follows.

(2) In paragraph 22(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1) and (2))” substitute “ Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act) ”.

(3) In paragraph 79(4) for the words from “section 68B(2)” to the end substitute “ Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan). ”

(4) In paragraph 80(3)(b) (other duties of trustees in relation to tax liabilities) for “Case V of Schedule D or Schedule F” substitute “ Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) ”.

(5) In paragraph 86(4)(c) at end insert “ that is issued in a case where section 410(2) or (3) of ITTOIA 2005 applies ”.

(6) In paragraph 87(2)(d) for sub-paragraph (ii) substitute—

(ii) sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc.)) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment),

618

(1) Amend Schedule 3 (approved SAYE option schemes) as follows.

(2) In paragraph 1(3) for “savings scheme” substitute “ savings arrangement ”.

(3) In paragraph 2(1)(b) for “savings schemes” substitute “ savings arrangements ”.

(4) In paragraph 14(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1) and (2))” substitute “ Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act) ”.

(5) In paragraph 23—

(a) in the heading (including the Part heading), for “scheme” substitute “ arrangement ”, and

(b) for “savings schemes”, in both places where it occurs, substitute “ savings arrangements ”.

(6) In paragraph 24(1)—

(a) in the heading, for “schemes” substitute “ arrangements ”,

(b) for “CCS scheme” substitute “ certified SAYE savings arrangement ”, and

(7) Omit paragraph 24(2).

(8) In paragraph 25—

(a) in the heading, for “schemes” substitute “ arrangements ”,

(b) in sub-paragraph (1), for “CCS scheme” substitute “ the approved savings arrangement ”, and

(c) in sub-paragraph (3)(a), for “CCS schemes linked to approved SAYE option schemes” substitute “ certified SAYE savings arrangements linked to approved SAYE option schemes ”.

(9) In paragraph 26—

(a) in the heading, for “scheme” substitute “ arrangement ”,

(b) in sub-paragraph (1), for “CCS scheme” substitute “ certified SAYE savings arrangement ”, and

(10) In paragraph 30(3), for “the CCS scheme” substitute “ the approved savings arrangement ”.

(11) In paragraph 48(1)—

(a) for “certified contractual savings scheme” substitute “ certified SAYE savings arrangement ”, and

(b) for “section 326(2) to (6) of ICTA” substitute “ section 703(1) of ITTOIA 2005 ”.

(12) In paragraph 49, for “certified contractual savings scheme (CCS scheme)” substitute “ certified SAYE savings arrangement ”.

619

In Schedule 4 (approved CSOP schemes), in paragraph 12(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1) and (2))” substitute “ Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act) ”.

620

(1) Amend Schedule 5 (enterprise management incentives) as follows.

(2) In paragraph 27(3)(a), for “under Case I or II of Schedule D” substitute “ as the profits of a trade, profession or vocation carried on wholly or partly in the United Kingdom ”.

(3) In paragraph 31(3), for “Chapter 1A of Part 15 of ICTA (see section 660G(1) and (2))” substitute “ Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act) ”.

Finance Act 2003 (c. 14)

621

The Finance Act 2003 is amended as follows.

622

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623

Omit section 176 (foster carers).

624

(1) Amend Schedule 24 (restriction of deductions for employee benefit contributions) as follows.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In paragraph 3(a) for “tax purposes” substitute “ corporation tax purposes ”.

(4) In paragraph 9(1) omit the definition of “for tax purposes”.

625

In Schedule 34 (policies of life insurance etc: miscellaneous amendments), in paragraph 15(1), after “1988” insert “ or Chapter 9 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 ”.

626

Omit Schedule 36 (foster carers).

Courts Act 2003 (c. 39)

627

In section 101(4)(a) of the Courts Act 2003 (bankruptcy of individuals with rights to receive periodical payments) for “section 329AA of the Income and Corporation Taxes Act 1988” substitute “ section 731 of the Income Tax (Trading and Other Income) Act 2005 ”.

Child Trust Funds Act 2004 (c. 6)

628

In section 14(1) of the Child Trust Funds Act 2004 (insurance companies and friendly societies) for “section 333 business” substitute “ plan business ”.

Finance Act 2004 (c. 12)

629

The Finance Act 2004 is amended as follows.

630

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631

Omit section 97 (exemption from income tax for certain interest and royalty payments: introductory).

632

Omit section 98 (exemption from income tax for certain interest and royalty payments).

633

Omit section 99 (permanent establishments and “25% associates”).

634

Omit section 100 (interest payments: exemption notices).

635

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636

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637

Omit section 103 (special relationships).

638

Omit section 104 (anti-avoidance).

639

Omit section 106 (transitional provision).

640

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641

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642

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643

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644

In section 186(1)(b) (scheme investments: income) for “which would” to the end substitute “ which are not relevant foreign income and which would otherwise be chargeable to income tax under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged). ”

645

(1) Amend section 189(2) (meaning of “relevant UK earnings”) as follows.

(2) In paragraph (b) for “Schedule D” substitute “ Part 2 of ITTOIA 2005 ”.

(3) For paragraph (c) substitute—

(c) income to which section 833(5B) of ICTA (patent income) applies.

646

In section 196(2) (relief for employers in respect of contributions paid) after “the purposes of” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

647

In section 197(10)(a) (spreading relief) after “charged under” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

648

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649

In section 200(a) (no other relief for employers in connection with contributions) after “the purposes of” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

650

(1) Amend section 246 (restriction of deduction for non-contributory provision) as follows.

(2) In subsection (2)(a) after “the purposes of” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

(3) In subsection (3)(a) after “charged under” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

651

(1) Amend section 249 of FA 2004 (amendments of ITEPA 2003) as follows.

(2) In subsection (3), in subsection (4) of the inserted section 393B—

(a) for paragraph (a) substitute—

(a) an excepted group life policy as defined in section 480 of ITTOIA 2005,

, and

(b) in paragraph (b) for the words from “condition 1” to the end of the paragraph substitute

— (i) condition A in section 481 of that Act would be met if paragraph (a) in that condition referred to the death, in any circumstances or except in specified circumstances, of that individual (rather than the death in any circumstances of each of the individuals insured under the policy) and if the condition did not include paragraph (b), and (ii) conditions C and D in that section and conditions A and C in section 482 of that Act are met, or

(3) In subsection (8), in the inserted section 395 of ITEPA 2003, for “Case VI of Schedule D” substitute “ subsection (2) of that section ”.

652

In section 280(1) (abbreviations and general index for Part 4) omit the “and” before the definition of “ITEPA 2003” and after that definition insert

and “ITTOIA 2005” means the Income Tax (Trading and Other Income Act) 2005.

653

(1) Amend Schedule 15 (charge to income tax on benefit received by former owner of property) as follows.

(2) In paragraph 1 (introductory) insert in the appropriate place—

“ITTOIA 2005” means the Income Tax (Trading and Other Income Act) 2005;

(3) In paragraph 8 (intangible property comprised in settlement where settlor retains an interest)—

(a) in sub-paragraph (1)(a)—

(i) for “section 660A of the Taxes Act 1988” substitute “ section 624 of ITTOIA 2005 ”, and

(ii) for “Part 15” substitute “ Chapter 5 of Part 5 ”, and

(b) in sub-paragraph (1)(b) for “subsection (2) of that section” substitute “ section 625(1) of ITTOIA 2005 (settlor's retained interest) ”.

(4) In paragraph 9(1) (intangible property comprised in settlement where settlor retains an interest), in the definition of “T”—

(a) in paragraph (a), for “section 547 of the Taxes Act 1988” substitute “ section 461 of ITTOIA 2005 ”,

(b) in paragraph (b) for “section 660A of that Act” substitute “ section 624 of that Act ”, and

(5) In paragraph 22(3)(b) (election for application of inheritance tax provisions) for “section 660A of the Taxes Act 1988” substitute “ section 624 of ITTOIA 2005 ”.

654

In paragraph 1(4) and (6) of Schedule 24, for the words from “(and” to “have” substitute “ has ”.

655

In paragraph 12 of Schedule 35 (pension schemes etc: minor and consequential amendments) for the words from “for” to the end substitute

for the words from the beginning to “, if the claimant” substitute Subject to subsection (2) below, section 274 of this Act and sections 192 to 194 of the Finance Act 2004, if the claimant .

656

(1) Amend Schedule 36 (pension schemes etc: transitional provisions and savings) as follows.

(2) In paragraph 41(a) (employers' contributions relieved before 6th April 2006) after “the purposes of” insert “ Part 2 of ITTOIA 2005 (trading income) or ”.

(3) In paragraph 53(2)(b) (benefits taxable under Chapter 2 of Part 6 of ITEPA 2003: contributions taxed pre-commencement) for “to tax under Case VI of Schedule D by virtue of” substitute “ to income tax under subsection (2) of ”.

Pensions Act 2004 (c. 35)

657

The Pensions Act 2004 is amended as follows.

658

In Schedule 3 (restricted information held by the Regulator: certain permitted disclosures to facilitate exercise of functions), in the second column, in the entry relating to the Commissioners of Inland Revenue or their officers—

(a) omit the “or” before paragraph (e), and

(b) at the end of that paragraph insert

or (f) the Income Tax (Trading and Other Income) Act 2005 (so far as relating to functions previously exercised under the Income and Corporation Taxes Act 1988).

659

In Schedule 8 (restricted information held by the Board: certain permitted disclosures to facilitate exercise of functions), in the second column, in the entry relating to the Commissioners of Inland Revenue or their officers—

(a) omit the “or” before paragraph (e), and

(b) at the end of that paragraph insert

or (f) the Income Tax (Trading and Other Income) Act 2005 (so far as relating to functions previously exercised under the Income and Corporation Taxes Act 1988).

SCHEDULE 2

Part 1 — General provisions

Continuity of the law: general

1

The repeal of provisions and their enactment in a rewritten form by this Act does not affect the continuity of the law.

2

Paragraph 1 does not apply to any change made by this Act in the effect of the law.

3

Any subordinate legislation or other thing which—

(a) has been made or done, or has effect as if made or done, under or for the purposes of a superseded enactment so far as it applied for relevant tax purposes, and

(b) is in force or effective immediately before the commencement of the corresponding rewritten provision,

has effect after that commencement as if made or done under or for the purposes of the rewritten provision.

4

(1) Any reference (express or implied) in this Act, another enactment or an instrument or document to a rewritten provision is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding superseded enactment had effect for relevant tax purposes, a reference to the superseded enactment so far as applying for those relevant tax purposes.

(2) In particular, any reference (express or implied) in this Act, another enactment or an instrument or document to—

(a) the profits of a UK property business,

(b) relevant foreign income, or

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding concept in a superseded enactment had effect for income tax purposes, a reference to that concept so far as applying for income tax purposes.

(3) Any reference (express or implied) in this Act, another enactment or an instrument or document to—

(a) things done under or for the purposes of a rewritten provision, or

(b) things falling to be done under or for the purposes of a rewritten provision,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding superseded enactment had effect for relevant tax purposes, a reference to things done or falling to be done under or for the purposes of the superseded enactment so far as applying for those relevant tax purposes.

5

(1) Any reference (express or implied) in any enactment, instrument or document to a superseded enactment in its application for relevant tax purposes is to be read, so far as is required for those relevant tax purposes, as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten provision has effect, a reference to the rewritten provision.

(2) In particular, any reference (express or implied) in any enactment, instrument or document to Schedule A, D or F or the Cases of Schedule D in their application for income tax purposes is to be read, so far as is required for income tax purposes, as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten concept has effect, a reference to the rewritten concept.

(3) Any reference (express or implied) in any enactment, instrument or document to—

(a) things done under or for the purposes of a superseded enactment in its application for relevant tax purposes, or

(b) things falling to be done under or for the purposes of a superseded enactment in its application for relevant tax purposes,

is to be read, so far as is required for those relevant tax purposes, as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten provision has effect, a reference to things done or falling to be done under or for the purposes of the rewritten provision.

6

(1) Paragraphs 1 to 5 have effect instead of section 17(2) of the Interpretation Act 1978 (c. 30) (but are without prejudice to any other provision of that Act).

(2) Paragraphs 4 and 5 apply only so far as the context permits.

General saving for old transitional provisions and savings

7

(1) The repeal by this Act of a transitional or saving provision relating to the coming into force of a provision rewritten in this Act does not affect the operation of the transitional or saving provision, so far as it is not specifically rewritten in this Act but remains capable of having effect in relation to the corresponding provision of this Act.

(2) The repeal by this Act of an enactment previously repealed subject to savings does not affect the continued operation of those savings.

(3) The repeal by this Act of a saving on the previous repeal of an enactment does not affect the operation of the saving so far as it is not specifically rewritten in this Act but remains capable of having effect.

General saving for section 9(5) of ICTA

8

(1) Sub-paragraph (2) applies if—

(a) as a result of this Act, an enactment which applies to both income tax and corporation tax (“the original enactment”) has become an enactment which applies to income tax and an enactment which applies to corporation tax (“the successor enactments”),

(b) immediately before 6th April 2005, section 9(5) of ICTA (taxes treated as one in certain circumstances) had effect in relation to the original enactment, and

(2) The successor enactments are not to be affected in their operation by the fact that income tax and corporation tax are distinct taxes but they are to apply in relation to income tax and corporation tax as if they were one tax so far as is—

(a) consistent with the Corporation Tax Acts, and

(b) required to preserve the effect of section 9(5) of ICTA,

and the successor enactments are to be read accordingly.

Partnerships involving companies

9

(1) References in this Act to any person are to be read, in the case of a person acting in partnership with other persons of whom at least one is a company chargeable to corporation tax, as references to all the partners so far as is required for the purposes of preserving the continuity of the law.

(2) References to a company or other person in any provision amended in its application for corporation tax purposes by this Act are to be read, in the case of a company acting in partnership with other persons of whom at least one is not a company, as references to all the partners so far as is required for the purposes of preserving the continuity of the law.

Interpretation

10

(1) In this Part—

“enactment” includes an enactment comprised in subordinate legislation (within the meaning of the Interpretation Act 1978 (c. 30)),

“relevant tax purposes” means, in relation to a superseded enactment, tax purposes for which the enactment has been rewritten by this Act, and

“superseded enactment” means an earlier enactment which has been rewritten by this Act for certain tax purposes (whether it applied only for those purposes or for those and other tax purposes).

(2) References in this Part to the repeal of a provision include references to its revocation and to its express or implied disapplication for income tax purposes of this Act.

(3) References in this Part to tax purposes are not limited to income tax purposes.

Part 2 — Changes in the law

11

(1) This paragraph applies if, in the case of any person—

(a) a thing is done or an event occurs before 6th April 2005, and

(b) because of a change in the law made by this Act, the tax consequences of that thing or event for the relevant period are different from what they would otherwise have been.

(2) If that person so elects, this Act applies with such modifications as may be necessary to secure that the tax consequences for the relevant period are the same as they would have been if the change in the law had not been made.

(3) In sub-paragraphs (1) and (2) “the relevant period” means—

(a) for income tax purposes, any period of account beginning before and ending on or after 6th April 2005, and

(b) for corporation tax purposes, any accounting period beginning before and ending on or after 6th April 2005.

(4) If this paragraph applies in the case of two or more persons in relation to the same thing or event, an election made under this paragraph by any one of those persons is of no effect unless a corresponding election is made by the other or each of the others.

(5) An election under this paragraph must be made—

(a) for income tax purposes, on or before the first anniversary of the normal self-assessment filing date for the tax year in which the period of account ends, and

(b) for corporation tax purposes, no later than two years after the end of the accounting period.

Part 3 — Trading income

Unpaid remuneration

12

(1) This paragraph applies for the purposes of section 36.

(2) In relation to a period of account ending before 27th November 2002, an amount charged in the accounts in respect of employees' remuneration includes an amount which is held by an intermediary with a view to its becoming employees' remuneration.

(3) In relation to a period of account ending on or after 27th November 2002, an amount charged in the accounts in respect of employees' remuneration includes an amount—

(a) in respect of employee benefit contributions (within the meaning of sections 38 to 44) made before that date, and

(b) which is held by an intermediary,

with a view to its becoming employees' remuneration.

Employee benefit contributions

13

Sections 38 to 44 do not apply to deductions that would otherwise be allowed—

(a) for a period ending before 27th November 2002, or

(b) in respect of employee benefit contributions made before that date.

14

(1) In relation to any time before the coming into force of ITEPA 2003—

(a) section 40(7) applies as if, in the definition of “employment income tax charge”, for “tax under ITEPA 2003” there were substituted “ income tax under Schedule E ”,

(b) section 41(1) applies as if for “treated as received” to the end there were substituted “ treated as received for the purposes of section 202A(1)(a) of ICTA (applying the rules in section 202B(1) to (6) of that Act (receipts basis of assessment for Schedule E)). ”, and

(2) The express provision made by this paragraph does not affect the construction of other provisions of this Act as a result of the operation of paragraph 5 of this Schedule on paragraph 4 of Schedule 7 to ITEPA 2003 (references in enactment to rewritten provisions include corresponding repealed provisions) or on any similar provision (for example paragraph 4 of Schedule 3 to CAA 2001).

15

(1) Subject to sub-paragraph (7), sections 38 to 44 apply before 6th April 2006 with the following amendments.

(2) In section 38(4)—

(a) for paragraphs (b) and (c) and the word “or” at the end of paragraph (c) substitute—

(b) contributions under a retirement benefits scheme within the meaning of Chapter 1 of Part 14 of ICTA (see section 611 of that Act), (c) contributions under a personal pension scheme approved under Chapter 4 of that Part (see section 630 of that Act), or

, and

(b) omit “For the purposes of paragraph (c)” to the end.

(3) In section 39—

(a) in subsection (1)(b) omit “, or in respect of, present or former”, and

(b) in subsection (2) omit “present or former”.

(4) In section 40—

(a) in subsection (1) for “, C or D” substitute “ or C ”, and

(b) omit subsection (5).

(5) In section 41(1) omit paragraph (b) and the word “and” before it.

(6) In section 44(1) omit the definition of “employer-financed retirement benefits scheme”.

(7) 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 an amendment substituting sections 38 to 44 of this Act for those sections as amended by sub-paragraphs (2) to (6) above.

Car or motor cycle hire

16

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17

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18

Section 55(1)(b) does not apply to expenditure which was incurred before 1st April 2002.

Tenants under taxed leases

19

(1) This paragraph relates to the operation of sections 60 to 67 where, in respect of a lease—

(a) there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, or

(b) there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).

In this paragraph and paragraph 20 such a receipt is referred to as a “pre-commencement receipt”.

(2) For the purposes of sections 60 to 67—

(a) the lease is treated as a taxed lease, and

(b) the pre-commencement receipt is treated as a taxed receipt.

(3) For the purposes of those sections, the “receipt period” of a taxed receipt which is a pre-commencement receipt is—

(a) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and

(b) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.

(4) For the purposes of sections 60 to 67 the “unreduced amount” of a taxed receipt which is a pre-commencement receipt is the amount of the pre-commencement receipt as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or (3) of ICTA.

(5) Sub-paragraph (6) applies to a taxed receipt which is a pre-commencement receipt arising as a result of section 34(2) of ICTA (obligation on tenant to carry out work under lease).

(6) If the obligation to carry out work included the carrying out of work which gave or will give rise to expenditure for which an allowance has been, or may be, made under the enactments relating to capital allowances, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.

20

(1) This paragraph provides for the application of section 61 as a result of section 63 if—

(a) a lease is a taxed lease as a result of paragraph 19,

(b) another lease is granted out of the taxed lease,

(c) in calculating the amount of a pre-commencement receipt in respect of the other lease, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and

(d) as a result of paragraph 19 the amount chargeable on the superior interest is the taxed receipt for the purposes of section 61.

(2) Sections 61 to 65 apply as follows—

(a) the pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 64 and 65,

(b) references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and

(i) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and

(ii) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.

(3) References to a reduction under section 37(2) or (3) of ICTA in a pre-commencement receipt by reference to the amount chargeable on the superior interest are to the difference between—

(a) the amount of the pre-commencement receipt before the operation of section 37(2) or (3) of ICTA, and

(b) the amount of the receipt after the operation of that subsection,

so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.

Seconded employees

21

(1) This paragraph applies if—

(a) the period of account of a trade begins before 1st April 2003 and ends on or after 6th April 2005, and

(b) in that period of account the person carrying on the trade made the services of a person employed for the purposes of the trade available to a self-governing school within the meaning of the Self-Governing Schools etc. (Scotland) Act 1989 (c. 39) on a basis that was stated and intended to be temporary.

(2) For the purposes of section 70 an “educational establishment”, in Scotland, includes such a school (despite the fact that, following the abolition of such schools on 1st April 2003, section 86(5)(d) of ICTA is not re-written in this Act).

(3) This paragraph applies to professions and vocations as it applies to trades.

Training courses for employees

22

(1) This paragraph applies if, without the modifications to section 588 of ICTA (training courses for employees) made by this Act—

(a) section 588(5) of ICTA would operate in relation to an employee by virtue of paragraph (a) of that provision and paragraph 37 of Schedule 7 to ITEPA 2003 (savings in relation to tax years before 2003-04),

(b) section 588(5) of ICTA would operate in relation to an employer by virtue of paragraph (b) of that provision and paragraph 37 of Schedule 7 to ITEPA 2003, or

(c) section 588(6) and (7) of ICTA would operate in relation to an employer by virtue of paragraph 37 of Schedule 7 to ITEPA 2003.

(2) Those modifications do not apply in relation to—

(a) the operation of section 588(5) of ICTA in relation to the employee as mentioned in sub-paragraph (1)(a),

(b) the operation of section 588(5) of ICTA in relation to the employer as mentioned in sub-paragraph (1)(b), and

23

(1) This paragraph applies if—

(a) at any time during the period beginning with 6th April 2003 and ending with 5th April 2005, a person (“the employer”) incurred expenditure in paying or reimbursing retraining course expenses within the meaning of section 311 of ITEPA 2003,

(b) the employer's liability to income tax for any tax year has been determined (before or after the passing of this Act, and by assessment or otherwise) on the assumption that, by virtue only of section 588(3) of ICTA, the employer is entitled to a deduction on account of the expenditure, and

(c) before 6th April 2005, no assessment has been made under section 29(1) of TMA 1970 by virtue of section 588(5) of ICTA of an amount due in consequence of the failure by the person in respect of whom the expenditure was incurred to meet a condition of the kind mentioned in section 312(1)(b)(i) or (ii) of ITEPA 2003.

(2) Section 75 (retraining courses: recovery of tax) applies in relation to the employer as if the condition in subsection (1) were met.

(3) In the application of that section to the employer, references to “the employee” are to the person in respect of whom the expenditure was incurred by the employer.

Contributions to urban regeneration companies

24

Section 82 does not apply to any contribution which was made to an urban regeneration company before 1st April 2003.

Local enterprise agencies

25

To the extent that any function of the Scottish Ministers under section 79 of ICTA was, before 6th April 2005, also exercisable by the Secretary of State for the purposes specified in section 2(2) of the European Communities Act 1972 (c. 68) that function as rewritten in—

(a) section 83(2) (meaning of “local enterprise agency”),

(b) section 84 (approval of local enterprise agencies), or

continues to be also exercisable by the Secretary of State for those purposes.

Expenses connected with patents, designs and trade marks

26

(1) This paragraph applies if—

(a) fees have been incurred, but not paid, for the purposes of a trade in connection with any of the matters mentioned in section 89 or 90,

(b) the fees were incurred in a period of account no part of which falls in the basis period for the tax year 2005-06 or a subsequent tax year, and

(2) A deduction is allowed for the fees in calculating the profits of the period of account in which they are paid.

Payments to Export Credits Guarantee Department

27

(1) This paragraph applies if—

(a) a sum is payable, but not paid, by the person carrying on a trade to the Export Credits Guarantee Department under an agreement mentioned in section 91(1)(a) or with a view to entering into such an agreement,

(b) the sum was incurred in a period of account no part of which falls in the basis period for the tax year 2005-06 or a subsequent tax year, and

(2) A deduction is allowed for the sum in calculating the profits of the period of account in which it is paid.

(3) This paragraph applies to professions and vocations as it applies to trades.

Reverse premiums

28

(1) Sections 101 and 102 do not apply to a reverse premium—

(a) which was received before 9th March 1999, or

(b) to which the recipient was entitled immediately before that date.

(2) In determining whether a reverse premium was one to which the recipient was entitled immediately before 9th March 1999, no account is to be taken of any arrangements made on or after that date.

Sums recovered under insurance policies etc.

29

(1) Section 106 does not apply if—

(a) a person carrying on a trade recovers a sum mentioned in that section, and

(b) the sum has been taken into account in calculating the profits of the trade of a tax year before the tax year 2005-06.

(2) This paragraph applies to professions and vocations as it applies to trades.

Meaning of “designated educational establishment”

30

To the extent that the power of the National Assembly for Wales to make regulations under section 84(5) of ICTA was, before 6th April 2005, also exercisable by the Secretary of State for the purpose of—

(a) implementing any Community EU obligation of the United Kingdom,

(b) enabling any such obligation to be implemented,

(c) enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Community EU Treaties to be exercised, or

(d) dealing with matters arising out of or related to any such obligation or rights or the operation of section 2(1) of the European Communities Act 1972 (c. 68),

that power as rewritten in section 110 continues to be also exercisable by the Secretary of State for those purposes.

Films and sound recordings

31

(1) This paragraph applies to—

(a) production expenditure in respect of the original master version of a film which (within the meaning of Chapter 9 of Part 2) was completed before 21st March 2000,

(b) production expenditure in respect of the original master version of a film which (within the meaning of that Chapter) is completed on or after that date, if the first day of principal photography was before that date (but see sub-paragraph (4)), and

(c) acquisition expenditure in respect of the original master version of a film which was incurred before 6th April 2000.

(2) For this purpose acquisition expenditure in respect of the original master version of a film includes the acquisition of any description of rights in the original master version of a film (whether or not held or acquired with it).

(3) In relation to expenditure to which this paragraph applies—

(a) section 130(4) applies with the omission of “that are held or acquired with it”,

(b) section 131(5) applies with the insertion at the end of “ or, if the expenditure is acquisition expenditure and the acquisition takes place after that time, at the time of the acquisition ”, and

(c) section 134(1) applies with the insertion after “acquisition expenditure,” of “ and the expenditure would otherwise constitute capital expenditure on the provision of plant or machinery for the purposes of Part 2 of CAA 2001, ”.

(4) This paragraph does not apply to expenditure falling within sub-paragraph (1)(b) if the person incurring the expenditure so elects.

(5) Any such election is irrevocable.

32

(1) Sections 134 and 135 do not apply in relation to expenditure incurred by a person carrying on a trade which consists of or includes the exploitation of original master versions of films if—

(a) the expenditure is incurred on the production or acquisition of an original master version of a film completed before 10th March 1992 (within the meaning of Chapter 9 of Part 2),

(b) the original master version is a certified master version,

(d) the film is genuinely intended for theatrical release.

(2) Sub-paragraph (1)(d) does not apply if—

(a) the original master version of the film was certified before 17th April 2002 by the Secretary of State under Schedule 1 to the Films Act 1985 (c. 21) as a qualifying film, tape or disc, or

(b) an application for such certification was received by the Secretary of State before that date.

33

Section 137 does not apply in relation to expenditure which was incurred before 10th March 1992.

34

Sections 138 and 138A do not apply in relation to production or acquisition expenditure in respect of the original master version of a film which was completed before 10th March 1992.

35

(1) Any requirement in Chapter 9 of Part 2 for a film to be genuinely intended for theatrical release does not apply to a film completed (within the meaning of that Chapter)—

(a) on or after 17th April 2002 if—

(i) an application for certification was received by the Secretary of State before that date, or

(ii) the film is a qualifying drama (see sub-paragraph (2)),

(b) before 1st January 2002 if—

(i) the film was certified by the Secretary of State before 17th April 2002, or

(ii) an application for certification was received by the Secretary of State before 17th April 2002, or

References in this sub-paragraph to certification are to certification of the original master version of the film under Schedule 1 to the Films Act 1985 (c. 21) as a qualifying film, tape or disc.

(2) A film is a qualifying drama if—

(a) it is a drama with an average production expenditure per hour of running time of the completed film greater than £500,000,

(b) it was commissioned on or before 17th April 2002, and

(3) For the purposes of sub-paragraph (2) “drama” does not include—

(a) anything in the nature of—

(i) an advertisement or promotional film,

(ii) a discussion programme, news or current affairs programme, quiz show, panel show, variety show or similar entertainment, or

(iii) a training film, or

(b) a film of a live event or of a theatrical or artistic performance given otherwise than for the purpose of being filmed,

but it includes a documentary involving the dramatic reconstruction of events if the dramatic content forms 50% or more of the running time.

(4) For the purposes of sub-paragraph (2) the production expenditure on a film means the total production expenditure in respect of the original master version of the film (as defined by section 141).

36

Sections 139 and 140 do not apply if—

(a) the expenditure was incurred before 2nd July 1997 (as determined by section 142), or

(b) the film was completed before that date (within the meaning of Chapter 9 of Part 2).

37

Sections 139(4) and 141(3) do not apply to any film which was completed before 17th April 2002.

38

The requirement in section 140 for the acquisition to be a relevant acquisition does not apply in relation to expenditure which was incurred before 30th June 2002 (as determined by section 142).

Certain telecommunication rights

39

Chapter 10 of Part 2 does not apply to an indefeasible right to use a telecommunications cable system (“IRU”) acquired before 21st March 2000.

40

(1) That Chapter also does not apply to an IRU acquired by a person on or after that date (directly or indirectly) from an associate or an associated company if the associate or associated company acquired the IRU before that date.

(2) In sub-paragraph (1)—

“associate” has the meaning given by section 448 of CTA 2010, and

“associated company”—in relation to another company, has the meaning given by section 449 of that Act, andin relation to any other person, means a company of which that person has control within the meaning of sections 450 and 451 of that Act.

Dealers in securities etc: taxation of amounts taken to reserves

41

(1) Section 149 does not apply in relation to periods of account beginning before 1st January 2005.

(2) But, in the case of a company required to prepare accounts—

(a) under the Companies Act 1985 (c. 6), or

(b) under the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)),

that section does apply in relation to a period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.

Purchase or sale of woodlands

42

Section 156 does not apply if the purchase mentioned in subsection (2) of that section was made under a contract entered into before 1st May 1963.

Ministers of religion

43

(1) This paragraph applies if—

(a) expenses have been incurred, but not borne, by a minister of a religious denomination on any of the matters mentioned in section 159(3),

(b) the expenses were incurred in a period of account no part of which falls in the basis period for the tax year 2005-06 or a subsequent tax year, and

(c) the part of the expenses corresponding to the amount under section 159(4) has not been taken into account in calculating the profits of the profession or vocation of the minister of any tax year.

(2) A deduction is allowed under section 159(3) for that part of the expenses in calculating the profits of the period of account in which the expenses are borne.

Waste disposal

44

If the predecessor ceased to carry on the trade carried on by the trader, or ceased to carry on a trade so far as relating to the site, before 21st March 2000, section 165 applies as if—

(a) “, or a predecessor,” in subsection (1) were omitted, and

(b) subsections (3) and (4) were omitted.

45

If the trade carried on by the trader was started before 1st April 1993, the definition of “waste disposal licence” in section 167(1) applies for the purposes of sections 165 and 166 as if paragraphs (d) and (e) of the definition were omitted (radioactive waste and nuclear site authorisations or licences).

46

Section 167(2) does not apply for the purposes of sections 165 and 166 if the trade was started before 1st April 1993.

Valuation of trading stock on cessation

47

(1) This paragraph applies if—

(a) a period of account of a trade begins before 6th April 2004 and ends on or after 6th April 2005 (“the straddling period of account”), and

(b) as a result of paragraph 48, the profits or losses of the period of account are to be calculated in accordance with Part 2 of this Act.

(2) Subsection (2) of section 173 (valuation of trading stock on cessation) does not apply in relation to the part of the period of account which—

(a) begins with the straddling period of account, and

(b) ends with 5th April 2004,

and the profits or losses of the trade are to be calculated accordingly.

Apportionment of profits or losses to tax years before tax year 2005-06

48

(1) This paragraph applies if—

(a) a period of account of a trade, profession or vocation begins before 6th April 2005 and ends on or after that date,

(b) the period of account, or part of the period of account, falls in the basis period for the tax year 2005-06,

(d) in order to arrive at the profits or losses of the basis period for any earlier tax year it is necessary to apportion the profits or losses of the period of account to any part of the period of account falling in that basis period.

(2) The profits or losses of the period of account—

(a) are calculated in accordance with Part 2 of this Act (and therefore, to that extent, that Part has effect for tax years before the tax year 2005-06), and

(b) may be apportioned in accordance with section 203 to any part of the period of account falling in a basis period for a tax year before the tax year 2005-06.

Treatment of business start-up payments received in an overlap period

49

(1) There is an exception to the rule that, subject to Part 8, the charge to tax under Chapter 2 of Part 2 on the profits of a trade, profession or vocation of a tax year operates by reference to the profits of the basis period for the tax year (which may include a period falling before 6th April 2005).

(2) The exception is that section 207 does not apply to payments received before 6th April 2005.

Profits or losses of a trade, profession or vocation previously chargeable in accordance with section 65(1) of ICTA

50

(1) This paragraph applies if—

(a) a person carries on a trade, profession or vocation wholly outside the United Kingdom, and

(b) the trade, profession or vocation was chargeable to income tax in accordance with section 65(1) of ICTA (Case IV and V assessments: general) for a tax year before 2005-06.

(2) If the trade, profession or vocation was so chargeable for the tax year 2004-05, the person is treated for the purpose of determining the basis period for the tax year 2005-06 and subsequent tax years as if the person started to carry on the trade, profession or vocation on 6th April 2005.

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

Profits of mines, quarries and other concerns not chargeable by reference to a basis period

51

(1) This paragraph applies if any profits or losses arising out of land in the case of any concern specified in section 55(2) of ICTA—

(a) arose in the tax year 2004-05, and

(b) were calculated for that tax year otherwise than by reference to a basis period.

(2) For the purpose of determining the basis period for the tax year 2005-06 and subsequent tax years, the concern is treated as if it were a trade which was started to be carried on by a person on 6th April 2005.

(3) Paragraph 48 of this Schedule applies in relation to any case to which this paragraph applies as if references to a basis period for a tax year (an “earlier tax year”) before the tax year 2005-06 were references to that earlier tax year.

Overlap profit: pre-April 1994 trades, professions and vocations

52

(1) This paragraph applies in the case of a trade, profession or vocation which was—

(a) set up and commenced by a person before 6th April 1994, and

(b) continued by the person after 5th April 1997,

and the profits of which were chargeable to income tax under Case I or II of Schedule D for the tax year 1997-98.

(2) For the purposes of Chapter 15 of Part 2 “overlap profit” includes the amount of profits or gains of the basis period for the tax year 1997-98 which—

(a) arose after the end of the basis period for the tax year 1996-97 or, in the case of a trade or profession carried on by a firm, the basis period of the firm for that year, and

(b) arose before 6th April 1997.

(3) In calculating the amount of the profits or gains of the basis period for the tax year 1997-98 which arose as mentioned above—

(a) any deduction of a capital allowance, and

(b) any addition of a balancing charge,

are ignored.

(4) But sub-paragraph (3) does not apply in the case of a trade or profession carried on by a firm which included both an individual and a company.

(5) For the purposes of this paragraph the basis period for the tax year 1996-97 is determined in accordance with paragraph 1 of Schedule 20 to FA 1994 despite the repeal by this Act of that paragraph.

(6) This paragraph is subject to Schedule 22 to FA 1995 (prevention of exploitation of the transitional rules facilitating self-assessment).

53

(1) This paragraph applies in the case of income which—

(a) was immediately derived from the carrying on of a trade, profession or vocation set up and commenced by a person before 6th April 1994 and continued by the person after 5th April 1998, and

(b) was chargeable to income tax under Case IV or V of Schedule D for the tax year 1997-98.

(2) But, in the case of income which was chargeable to tax by reference to the amounts of income received in the United Kingdom, this paragraph applies only if the date on which the first amount of income was received in the United Kingdom was before 6th April 1994.

(3) For the purposes of Chapter 15 of Part 2 “overlap profit” includes the amount of profits or gains of the basis period for the tax year 1997-98 which arose before 6th April 1997.

(4) This paragraph is subject to Schedule 22 to FA 1995 (prevention of exploitation of the transitional rules facilitating self-assessment).

54

The repeal by this Act of paragraphs 2, 6 and 10 of Schedule 20 to FA 1994 (changes for facilitating self-assessment: transitional provisions and savings) does not affect the continuing application of the assumptions mentioned in paragraph 11(4) of that Schedule (double taxation relief).

Averaging profits of farmers and creative artists

55

(1) The first tax years which may be the subject of an averaging claim under section 222 are the tax years 2004-05 and 2005-06.

(2) If—

(a) an individual carries on a trade of farming or market gardening in the United Kingdom in partnership, and

(b) but for the repeal by this Act of section 96 of ICTA the individual could have made a claim under that section in relation to the profits of that trade for the tax years 2004-05 and 2005-06,

the individual may make an averaging claim under section 222 of this Act in relation to those profits for those tax years (despite anything in Chapter 16 of Part 2 of this Act to the contrary).

Adjustment on change of basis

56

(1) Chapter 17 of Part 2 applies to a change of basis taking effect for a period of account which ends on or after 6th April 2005.

(2) For this purpose the period of account for which a change of basis takes effect is the first period of account for which the new basis is adopted.

57

(1) Subject to sub-paragraph (3), section 232 applies before 6th April 2006 with the following amendment.

(2) In subsection (4)—

(a) before paragraph (a) insert—

(aa) relevant earnings within section 623(2)(c) or 644(2)(c) of ICTA, or

(b) omit paragraph (b) and the word “or” before it, and

(3) 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 an amendment substituting section 232(4) of this Act for that subsection as amended by sub-paragraph (2) above.

58

If—

(a) an individual has made an election under paragraph 12 of Schedule 22 to FA 2002 (election by barrister or advocate to accelerate adjustment charge),

(b) as a result of the election sub-paragraph (4) of that paragraph applies in relation to the tax year 2004-05, and

the election continues to apply in relation to the tax year 2005-06 and subsequent tax years (despite paragraph 3 of this Schedule).

59

Section 104(4) of ICTA (which, despite its repeal, applies in relation to any change of accounting basis occurring before 6th April 1999) does not apply if the person who would be liable to tax as a result of the change was born before 6th April 1917.

Post-cessation receipts

60

(1) Subject to sub-paragraph (4), section 256 applies before 6th April 2006 with the following amendments.

(2) In subsection (1)(b)—

(a) after “from the trade was” insert “ relevant earnings within section 623(2)(c) or 644(2)(c) of ICTA or ”, and

(b) omit “or relevant UK earnings within section 189(2)(b) of FA 2004”.

(3) In subsection (2) for “earned income or relevant UK earnings” substitute “ relevant earnings or earned income ”.

(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 an amendment substituting section 256 of this Act for that section as amended by sub-paragraphs (2) and (3) above.

61

Chapter 18 of Part 2 does not apply in relation to a post-cessation receipt if—

(a) the person who would be liable to tax on the receipt was born before 6th April 1917, and

(b) the cessation of the trade occurred before 6th April 2000.

Part 4 — Property income

Apportionment of profits or losses to tax years before tax year 2005-06

62

(1) This paragraph applies if—

(a) a period of account of a property business begins before 6th April 2005 and ends on or after that date, and

(b) in order to arrive at the profits or losses of a tax year before the tax year 2005-06 it is necessary to apportion the profits or losses of the period of account to any part of that period falling in a tax year before the tax year 2005-06.

(2) The profits or losses of the period of account—

(a) are calculated in accordance with Part 3 of this Act (and therefore, to that extent, that Part has effect for tax years before the tax year 2005-06), and

(b) may be apportioned in accordance with section 275 to any part of the period of account falling in a tax year before the tax year 2005-06.

Lease premiums

63

Section 277 does not apply in relation to a lease granted pursuant to a contract entered into before 4th April 1963.

Lease premiums: sums payable instead of rent

64

Section 279 does not apply in relation to a lease granted—

(a) before 6th April 1963, or

(b) pursuant to a contract entered into before 4th April 1963.

Lease premiums: sums payable for surrender of lease

65

Section 280 does not apply in relation to a lease granted—

(a) before 6th April 1963, or

(b) pursuant to a contract entered into before 4th April 1963.

Lease premiums: assignments for profit of lease granted at undervalue

66

Section 282 does not apply in relation to a lease granted —

(a) before 6th April 1963, or

(b) pursuant to a contract entered into before 4th April 1963.

Lease premiums: pre-commencement receipts treated as taxed receipts

67

(1) This paragraph relates to the operation of sections 287 to 298 where, in respect of a lease—

(a) there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, or

(b) there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).

In this paragraph and paragraphs 68 and 69 such a receipt is referred to as a “pre-commencement receipt”.

(2) For the purposes of Chapter 4 of Part 3—

(a) the lease is treated as a taxed lease, and

(b) the pre-commencement receipt is treated as a taxed receipt.

(3) For the purposes of that Chapter, the “receipt period” of a taxed receipt which is a pre-commencement receipt is—

(a) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and

(b) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.

(4) For the purposes of that Chapter the “unreduced amount” of a taxed receipt which is a pre-commencement receipt is the amount of the pre-commencement receipt as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or (3) of ICTA.

(5) Sub-paragraph (6) applies to a taxed receipt which is a pre-commencement receipt arising as a result of section 34(2) of ICTA (obligation on tenant to carry out work under lease).

(6) If the obligation to carry out work included the carrying out of work which gave or will give rise to expenditure for which an allowance has been, or may be, made under the enactments relating to capital allowances, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.

Lease premiums: taking account of reductions in pre-commencement receipts

68

(1) This paragraph applies if—

(a) in calculating the amount of a pre-commencement receipt, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and

(b) as a result of paragraph 67 the amount chargeable on the superior interest is the taxed receipt for the purposes of Chapter 4 of Part 3.

(2) References to a reduction under section 37(2) or (3) of ICTA in a pre-commencement receipt by reference to the amount chargeable on the superior interest are to the difference between—

(a) the amount of the pre-commencement receipt before the operation of section 37(2) or (3) of ICTA, and

(b) the amount of the receipt after the operation of that subsection,

so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.

(3) In sections 290(5)(a) (meaning of “unused amount”) and 295(1)(a) (limit on reductions and deductions) references to reductions under section 288 by reference to the taxed receipt include references to reductions under section 37(2) or (3) of ICTA in pre-commencement receipts by reference to the amount chargeable on the superior interest.

(4) Sections 292 to 294 apply as follows—

(a) the pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 293 and 294,

(b) references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and

(i) in the case of a pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and

(ii) in the case of a pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.

Lease premiums: taking account of deductions for rent as a result of section 37(4) or 87(2) of ICTA

69

(1) Sub-paragraph (2) applies if—

(a) in calculating the profits of a trade, profession or vocation for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, a person is treated as paying rent under section 87(2) of ICTA by reference to the amount chargeable for the purposes of that section, and

(b) as a result of paragraph 67 the amount chargeable is the taxed receipt for the purposes of Chapter 4 of Part 3.

(2) References in sections 290(5)(b) and 295(2)(b) to the deductions allowed for expenses under section 61 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the trade, profession or vocation for the rent that the person is treated as paying under section 87(2) of ICTA by reference to the amount chargeable.

(3) Sub-paragraph (4) applies if—

(a) in calculating the profits of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) for a tax year before the tax year 2005-06 or an accounting period ending before 6th April 2005, a person is treated as paying rent as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and

(b) as a result of paragraph 67 the amount chargeable on the superior interest is the taxed receipt for the purposes of Chapter 4 of Part 3.

(4) References in sections 290(5)(c) and 295(1)(b) to the deductions allowed for expenses under section 292 by reference to the taxed receipt include references to the deductions allowed in calculating the profits of the Schedule A business or overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) for the rent that the person is treated as paying as a result of section 37(4) of ICTA by reference to the amount chargeable on the superior interest.

Lease premiums: rules for determining effective duration of lease

70

(1) In relation to a lease granted after 12th June 1969 and before 25th August 1971, for sections 303 and 304 substitute—

(303) (1) The following rules apply for determining the effective duration of a lease for the purposes of this Chapter. Rule 1: Where the terms of a lease include provision for the determination of the lease by notice given by the landlord, the lease is not to be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice so given. Rule 2: A lease is not to be treated as having been granted for a term longer than one ending on a date before the end of the term for which the lease was granted, if the terms of the lease or any other circumstances make it unlikely that the lease will continue beyond that date. Rule 3: Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant, account may be taken of any circumstances making it likely that the lease will be so extended. (2) Rule 2 applies by reference to the facts known or ascertainable at the time of the grant of the lease. (3) In applying the rules, it is assumed that all parties concerned, whatever their relationship, act as if they were at arm's length. (4) In this section, in relation to Scotland, “term”, where referring to the duration of a lease, means period.

(2) This paragraph does not apply if the determination is for the purposes of section 281 (sums payable for variation or waiver of terms of lease).

71

(1) In relation to a lease granted before 13th June 1969, for sections 303 and 304 substitute—

(303) (1) The following rules apply for determining the effective duration of a lease for the purposes of this Chapter. Rule 1: Where the effective duration of a lease is being determined after the date on which the lease has for any reason come to an end, the duration is taken to have extended from its commencement to that date. Rule 2: Where the terms of the lease include provision for the determination of the lease by notice given either by the landlord or by the tenant, the lease is not to be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice. Rule 3: A lease is not to be treated as having been granted for a term longer than one ending on a date before the end of the term for which the lease was granted, if the terms of the lease or any other circumstances make it unlikely that the lease will continue beyond that date. (2) Rules 2 and 3 are subject to rule 1. (3) Rules 2 and 3 apply in accordance with circumstances prevailing at the time of the determination. (4) In this section, in relation to Scotland, “term”, where referring to the duration of a lease, means period.

(2) This paragraph does not apply if the determination is for the purposes of section 281 (sums payable for variation or waiver of terms of lease).

Reverse premiums

72

(1) Section 311 does not apply to a reverse premium—

(a) which was received before 9th March 1999, or

(b) to which the recipient was entitled immediately before that date.

(2) In determining whether a reverse premium was one to which the recipient was entitled immediately before 9th March 1999, no account is to be taken of any arrangements made on or after that date.

Deductions for expenditure on energy-saving items

73

Sections 312 to 314 do not apply to expenditure incurred before 6th April 2004.

Commercial letting of furnished holiday accommodation

74

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustment on change of basis

76

(1) Chapter 7 of Part 3 applies to a change of basis taking effect for a period of account which ends on or after 6th April 2005.

(2) For this purpose the period of account for which a change of basis takes effect is the first period of account for which the new basis is adopted.

Meaning of “mineral royalties”

77

The definition of “mineral royalties” in section 341(2) does not include any rent receivable before 6th April 1970.

Part 5 — Savings and investment income: general

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

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.

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

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

79

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

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.

(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

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.

(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

82

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 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 541 of that Act (restrictions on exemptions: attributing items of income to the non-exempt amount) .

Deeply discounted securities: saving for pension trustees' losses

83

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),

(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)

84

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gains from contracts for life insurance etc: foreign policies of life insurance

85

(1) This paragraph modifies the application of—

(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

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

86

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

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

(479) (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 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.

(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.

Gains from contracts for life insurance etc: rights partially assigned

87

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.

(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

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

89

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

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.

(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

91

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transactions in deposits

92

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—

(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.

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