Income Tax (Trading and Other Income) Act 2005

• (6) After a balance has been struck for a dividend on an interest-bearing corporate security, any payment to be made in respect of that dividend shall, at times falling after that balance has been struck, be treated for the purposes of this paragraph as not being a payment remaining to be made under the security.

452D

• (1) For the purposes of this Chapter, section 452C also has effect in relation to each of the separate assets mentioned in subsection (1) of that section as if that separate asset were itself an interest-bearing corporate security (if that is not in fact the case).

• (2) In subsection (1), the reference to section 452C includes a reference to that section as it has effect by virtue of this section.

• (3) In the application of section 452C by virtue of this section, references to payments the right to which a separate asset represents or secures shall be construed in accordance with subsection (6) of that section.

• (4) Where section 452C has effect by virtue of subsection (1)—

• (a) any reference in this Chapter to converting an interest-bearing corporate security into corporate strips of the security shall be construed accordingly, and

• (b) section 452E (meaning of “corporate strip”) has effect accordingly.

452E

• (1) In this Chapter “corporate strip” means any asset—

• (a) which is, or has at any time been, one of the separate assets mentioned in section 452C(1), and

• (b) which is not prevented from being a corporate strip by subsection (2) or (3).

• (2) An asset is not a corporate strip if it—

• (a) represents the right to, or

• (b) secures,

payments of, or corresponding to, a part of every payment remaining to be made under an interest-bearing corporate security or a corporate strip.

• (3) An asset is a corporate strip in the case of any person only if he acquired it—

• (a) on or after 2nd December 2004, and

• (b) otherwise than in pursuance of an agreement entered into before that date.

452F

• (1) A person who converts an interest-bearing corporate security into corporate strips of the security is treated as having acquired each corporate strip by the payment of an amount equal to—

$$A×BC$where—A is the acquisition cost of the converted corporate security;B is the market value of the corporate strip;C is the total of the market values of all the separate assets resulting from the conversion.$

• (2) If the converted corporate security is a deeply discounted security—

• (a) its conversion into corporate strips is to be treated for the purposes of this Chapter as a transfer of the security, but

• (b) the amount payable on the transfer is taken to be an amount equal to the acquisition cost of the converted corporate security.

• (3) For the purposes of this Chapter—

• (a) the consolidation of a corporate strip with other corporate strips into a single security is a disposal of the corporate strip by the person consolidating it (whether or not it would be apart from this subsection), and

• (b) an amount equal to the market value of the corporate strip at the consolidation is treated as payable on the disposal.

• (4) Section 438 (timing of transfers and acquisitions) does not apply to a conversion within subsection (1) or a consolidation within subsection (3).

• (5) Subsections (1) to (3) apply instead of sections 440(4) (market value on general conversions of deeply discounted securities) and 441 (market value acquisitions).

• (6) For the purposes of this section, the acquisition cost of the converted corporate security is the amount paid in respect of his acquisition of the security by the person who has it immediately before the conversion (no account being taken of any costs incurred in connection with that acquisition).

• (7) References in this section to the market value of a security given or received in exchange for, or otherwise converted into, another are references to its market value at the time of the exchange or conversion.

Receipts relating to post-cessation expenditure

452G

• (1) This section applies if—

• (a) as a result of any scheme or arrangement, an amount referred to in subsection (2)(a), (b) or (c) differs from the market value of the corporate strip in a way specified in that subsection, and

• (b) the obtaining of a tax advantage by any person is the main benefit, or one of the main benefits, that might have been expected to accrue from, or from any provision of, the scheme or arrangement.

• (2) The ways are that—

• (a) the amount paid by a person in respect of the acquisition of the corporate strip is or was more than the market value of the corporate strip at the time of that acquisition,

• (b) the amount payable to a person on transferring the corporate strip is less than the market value at the time of the transfer, or

• (c) on redemption of the corporate strip the amount payable to a person, as the person holding the corporate strip, is less than the market value on the day before redemption.

• (3) In a case within subsection (2)(a), for the purposes of section 439(1) on transferring the corporate strip the person is treated as if the person had paid to acquire the corporate strip an amount equal to the market value of the corporate strip at the time of the acquisition.

• (4) In a case falling within subsection (2)(b), for those purposes the person is treated as if the amount payable to the person on the transfer were an amount equal to the market value of the corporate strip at the time of the transfer.

• (5) In a case falling within subsection (2)(c), for those purposes the person is treated as if the amount payable to the person on redemption were an amount equal to the market value of the corporate strip on the day before redemption.

• (6) The market value of a corporate strip at any time is to be determined for the purposes of this section without regard to any increase or diminution in the value of the corporate strip as a result of the scheme or arrangement mentioned in subsection (1).

• (7) For the purposes of this section, no account is to be taken of any incidental expenses incurred in connection with any disposal or acquisition of a corporate strip.

465A

• (1) This section applies if—

• (a) an individual is liable for tax under this Chapter in respect of an amount, and

• (b) the individual is treated by section 530 as having paid income tax at the basic rate on the amount.

• (2) The amount is treated as the highest part of the individual's total income.

• (3) Subsection (2) has effect for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief).

• (4) See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—

• (a) the rule in subsection (2), and

• (b) other rules requiring particular income to be treated as the highest part of a person's total income.

Debts released after cessation

Restricting deductions for finance costs related to residential property

Relevant UK earnings for pension purposes: overseas property business

Meaning of “commercial letting of furnished holiday accommodation”

Rebated or reinvested commission

541A

• (1) This section applies if—

• (a) a chargeable event within section 484(1)(a)(i) to (iii), (c) or (e) occurs in respect of a policy or contract,

• (b) commission in respect of the policy or contract has at any time been rebated or reinvested, and

• (c) condition A or B is met.

• (2) For the purposes of performing the calculation in section 494 (total allowable deductions) for the chargeable event, the total amount of premiums under the policy or contract paid in the period mentioned in section 494(1) or (2)(b) is to be reduced by the total amount of commission attributable to those premiums that has been rebated or reinvested.

• (3) Condition A is that the total amount of premiums under the policy or contract paid in a relevant period exceeds £100,000.

• (4) Condition B is that—

• (a) at a time when the policy or contract was the taxable person's, the taxable person's policies and contracts exceeded the relevant threshold as respects a relevant period, and

• (b) premiums under the policy or contract were paid in that relevant period.

• (5) In subsection (4)(a) “taxable person” means the person whose policy or contract the policy or contract is, immediately before the chargeable event.

• (6) For the purposes of subsection (4)(a) a person's policies and contracts “exceed the relevant threshold” as respects a relevant period if the total amount of premiums under them paid in that relevant period exceeds the sum specified in subsection (3).

• (7) In this section “relevant period” means—

• (a) the period beginning with the beginning of the tax year in which the chargeable event occurs and ending with the chargeable event, or

• (b) any of the 3 preceding tax years.

• (8) The Treasury may by order—

• (a) substitute another sum for the sum for the time being specified in subsection (3);

• (b) amend the definition of “relevant period”.

Introduction

541B

• (1) This section supplements section 541A.

• (2) “Commission”, in relation to a policy or contract, includes any passing of value to or for the benefit of an intermediary, or a person connected with an intermediary, that can reasonably be taken to represent a reward in respect of the policy or contract.

• (3) Commission in respect of a policy or contract is “reinvested” if, as a result of a waiver of an entitlement to it, there is an increase in the total value of a relevant person's policies and contracts.

• (4) The amount of commission reinvested is the amount of the increase.

• (5) Commission in respect of a policy or contract is “rebated” if—

• (a) value passes (directly or indirectly) from an intermediary, or a person connected with an intermediary, to or for the benefit of a relevant person (and the passing of value does not amount to the reinvestment of the commission), and

• (b) the passing of value can reasonably be taken to be in respect of the commission.

• (6) The amount of commission rebated is the amount of value passed.

• (7) A policy or contract is a person's policy or contract if a gain arising in connection with it would be—

• (a) a gain for which the person, or (if the person is an individual) the person's spouse or civil partner, would be liable to tax under this Chapter, or

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) Any necessary apportionment is to be made (on a just and reasonable basis) as regards—

• (a) commission which is attributable to two or more premiums, and

• (b) any part of such commission that has been rebated or reinvested.

• (9) Commission which is in respect of one or more policies or contracts (but is not attributable to particular premiums) is to be attributed to such premiums as is just and reasonable.

• (10) In subsections (3) and (5), “relevant person” means—

• (a) any of the policyholders (including any of the persons who hold the contract),

• (b) a person who beneficially owns the rights under the policy or contract,

• (c) if those rights are held on trust, any of the trustees, or

• (d) a person connected with a person within any of paragraphs (a) to (c).

Meaning of “unused amount” and “unreduced amount”

Reduction for accumulated or discretionary trust income: calculation

Payment of tax by instalments

Introduction

619A

• (1) This section applies to income which is treated as income of a settlor as a result of section 624 (income where settlor retains an interest) or 629 (income paid to unmarried minor children of settlor).

• (2) The income is treated as the highest part of the settlor's total income for the purposes of section 619 (so far as it relates to the income).

• (3) See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—

• (a) the rule in subsection (2), and

• (b) other rules requiring particular income to be treated as the highest part of a person's total income.

Meaning of “unused amount” and “unreduced amount”

Provisions which must be given priority over Part 4

646A

• (1) This section applies if—

• (a) in a tax year qualifying income arises under a UK settlement, and

• (b) the qualifying income consists of charitable income and non-charitable income.

• (2) If expenses of the trustees are to be set against the charitable income by virtue of section 484 of ITA 2007, the amount of those expenses which can used for that purpose is limited to the amount allocated to the charitable income.

• (3) If—

• (a) Chapter 8 of Part 9 of ITA 2007 applies in relation to the charitable income, and

• (b) expenses of the trustees are to be used to reduce the charitable income for income tax purposes,

the amount of those expenses which can used for that purpose is limited to the amount allocated to the charitable income.

• (4) For the purposes of subsections and (3) the amount of the expenses allocated to the charitable income is determined by apportioning them rateably between the charitable income and the non-charitable income.

• (5) In this section—

• “charitable income” means income within section 628(1) or 630(1),

• “non-charitable income” means income which is not charitable income, and

• “qualifying income” and “UK settlement” have the same meaning as in section 628.

Cash basis: modification of deduction for costs of loans

Deemed capital receipts under, or after leaving, cash basis

680A

• (1) This section applies to estate income that—

• (a) by virtue of section 663 (applicable rate for grossing up basic amounts of estate income) is treated as bearing income tax at the ordinary dividend rate, or

• (b) by virtue of that section and section 680(2A) (income treated as bearing income tax: dividends and loans to a participator in close company) is treated as bearing income tax at 0%.

• (2) The income is treated as being dividend income.

Relevant UK earnings for pension purposes: UK property business

685A

• (1) This section applies if—

• (a) a person receives an annual payment in respect of income from the trustees of a settlement,

• (b) the payment is made in the exercise of a discretion (whether of the trustees of the settlement or any other person), and

• (c) a settlor is charged to tax under section 619(1) on the income arising to the trustees of the settlement (whether in the current year of assessment or in a previous year of assessment) out of which the annual payment is made.

• (2) This section applies only in respect of that proportion of the annual payment which corresponds to the proportion of the total income arising to the trustees of the settlement in respect of which a settlor is chargeable to tax under section 619(1).

• (3) If and in so far as this section applies, the recipient of the annual payment shall be treated for the purposes of this Chapter as having paid income tax at the applicable rate in respect of the annual payment.

• (3A) For the purposes of subsection (3), the “applicable rate” means—

• (a) in the case of a Scottish taxpayer, the highest Scottish rate,

• (b) in the case of a Welsh taxpayer, the Welsh additional rate, or

• (c) in any other case, the additional rate.

• (4) But—

• (a) tax which the recipient is treated by virtue of this section as having paid is not repayable,

• (b) tax which the recipient is treated by virtue of this section as having paid may not be taken into account in relation to a tax liability of the recipient in respect of any other income of his, . . .

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) If the recipient of the annual payment is a settlor in relation to the settlement, if and in so far as this section applies the annual payment shall not be treated as his income for the purposes of the Income Tax Acts (and subsection (3) does not apply).

• (5A) If the recipient of the annual payment is treated by subsection (3) as having paid income tax in respect of the annual payment, the amount of the payment is treated as the highest part of the recipient's total income for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief).

• (5B) See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—

• (a) the rule in subsection (5A), and

• (b) other rules requiring particular income to be treated as the highest part of a person's income.

• (6) Sections 494 and 495 of ITA 2007 shall not apply in relation to an annual payment if and in so far as this section applies.

Relevant UK earnings for pension purposes: UK property business

Relief: UK property business

Valuation of interest not paid in cash

Under-used holiday accommodation: averaging elections

Priority between Chapters within Part 4

756A

• (1) No liability to income tax arises in respect of interest which is paid—

• (a) to or in respect of a victim of National-Socialist persecution,

• (b) under a qualifying compensation scheme, and

• (c) for a qualifying purpose in respect of a qualifying deposit of the victim.

• (2) A scheme is a qualifying compensation scheme if—

• (a) it is constituted (whether under the law of any part of the United Kingdom or elsewhere) by an instrument in writing, and

• (b) the purpose of the scheme, or one of its purposes, is to make payments of interest to or in respect of victims of National-Socialist persecution for qualifying purposes in respect of qualifying deposits.

• (3) Interest is paid for a qualifying purpose in respect of a deposit if—

• (a) it is paid for meeting a liability in respect of interest on the deposit, or

• (b) it is paid for compensating for the effects of inflation on the deposit.

• (4) In relation to a victim of National-Socialist persecution, a deposit is a qualifying deposit if it was made—

• (a) by, or on behalf of, the victim, and

• (b) on or before 5th June 1945.

• (5) In this section “deposit” has the same meaning as in Chapter 19 of Part 15 of ITA 2007 (see section 983 of that Act)

782A

• (1) No liability to income tax arises in respect of income arising to an individual from the sale of electricity generated by a microgeneration system if—

• (a) the system is installed at or near domestic premises occupied by the individual, and

• (b) the individual intends that the amount of electricity generated by it will not significantly exceed the amount of electricity consumed in those premises.

• (2) In subsection (1)—

• “domestic premises” means premises used wholly or mainly as a separate private dwelling, and

• “microgeneration system” has the same meaning as in section 263AZA of the Taxation of Chargeable Gains Act 1992.

782B

• (1) No liability to income tax arises in respect of the receipt by an individual of a renewables obligation certificate if—

• (a) the individual receives the certificate in connection with the generation of electricity by a microgeneration system,

• (b) the system is installed at or near domestic premises occupied by the individual, and

• (c) the individual intends that the amount of electricity generated by it will not significantly exceed the amount of electricity consumed in those premises.

• (2) In subsection (1)—

• “domestic premises” and “microgeneration system” have the same meaning as in section 782A, and

• “renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.

Charge to tax on dividends and other distributions

Under-used holiday accommodation: averaging elections

Application to businesses within the charge to corporation tax

Valuation of interest not paid in cash

Conversion etc of bonus share capital

Income charged

Finance Act 1950 (c. 15)

Chevening Estate Act 1959 (c. 49)

Taxes Management Act 1970 (c. 9)

Finance Act 1971 (c. 68)

Finance Act 1973 (c. 51)

Biological Standards Act 1975 (c. 4)

Oil Taxation Act 1975 (c. 22)

Inheritance Tax Act 1984 (c. 51)

Films Act 1985 (c. 21)

Finance Act 1988 (c. 39)

Water Act 1989 (c. 15)

Finance Act 1989 (c. 26)

Electricity Act 1989 (c. 29)

Finance Act 1990 (c. 29)

Finance Act 1991 (c. 31)

Social Security Contributions and Benefits Act 1992 (c. 4)

Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)

Taxation of Chargeable Gains Act 1992 (c. 12)

Finance (No. 2) Act 1992 (c. 48)

Finance Act 1993 (c. 34)

Pension Schemes Act 1993 (c. 48)

Pension Schemes (Northern Ireland) Act 1993 (c. 49)

Finance Act 1994 (c. 9)

Coal Industry Act 1994 (c. 21)

Finance Act 1995 (c. 4)

Finance Act 1996 (c. 8)

Finance Act 1997 (c. 16)

Finance Act (No.2) 1997 (c. 58)

Finance Act 1998 (c. 39)

Finance Act 1999 (c. 16)

Commonwealth Development Corporation Act 1999 (c. 20)

Finance Act 2000 (c. 17)

Capital Allowances Act 2001 (c. 2)

Finance Act 2002 (c. 23)

Proceeds of Crime Act 2002 (c. 29)

Income Tax (Earnings and Pensions) Act 2003 (c. 1)

Finance Act 2003 (c. 14)

Courts Act 2003 (c. 39)

Child Trust Funds Act 2004 (c. 6)

Finance Act 2004 (c. 12)

Pensions Act 2004 (c. 35)

Continuity of the law: general

General saving for old transitional provisions and savings

General saving for section 9(5) of ICTA

Partnerships involving companies

Interpretation

Unpaid remuneration

Employee benefit contributions

...

Crime-related payments

Tenants under taxed leases

Seconded employees

Training courses for employees

Contributions to urban regeneration companies

Local enterprise agencies

Expenses connected with patents, designs and trade marks

Payments to Export Credits Guarantee Department

Reverse premiums

Sums recovered under insurance policies etc.

Meaning of “designated educational establishment”

Films and sound recordings

Certain telecommunication rights

Dealers in securities etc: taxation of amounts taken to reserves

Purchase or sale of woodlands

Ministers of religion

Waste disposal

Valuation of trading stock on cessation

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

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

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

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

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

Averaging profits of farmers and creative artists

Adjustment on change of basis

Post-cessation receipts

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

Lease premiums

Lease premiums: sums payable instead of rent

Lease premiums: sums payable for surrender of lease

Lease premiums: assignments for profit of lease granted at undervalue

Lease premiums: pre-commencement receipts treated as taxed receipts

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

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

Lease premiums: rules for determining effective duration of lease

Reverse premiums

Deductions for expenditure on energy-saving items

Commercial letting of furnished holiday accommodation

Adjustment on change of basis

Meaning of “mineral royalties”

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

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

Deeply discounted securities: deemed transfers of strips on 5th April

Deeply discounted securities: restriction of profits and losses on strips

Deeply discounted securities: saving for charities' losses

Deeply discounted securities: saving for pension trustees' losses

Exclusion of deeply discounted securities from section 711 to 728 of ICTA (accrued income profits)

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

Gains from contracts for life insurance etc: exclusion of pension policies

Gains from contracts for life insurance etc: rights partially assigned

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

Gains from contracts for life insurance etc: pure protection group life policies

Gains from contracts for life insurance etc: assessment of trustees etc

Transactions in deposits

Disposals of futures and options involving guaranteed returns: certain pre-6th February 1998 transactions

Disposals of futures and options involving guaranteed returns: rates of tax for pension trustees

Pre-20th March 1968 policies and contracts excluded from Chapter 9 of Part 4

Pre-27th March 1974 policies and contracts: disapplication of section 500(c)

Pre-27th March 1974 contracts: disapplication of section 531(3)(c)

Pre-10th December 1974 contracts for a life annuity: disapplication of section 484(1)(d)

Pre-14th March 1975 policies and contracts: calculation of gains under section 507

Pre-25th March 1982 replacement policies: disapplication of section 542

Certain pre-26th June 1982 policies and contracts excluded from Chapter 9 of Part 4

Certain pre-18th November 1983 policies not foreign policies of life insurance

Certain pre-23rd February 1984 policies not foreign capital redemption policies

Pre-14th March 1984 policies: disregard of amounts deducted and repaid after tax relief by deduction from premiums abolished

Certain pre-20th March 1985 policies: application of section 529(1)

Pre-14th March 1989 qualifying policies: application of section 485(2)(b) and (3)(b)

Pre-14th March 1989 policies and contracts: application of section 501

Contracts in accounting periods beginning before 1st January 1992: disapplication of sections 530 and 539(3)

Certain pre-17th March 1998 policies: application of section 529(1)

Certain pre-17th March 1998 policies not foreign policies of life insurance

Pre-17th March 1998 policy or contract: UK resident trustees

Certain pre-23rd March 1999 policies not foreign capital redemption policies

Pre-9th April 2003 policy or contract: UK resident trustees

Pre-9th April 2003 policy or contract: loans to trustees

Pre-9th April 2003 policy: excepted group life policies

Pre-3rd March 2004 policy or contract: calculation of deficiencies

Pre-1st January 2005 contracts for immediate needs annuities: income tax treated as paid

Pre-17th March 1998 contract or policy: conditions to be met for contract or policy not to be a personal portfolio bond

The date condition

The non-variation condition

The first selection condition

The second selection condition

Policy holders becoming UK resident after 17th March 1998

Policy holders becoming permanently UK resident after 17th March 1998

Meaning of “permitted index”

Meaning of “permitted property”

Other definitions

Intellectual property: contributions to expenditure not made by public bodies nor eligible for tax relief

Certain telecommunication rights

Income treated as income of settlor: exception for pension income

Amounts treated as income of settlor: income paid to unmarried minor children of settlor

Amounts treated as income of settlor: capital sums paid to settlor by trustees of settlement

Amounts treated as income of settlor: capital sums paid to settlor by body connected with settlement

Beneficiaries' income from estates in administration: basic amounts

Beneficiaries' income from estates in administration: income treated as bearing income tax

Ulster savings certificates

SAYE interest

Venture capital trust dividends: shares acquired before the tax year 2004-05

Purchased life annuity payments: old determinations concerning capital elements

Purchased life annuity payments: carry forward of excess capital elements

Purchased life annuity payments: penalty for false statements

Certain annual payments by individuals

Annual payments for non-taxable consideration

Periodical payments of personal injury damages etc.

Relevant foreign income charged on remittance basis: income arising before the tax year 2005-06

Relevant foreign income charged on remittance basis: delayed remittances

Relief for backdated pensions charged on arising basis

Unremittable income that arose before the tax year 2005-06

Unpaid remuneration: non-trades and non-property businesses

Employee benefit contributions: non-trades and non-property businesses

Crime-related payments: non-trades and non-property businesses

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

General deduction rules

Section 820 of ICTA

Amendments of Part 4 of FA 2004 (pension schemes etc.)

Editorial notes