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Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

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(a) is charged to tax on a relevant person as an amount of income,

(b) is brought into account in calculating for tax purposes any income of a relevant person, or

(c) is brought into account for the purposes of any provision of CAA 2001 as a disposal receipt, or proceeds from a balancing event or disposal event, of a relevant person.

(2) Treat subsection (1)(c) as not met if—

(a) the receipt gives rise, or proceeds give rise, to a balancing charge, and

(b) the amount of the balancing charge is limited by any provision of CAA 2001.

(3) A finance arrangement code does not apply if at all times the whole of the advance under the arrangement—

(a) is a debtor relationship of a relevant person for the purposes of Part 5 of CTA 2009 (loan relationships), or

(b) would be a debtor relationship of a relevant person for those purposes if that person were a company within the charge to corporation tax.

(4) In subsection (3) references to a debtor relationship do not include references to a relationship to which Chapter 2 of Part 6 of CTA 2009 applies (relevant non-lending relationships).

(5) A finance arrangement code does not apply so far as—

(a) section 263A of TCGA 1992 applies in relation to the arrangement (agreements for sale and repurchase of securities), or

(b) Schedule 13 to FA 2007 or Chapter 10 of Part 6 of CTA 2009 applies in relation to the arrangement (sale and repurchase of securities, and repos).

(6) A finance arrangement code does not apply so far as Part 10A of this Act, Chapter 4 of Part 4 of TCGA 1992 or Chapter 6 of Part 6 of CTA 2009 has effect in relation to the arrangement (alternative finance arrangements).

(7) A finance arrangement code does not apply so far as the security is plant or machinery which is the subject of a sale and finance leaseback.

(8) For the purposes of subsection (7) apply section 221 of CAA 2001 to determine whether plant or machinery is the subject of a sale and finance leaseback.

(9) A finance arrangement code does not apply so far as sections 228B and 228C of CAA 2001 (finance leaseback) apply in relation to the arrangement.

(9A) A finance arrangement code does not apply if the arrangement is a right-of-use lease—

(a) under which the relevant person is a lessee, and

(b) which, were that person required under generally accepted accounting practice to determine whether the lease falls to be treated in the accounts of that person as a finance lease or loan, would not fall to be so treated.

(9B) In subsection (9A) “right-of-use lease” has the same meaning as in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

(10) Section 809BZO defines a relevant person for the purposes of this section.

809BZO

(1) This section defines a relevant person for the purposes of section 809BZN.

(2) If (apart from sections 809BZN and 809BZP) sections 809BZA to 809BZE would apply, each of the following is a relevant person—

(a) the borrower, and

(b) a person connected with the borrower or (if the borrower is a partnership) a member of the partnership.

(3) If (apart from sections 809BZN and 809BZP) sections 809BZF to 809BZI would apply, the transferor is a relevant person.

(4) If (apart from sections 809BZN and 809BZP) sections 809BZJ to 809BZL would apply, a relevant member as there defined is a relevant person.

(5) For the purposes of subsection (2)(b) the persons connected with the borrower include any persons who under section 993 (meaning of “connected”) are connected with the borrower.

809BZP

(1) The Treasury may make regulations prescribing other circumstances in which a finance arrangement code is not to apply.

(2) The regulations may amend sections 809BZN and 809BZO.

(3) The power to make regulations includes—

(a) power to make provision that has effect in relation to times before the making of the regulations (but not times before 6 June 2006),

(b) power to make different provision for different cases or different purposes, and

Supplementary

809BZQ

(1) This section applies for the purposes of this Chapter.

(2) A reference to the accounts of a person includes (if the person is a company) a reference to the consolidated group accounts of a group of companies of which it is a member.

(3) In determining whether accounts record an amount as a financial liability in respect of an advance, assume that the period in which the advance is received ended immediately after the receipt of the advance.

(4) If a person does not draw up accounts in accordance with generally accepted accounting practice, assume that the person drew up the accounts in accordance with that practice.

809BZR

A reference in this Chapter to an arrangement includes a reference to an agreement or understanding (whether or not legally enforceable).

809BZS

(1) This section applies for the purposes of this Chapter.

(2) A reference to a person receiving an asset includes—

(a) a reference to the person obtaining (directly or indirectly) the value of an asset or otherwise deriving (directly or indirectly) a benefit from it, and

(b) a reference to the discharge (in whole or part) of a liability of the person.

(3) A reference to a disposal of an asset includes a reference to anything constituting a disposal of it for the purposes of TCGA 1992.

(4) A reference to payments in respect of an asset includes—

(a) a reference to payments in respect of another asset substituted for it under the arrangement, and

(b) a reference to obtaining (directly or indirectly) the value of an asset or otherwise deriving (directly or indirectly) a benefit from it.

Chapter 5C — Loan or credit transactions

809CZA

(1) This section defines a loan or credit transaction for the purposes of sections 809CZB and 809CZC.

(2) A transaction is a loan or credit transaction if it is—

(a) effected with reference to the lending of money or the varying of the terms on which money is lent, or

(b) effected with a view to enabling or facilitating an arrangement concerning the lending of money or the varying of the terms on which money is lent.

(3) A transaction is a loan or credit transaction if it is—

(a) effected with reference to the giving of credit or the varying of the terms on which credit is given, or

(b) effected with a view to enabling or facilitating an arrangement concerning the giving of credit or the varying of the terms on which credit is given.

(4) Subsection (2) has effect whether the transaction is effected—

(a) between the lender and borrower,

(b) between either of them and a person connected with the other, or

(5) Subsection (3) has effect whether the transaction is effected—

(a) between the creditor and debtor,

(b) between either of them and a person connected with the other, or

809CZB

(1) This section applies if a loan or credit transaction provides for a payment which is not interest but is—

(a) an annuity or other annual payment falling within Part 5 of ITTOIA 2005 and chargeable to income tax otherwise than as relevant foreign income, or

(b) an annuity or other annual payment which is from a source in the United Kingdom and chargeable to corporation tax under Chapter 7 of Part 10 of CTA 2009 (annual payments not otherwise charged) or regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013.

(2) The payment must be treated for the purposes of the Income Tax Acts as if it were a payment of yearly interest (see, in particular, section 874).

809CZC

(1) This section applies if—

(a) under a loan or credit transaction a person transfers income arising from property,

(b) the person is not, as a result of Chapter 5B (finance arrangements), chargeable to income tax on the income transferred, and

(2) In such a case—

(a) income tax is charged under this section,

(b) the tax is charged on an amount equal to the full amount of the income transferred,

(d) the person who transfers the income is liable for the tax.

(3) This section does not prejudice the liability of any other person to tax.

(4) For the purposes of this section a person transfers income if the person surrenders, waives or forgoes it.

(5) Subsection (6) applies for the purposes of this section if—

(a) credit is given for the purchase price of property, and

(b) the rights attaching to the property are such that the buyer's rights to income from the property are suspended or restricted during the life of the debt.

(6) The buyer must be treated as surrendering income of an amount equal to the income the buyer in effect forgoes by obtaining the credit.

(7) For the purposes of this section an amount of income payable subject to deduction of income tax must be taken as the amount before deduction of tax.

809ZE

(1) This section gives the meaning of “capital payment”, “relevant capital payment” and references to payment for the purposes of sections 809ZA to 809ZD and this section.

(2) “Capital payment” means any payment except one which, if made to the lessor—

(a) would fall to be included in a calculation of the lessor's income for income tax purposes, or

(b) would so fall but for section 148A of ITTOIA 2005 (rental earnings under long funding finance lease).

(3) A capital payment, in relation to a lease or relevant arrangement, is “relevant” if condition A or B is met (but this is subject to subsections (6) and (7)).

(4) Condition A is that the capital payment is payable (or paid), directly or indirectly, by or on behalf of the lessee to the lessor or another person on the lessor's behalf in connection with—

(a) the grant, assignment, novation or termination of the lease, or

(b) any provision of the lease or relevant arrangement (including the variation or waiver of any such provision).

(5) Condition B is that rentals payable under the lease are less than, or payable later than, they might reasonably be expected to be if there were no obligation to make the capital payment and it were not made.

(6) A capital payment is not “relevant” so far as it—

(a) reduces the amount of expenditure incurred by the lessor for the purposes of CAA 2001 in respect of the plant or machinery in question or would reduce it but for section 536 of that Act (contributions not made by public bodies and not eligible for tax relief), or

(b) is compensation for loss resulting from damage to, or damage caused by, the plant or machinery in question.

(7) If—

(a) a capital payment is an initial payment under a long funding lease for the purposes of Part 2 of CAA 2001 (see section 70YI of that Act), and

(b) under section 61 of that Act (disposal events and disposal values) the commencement of the term of the lease (as defined in section 70YI of that Act) is an event that requires the lessor to bring a disposal value into account,

the capital payment is only “relevant” so far as it exceeds the amount that is the disposal value for the purposes of Part 2 of that Act.

(8) References to payment include the provision of value by any means other than the making of a payment.

(9) Accordingly—

(a) references to the making of a payment include the passing of value by any other means, and

(b) references to the amount of the payment include the value passed.

809ZF

(1) This section applies for the purposes of sections 809ZA to 809ZE and this section.

(2) “Lease” includes—

(a) a licence, and

(b) the letting of a ship or aircraft on charter or the letting of any other asset on hire,

and “lessor” and “lessee” must be read accordingly.

(3) “Lease of plant or machinery” includes a lease of plant or machinery and other property, but does not include a lease to which subsection (4) or (5) applies.

(4) This subsection applies to a lease if any income attributable to it and received by the lessor would be chargeable to tax under Part 3 of ITTOIA 2005 (property income).

(5) This subsection applies to a lease of plant or machinery if the lessor has incurred on the plant or machinery what would be qualifying expenditure within the meaning of Part 2 of CAA 2001 but for section 34A of that Act (expenditure on plant or machinery for long funding leasing not qualifying expenditure).

(6) “Relevant arrangement” means any agreement or arrangement relating to a lease of plant or machinery, including one made before the lease is entered into or after it has ended.

(7) Accordingly, “lessor” and “lessee” include prospective and former lessors and lessees.

Chapter 7 — Avoidance involving obtaining tax relief for interest

809ZG

(1) Relief is not to be given under any provision of the Income Tax Acts to a person in respect of a payment of interest if a tax relief scheme has been effected, or tax relief arrangements have been made, in relation to the transaction under which the interest is paid.

(2) Subsection (1) applies whether the tax relief scheme is effected, or the tax relief arrangements are made, before or after the transaction.

(3) A scheme is a tax relief scheme in relation to a transaction for the purposes of subsection (1) if it is such that the sole or main benefit that might be expected to accrue to the person from the transaction is the obtaining of a reduction in tax liability by means of relief under the Income Tax Acts.

(4) Arrangements are tax relief arrangements in relation to a transaction for the purposes of subsection (1) if they are such that the sole or main benefit that might be expected to accrue to the person from the transaction is the obtaining of a reduction in tax liability by means of relief under the Income Tax Acts.

(5) In this section “relief” means relief by way of—

(a) deduction in calculating profits or gains, or

(b) deduction or set off against income.

Chapter 2A — Domicile

835B

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Chapter 2B — UK representative of non-UK resident

Introduction

835C

(1) This Chapter provides for a branch or agency to be treated as the UK representative of a non-UK resident in respect of certain amounts chargeable to income tax.

(2) For obligations and liabilities in relation to income tax imposed on a branch or agency which under this Chapter is treated as the UK representative of a non-UK resident, see Chapter 2C.

835D

This Chapter does not apply in relation to income tax chargeable on income of a company otherwise than as a trustee.

Branches and agencies

835E

(1) This section applies if a non-UK resident carries on (alone or in partnership) any trade, profession or vocation through a branch or agency in the United Kingdom.

(2) The branch or agency is the UK representative of the non-UK resident in relation to—

(a) the amount of any income from the trade, profession or vocation that arises (directly or indirectly) through or from the branch or agency, and

(b) the amount of any income from property or rights which are used by, or held by or for, the branch or agency.

(3) The following rules are to be applied for the purposes of subsection (2) and Chapter 2C in relation to an amount within that subsection.

Rule 1 The UK representative continues to be the UK representative of the non-UK resident in relation to the amount even after ceasing to be a branch or agency through which the non-UK resident carries on the trade, profession or vocation concerned.

Rule 2 The UK representative is treated in relation to the amount as a distinct and separate person from the non-UK resident (if the representative would not otherwise be so treated).

Rule 3 If the branch or agency is carried on by persons in partnership, the partnership, as such, is treated in relation to the amount as the UK representative of the non-UK resident.

(4) For further rules that apply where a trade or profession carried on by a non-UK resident in the United Kingdom is carried on in partnership, see section 835F.

(5) This section needs to be read with sections 835G to 835K (which provide for descriptions of persons who are not to be regarded as the UK representative of a non-UK resident if certain conditions are met).

835F

(1) Subsection (2) applies if a trade or profession carried on by a non-UK resident through a branch or agency in the United Kingdom is carried on by the non-UK resident in partnership.

(2) The trade or profession carried on through the branch or agency is, for the purposes of section 835E and Chapter 2C, to be treated as including the notional trade or profession.

(3) Subsection (4) applies (in addition to subsection (2) if that subsection also applies) if—

(a) a trade or profession carried on by a non-UK resident in the United Kingdom is carried on by the non-UK resident in partnership, and

(b) any member of the partnership is resident in the United Kingdom.

(4) The notional trade or profession is, for the purposes of section 835E and Chapter 2C, to be treated as being a trade carried on in the United Kingdom through the partnership as such.

(5) In this section “the notional trade or profession” means the notional trade from which the non-UK resident's share in the partnership's profits or losses is treated for the purposes of section 852 of ITTOIA 2005 as deriving.

Persons who are not UK representatives

835G

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through an agent in the United Kingdom.

(2) The agent is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) arising to the non-UK resident from—

(a) so much of the non-UK resident's business as relates to disregarded transactions, or

(b) property or rights which, as a result of disregarded transactions, are used by, or held by or for, the agent on behalf of the non-UK resident.

(3) “Disregarded transactions” are transactions—

(a) carried out through the agent in the United Kingdom, and

(b) in respect of which the agent does not act in the course of carrying on a regular agency for the non-UK resident.

835H

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through a broker in the United Kingdom.

(2) The broker is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) if—

(a) the amount is transaction income in relation to a transaction carried out through the broker in the United Kingdom on behalf of the non-UK resident, and

(b) the independent broker conditions are met in relation to the transaction (see section 835L).

(3) In subsection (2) “transaction income”, in relation to a transaction carried out through a broker in the United Kingdom on behalf of a non-UK resident, has the same meaning as in Chapter 1 (see section 814(5)).

835I

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through an investment manager in the United Kingdom.

(2) The investment manager is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) if—

(a) the amount is transaction income in relation to an investment transaction carried out through the investment manager in the United Kingdom on behalf of the non-UK resident, and

(b) the independent investment manager conditions are met in relation to the investment transaction (see section 835M).

(3) In subsection (2) “transaction income”, in relation to a transaction carried out through an investment manager in the United Kingdom on behalf of a non-UK resident, has the same meaning as in Chapter 1 (see section 814(5)).

835J

(1) Subsection (2) applies if an amount within section 835E(2) arising to a non-UK resident consists of alternative finance return.

(2) Neither of the following is the UK representative of the non-UK resident in relation to the amount—

(a) the other party to the alternative finance arrangements,

(b) any other person acting for the non-UK resident in relation to the alternative finance arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance return within the application of section 564I, 564K or 564L(2) or (3).

(4) In subsection (2) the reference to “the alternative finance arrangements” is a reference to the alternative finance arrangements under which the alternative finance return mentioned in subsection (1) arises.

835K

(1) This section applies if—

(a) a non-UK resident (“X”) is a member of Lloyd's, and

(b) an amount within section 835E(2) arises to X from X's underwriting business.

(2) A person who has been X's members' agent or the managing agent of the syndicate in question is not the UK representative of X in relation to the amount or to matters connected with the amount.

(3) For the purposes of this section—

(a) X is a member of Lloyd's if X is a member within the meaning of Chapter 3 of Part 2 of FA 1993, and

(b) “members' agent” and “managing agent” are to be construed in accordance with section 184 of that Act.

The independent broker conditions

835L

(1) The independent broker conditions are met in relation to a transaction carried out on behalf of a non-UK resident by a broker in the United Kingdom if conditions A to D are met.

(2) Condition A is that at the time of the transaction the broker is carrying on the business of a broker.

(3) Condition B is that the transaction is carried out in the ordinary course of that business.

(4) Condition C is that the remuneration which the broker receives in respect of the transaction for the provision of the services of a broker to the non-UK resident is not less than is customary for that class of business.

(5) Condition D is that the broker does not fall (apart from this subsection) to be treated under this Chapter, or under Chapter 1 of Part 7A of TCGA 1992, as a UK representative of the non-UK resident in relation to any amounts that—

(a) are not included in transaction income in relation to the transaction (see section 835H(2) and (3)), and

(b) are chargeable to tax for the same tax year as that transaction income.

The independent investment manager conditions

835M

(1) The independent investment manager conditions are met in relation to an investment transaction carried out on behalf of a non-UK resident by an investment manager in the United Kingdom if conditions A to E are met.

(2) Condition A is that at the time of the transaction the investment manager is carrying on a business of providing investment management services.

(3) Condition B is that the transaction is carried out in the ordinary course of that business.

(4) Condition C is that, when the investment manager acts on behalf of the non-UK resident in relation to the transaction, the relationship between them, having regard to its legal, financial and commercial characteristics, is a relationship between persons carrying on independent businesses dealing with each other at arm's length.

(5) Condition D is that the requirements of the 20% rule are met (see section 835N).

(6) Condition E is that the remuneration which the investment manager receives in respect of the transaction for the provision of investment management services to the non-UK resident is not less than is customary for that class of business.

835N

(1) The requirements of the 20% rule are met if conditions A and B are met.

(2) Condition A is that, in relation to a qualifying period, it has been or is the intention of the investment manager and the persons connected with the investment manager that at least 80% of the non-UK resident's relevant disregarded income should consist of amounts to which none of them has a beneficial entitlement.

(3) Condition B is that, so far as there is a failure to fulfil that intention, that failure—

(a) is attributable (directly or indirectly) to matters outside the control of the investment manager and persons connected with the investment manager, and

(b) does not result from a failure by any of them to take such steps as may be reasonable for mitigating the effect of those matters in relation to the fulfilment of that intention.

835O

(1) This section applies for the purposes of this Chapter.

(2) A “qualifying period” means—

(a) the tax year in which the transaction income mentioned in section 835I(2) is chargeable to tax, or

(b) a period of not more than 5 years comprising two or more tax years including that one.

(3) The “relevant disregarded income” of the non-UK resident for a qualifying period is the total of the non-UK resident's income for the tax years comprised in the qualifying period which derives from investment transactions—

(a) carried out by the investment manager on the non-UK resident's behalf, and

(b) in relation to which the independent investment manager conditions are met, ignoring the requirements of the 20% rule.

(4) A person has a “beneficial entitlement” to relevant disregarded income if the person has or may acquire a beneficial entitlement that is, or would be, attributable to the relevant disregarded income as a result of having an interest or other rights mentioned in subsection (5).

(5) The interests and rights referred to in subsection (4) are—

(a) an interest (whether or not an interest giving a right to an immediate payment of a share in the profits or gains) in property in which the whole or any part of the relevant disregarded income is represented, or

(b) an interest in, or other rights in relation to, the non-UK resident.

835P

(1) This section applies in the case of an investment transaction in relation to which the independent investment manager conditions are met, except for the requirements of the 20% rule.

(2) This Chapter has effect as if the requirements of that rule were met in relation to the transaction, but only in relation to so much of the transaction income in relation to the transaction (see section 835I(2) and (3)) as does not represent an amount—

(a) which is relevant disregarded income of the non-UK resident, and

(b) to which the investment manager or a person connected with the investment manager has or has had any beneficial entitlement.

835Q

(1) This section applies if amounts arise or accrue to the non-UK resident as a participant in a collective investment scheme.

(2) It applies for the purposes of determining whether the requirements of the 20% rule are met in relation to a transaction carried out for the purposes of the scheme (so far as the transaction is one in respect of which amounts so arise or accrue).

(3) In applying this section make the following assumptions—

(a) that all the transactions carried out for the purposes of the scheme are carried out on behalf of a company (“the assumed company”) which is—

(i) constituted for the purposes of the scheme, and

(ii) non-UK resident, and

(b) that the participants do not have any rights in respect of the amounts arising or accruing in respect of those transactions, other than the rights which, if they held shares in the assumed company, would be their rights as shareholders.

(4) If the scheme is such that the assumed company would not be regarded for tax purposes as carrying on a trade in the United Kingdom in relation to the tax year in which the transaction income mentioned in section 835I(2) is chargeable to tax, the requirements of the 20% rule are treated as met in relation to a transaction carried out for the purposes of the scheme.

(5) If the scheme is such that the assumed company would be so regarded for tax purposes, sections 835N to 835P have effect in relation to a transaction carried out for the purposes of the scheme with the modifications in subsection (6).

(6) The modifications are—

(a) for references to the non-UK resident substitute references to the assumed company, and

(b) for references to the non-UK resident's relevant disregarded income for a qualifying period substitute references to the sum of the amounts that would, for tax years comprised in the qualifying period, be chargeable to tax on the assumed company as profits deriving from the transactions—

(i) carried out by the investment manager, and

(ii) assumed to be carried out on behalf of the company.

(7) In this section—

“collective investment scheme” has the meaning given by section 235 of FISMA 2000, and

“participant”, in relation to a collective investment scheme, is construed in accordance with that section.

Supplementary

835R

(1) For the purposes of this Chapter a person is to be regarded as carrying out a transaction on behalf of another if the person—

(a) undertakes the transaction, whether on behalf of or to the account of the other, or

(b) gives instructions for it to be so carried out by another.

(2) In the case of a person who acts as a broker or investment manager as part only of a business, this Chapter has effect as if that part were a separate business.

835S

(1) This section applies for the purposes of this Chapter.

(2) “Branch or agency” means any factorship, agency, receivership, branch or management.

(3) “Investment manager” has the same meaning as in Chapter 1 (see section 827).

(4) “Investment transaction” means any transaction of a description specified for the purposes of this section in regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(5) Provision made in regulations under subsection (4) may, in particular, have effect in relation to the tax year current on the day on which the regulations are made.

Chapter 2C — Income tax obligations and liabilities imposed on UK representatives

835T

(1) This Chapter applies to the enactments relating to income tax so far as they make provision for or in connection with the assessment, collection and recovery of tax, or of interest on tax.

(2) Those enactments have effect in accordance with section 835U in relation to amounts in respect of which a branch or agency is to be treated as the UK representative of a non-UK resident under Chapter 2B.

(3) In this section “enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978.

835U

(1) The obligations and liabilities of a non-UK resident are to be treated, for the purposes of the enactments to which this Chapter applies, as if they were also the obligations and liabilities of the UK representative of the non-UK resident.

(2) Subsection (3) applies if—

(a) the UK representative of a non-UK resident discharges an obligation or liability imposed by this section that corresponds to one to which the non-UK resident is subject, or

(b) a non-UK resident discharges an obligation or liability that corresponds to one to which the non-UK resident's UK representative is subject by virtue of this section.

(3) The corresponding obligation or liability—

(a) of the non-UK resident (in a case within subsection (2)(a)), or

(b) of the UK representative (in a case within subsection (2)(b)),

is discharged.

(4) A non-UK resident is bound, as if they were the non-UK resident's own, by acts or omissions of the non-UK resident's UK representative in the discharge of the obligations and liabilities imposed on the representative by this section.

(5) This section is subject to sections 835V and 835W.

835V

(1) An obligation or liability attaching to a non-UK resident (“X”) by reason of a notice or other document having been given or served on X does not also attach to the UK representative of X by virtue of section 835U unless the notice or other document (or a copy of it) has been given to or served on the representative.

(2) An obligation or liability attaching to X by reason of a request or demand having been received by X does not also attach to the UK representative of X by virtue of section 835U unless the representative has been notified of the request or demand.

(3) Subsection (4) applies to obligations relating to the provision of information that are imposed on the UK representative of X by section 835U in a case where the representative is X's independent agent.

(4) The obligations do not require the UK representative to do anything except so far as it is practicable for the representative to do so.

(5) For this purpose, the representative must act to the best of the representative's knowledge and belief after taking all reasonable steps to obtain the necessary information.

(6) An obligation of X to provide information is not discharged by virtue of section 835U in a case where the UK representative of X has discharged the obligation only so far as required by subsection (4) of this section.

(7) X is not bound by virtue of section 835U by mistakes in information provided by the UK representative of X in discharging, so far as required under subsection (4) of this section, an obligation imposed on the representative by section 835U unless—

(a) the mistake is the result of an act or omission of X, or

(b) the mistake is one to which X consented or in which X connived.

(8) In this section “information” includes anything contained in a return, self-assessment, account, statement or report required to be provided to the Commissioners for Her Majesty's Revenue and Customs or to any officer of Revenue and Customs.

835W

(1) A person is not by virtue of section 835U liable to be proceeded against for a criminal offence unless the person—

(a) committed the offence, or

(b) consented to or connived in its commission.

(2) An independent agent of a non-UK resident is not by virtue of section 835U liable to any civil penalty or surcharge in respect of an act or omission if conditions A and B are met.

(3) Condition A is that the act or omission is not—

(a) an act or omission of the independent agent, or

(b) an act or omission to which the agent consented or in which the agent connived.

(4) Condition B is that the independent agent is able to show that the amount of the penalty or surcharge will not be recoverable out of the sums mentioned in section 835X(3) (after being indemnified for any other liabilities under section 835X).

835X

(1) An independent agent of a non-UK resident is entitled to be indemnified for the amount of any liability of the non-UK resident which the agent has discharged by virtue of section 835U.

(2) An independent agent of a non-UK resident is entitled to retain, from the sums mentioned in subsection (3), amounts sufficient to meet any liabilities which by virtue of section 835U the agent has discharged or to which the agent is subject.

(3) The sums are those which—

(a) (ignoring subsection (2)) are due from the independent agent to the non-UK resident, or

(b) are received by the independent agent on behalf of the non-UK resident.

835Y

(1) In this Chapter “independent agent”, in relation to a non-UK resident (“X”), means a person who is the UK representative of X in respect of any agency in which the person is acting on behalf of X in an independent capacity.

(2) For this purpose a person does not act in an independent capacity on behalf of X unless the relationship between them, having regard to its legal, financial and commercial characteristics, is a relationship between persons carrying on independent businesses dealing with each other at arm's length.

Chapter 3A — Banks etc in compulsory liquidation

837A

(1) This Chapter provides for the receipts of certain types of company being wound up to be charged to income tax.

(2) For provision charging the receipts of such companies to corporation tax, see Chapter 6 of Part 13 of CTA 2010.

837B

(1) This Chapter applies if—

(a) a company is being or has been wound up by the court in the United Kingdom, and

(b) conditions A, B and C are met.

(2) Condition A is that the company was, at any time within the period mentioned in subsection (5), lawfully carrying on a business of accepting deposits as—

(a) a person of the kind mentioned in paragraph (b) of the definition of “bank” in section 991(2) (persons with permission under Part 4 of FISMA 2000 to accept deposits), ...

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

(3) Condition B is that the company has permanently ceased to carry on the trade that included the business of accepting deposits (the “deposit-taking trade”).

(4) Condition C is that the company is insolvent and—

(a) was so when the winding up proceedings started, or

(b) became so at any time in the period of 12 months following the day on which those proceedings started.

(5) The period referred to in subsection (2) is the period of 12 months ending with the earlier of—

(a) the day on which the winding up proceedings started, and

(b) the day on which the company permanently ceased to carry on the deposit-taking trade.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

837C

(1) Winding up receipts arising from the deposit-taking trade are chargeable to income tax.

(2) Subsection (1) applies in relation to a winding up receipt only so far as its value was not brought into account in calculating the profits of the trade of any period before the permanent cessation of the trade.

(3) A “winding up receipt” means (subject to subsection (4)) a sum received by the company or its liquidator after—

(a) the start of the winding up proceedings, or

(b) if later, the permanent cessation of the deposit-taking trade.

(4) The following are not winding up receipts—

(a) a sum received on behalf of a person entitled to the sum to the exclusion of the company and its liquidator, and

(b) a sum realised by the transfer of an asset required to be valued under section 173 of ITTOIA 2005 (valuation of trading stock on cessation).

837D

(1) This section applies if—

(a) the company or its liquidator transfers for value to another person the right to receive a sum arising from the deposit-taking trade, and

(b) the sum is one which, if received by the company or its liquidator, would be a winding up receipt.

(2) If the transfer is at arm's length, this Chapter has effect as if the amount or value of the consideration for the transfer were a winding up receipt arising from the deposit-taking trade.

(3) If the transfer is not at arm's length, this Chapter has effect as if the value of the right transferred as between parties at arm's length were a winding up receipt arising from the deposit-taking trade.

837E

(1) In calculating the amount on which income tax is charged under this Chapter for a tax year, deductions are allowed in accordance with this section from the amount which would otherwise be chargeable to income tax under this Chapter.

(2) A deduction is allowed for the total sum of all losses, expenses and debits within subsection (3) that are incurred during or before the tax year (but subject to subsections (4) and (5)).

(3) The losses, expenses and debits within this subsection are those which, if the company carrying on the deposit-taking trade had not permanently ceased to do so—

(a) would have been deducted in calculating the profits of the trade for income or corporation tax purposes, or

(b) would have been deducted from or set off against the profits of the trade for income or corporation tax purposes.

(4) No deduction is allowed if the loss, expense or debit arises directly or indirectly from the cessation itself.

(5) A loss, expense or debit is only within subsection (3) if incurred—

(a) after the start of the winding up proceedings or, if later, the permanent cessation of the deposit-taking trade, or

(b) in the case of a loss, at or before the permanent cessation of the deposit-taking trade.

(6) No deduction for an amount is allowed under this section if the amount has already been allowed (whether under this section or under any other provision of the Tax Acts).

837F

(1) This section applies if a winding up receipt arising from the deposit-taking trade is received in a tax year beginning no later than 6 years after the company permanently ceased to carry on the trade.

(2) The company or its liquidator may elect that the income tax chargeable under this Chapter in respect of the receipt is to be charged as if the receipt has been received on the date of the cessation.

(3) The election must be made before the end of the period of two years beginning immediately after the end of the tax year in which the receipt is received.

(4) If an election is made under this section an assessment to income tax must be made accordingly (regardless of anything in the Income Tax Acts).

837G

If a winding up receipt arising from the deposit-taking trade is chargeable to income tax under this Chapter it is not chargeable to income tax under any other provision.

837H

(1) This section applies for the purposes of this Chapter.

(2) There is the permanent cessation of a company's trade if—

(a) the company ceases to carry on the trade, or

(b) the company ceases to be within the charge to corporation tax in respect of the trade,

whether or not the trade is in fact ceased.

(3) A company is insolvent at any time if at that time—

(a) it is unable to pay its debts as they fall due, or

(b) the value of its assets is less than the amount of its liabilities (including its contingent and prospective liabilities).

(4) “Company” means—

(a) a company as defined in section 1(1) of the Companies Act 2006, or

(b) an unregistered company as defined in section 220 of the Insolvency Act 1986 or Article 184 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).

(5) For the meaning of “deposit-taking trade” and “winding up receipt”, see sections 837B(3) and 837C(3) respectively.

Repos

925A

(1) Subsection (2) applies if a company (“the lender”) has a creditor repo for the purposes of Chapter 10 of Part 6 of CTA 2009 (see section 543 of that Act).

(2) Sections 918 , 919 and 921 have effect in relation to the lender while the arrangement is in force as if—

(a) the lender paid the borrower amounts which are representative of the income payable on the securities that are initially sold,

(b) the payments were made under requirements of the arrangement, and

(3) For the purposes of subsection (2), an arrangement is in force from the time when the securities are initially sold until the earlier of—

(a) the time when the subsequent sale of the securities, or similar securities, takes place, and

(b) the time when it becomes apparent that that sale will not take place.

925B

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

925C

If section 925A(2) ... applies, any payment actually made under an arrangement which is representative of any income payable on any securities is to be treated for the purposes of sections 918 , 919 and 921 as if it had not been made.

925D

(1) The Treasury may by regulations provide for all or any of the provisions of sections 925A to 925F to apply with modifications in relation to—

(a) cases to which section 925E (non-standard repo cases) applies, or

(b) cases involving redemption arrangements, or

(2) A case involves redemption arrangements if—

(a) arrangements, corresponding to those made in cases where a company has a repo, are made in relation to securities that are to be redeemed in the period after their sale, and

(b) the arrangements are such that a person (instead of having the right or obligation to buy those securities, or similar or other securities, at any subsequent time) has a right or obligation in respect of the benefits which will result from the redemption.

(3) The regulations may make incidental, supplemental, consequential and transitional provision and savings.

(4) In this section “modifications” includes exceptions and omissions.

(5) For the purposes of subsection (2)(a) and section 925E(1), a company has a repo if—

(a) for the purposes of Chapter 10 of Part 6 of CTA 2009—

(i) it has a creditor repo (see section 543 of that Act),

(ii) it has a creditor quasi-repo (see section 544 of that Act),

(iii) it has a debtor repo (see section 548 of that Act), or

(iv) it has a debtor quasi-repo (see section 549 of that Act), or

(b) as a result of section 547 of that Act, the company has a creditor repo for the purposes of section 546 of that Act.

925E

(1) This section applies to a case if—

(a) a company has a repo,

(b) there has been a sale of the securities under the arrangement or arrangements by reference to which the company has the repo, and

(2) Condition A is that those securities, or similar or other securities, are not subsequently bought under the arrangement or arrangements.

(3) Condition B is that provision is made by or under an arrangement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the subsequent purchase, are to represent those initially sold.

(4) Condition C is that provision is made by or under an arrangement for securities to be treated as not so included.

(5) Section 925D(5) interprets references in subsection (1) to a company having a repo.

925F

(1) This section applies for the purposes of sections 925A to 925E and this section.

(2) “Arrangement” includes any agreement or understanding (whether or not legally enforceable).

(3) It does not matter whether or not provision of any arrangement conferring a right or imposing an obligation on any person to buy any securities is subject to any conditions.

(4) “Securities” means shares, stock or other securities issued by—

(a) the government of the United Kingdom,

(b) any public or local authority in the United Kingdom,

(d) a government or public or local authority of a territory outside the United Kingdom, or

(e) any other body of persons not resident in the United Kingdom.

(5) Securities are similar if they give their holders—

(a) the same rights against the same persons as to capital, interest and dividends, and

(b) the same remedies to enforce those rights.

(6) Subsection (5) applies even if there is a difference in—

(a) the total nominal amounts of the securities,

(b) the form in which they are held, or

(7) If—

(a) a person (“A”) buys securities (or has a right or obligation to buy securities), but

(b) the securities are (or are to be) held for the benefit of another person (“B”),

B (not A) is treated as buying (or having the right or obligation to buy) the securities.

(8) If—

(a) a person (“C”) sells securities, but

(b) the proceeds of the sale are held for the benefit of another person (“D”),

D (not C) is treated as selling the securities.

998A

(1) This section applies for the purposes of the provisions of the Income Tax Acts which apply this section.

(2) A hire-purchase agreement is an agreement in whose case each of conditions A to C is met.

(3) Condition A is that under the agreement goods are bailed (or in Scotland hired) in return for periodical payments by the person to whom they are bailed (or hired).

(4) Condition B is that under the agreement the property in the goods will pass to the person to whom they are bailed (or hired) if the terms of the agreement are complied with and one or more of the following events occurs—

(a) the exercise of an option to purchase by that person,

(b) the doing of another specified act by any party to the agreement,

(5) Condition C is that the agreement is not a conditional sale agreement.

(6) In subsection (5) “conditional sale agreement” means an agreement for the sale of goods under which—

(a) the purchase price or part of it is payable by instalments, and

(b) the property in the goods is to remain in the seller (even though they are to be in the possession of the buyer) until conditions specified in the agreement are met (whether as to the payment of instalments or otherwise).

Application in relation to corresponding bonus shares

57A

(1) For the purposes of this Part of this Schedule, if—

(a) any shares (“the original shares”) have been issued to an individual before a particular date, or are treated under this paragraph as having been issued to the individual before a particular date, and

(b) any corresponding bonus shares are issued to the individual on or after that date,

the bonus shares are treated as having been issued at the time the original shares were issued to the individual or are treated as having been so issued.

(2) In this paragraph “bonus shares” and “corresponding bonus shares” have the same meaning as in Chapter 6 of Part 4.

Maximum amount for cases outside section 257MNA

74ZA

(1) This section applies if—

(a) during a tax year a person carries on (alone or in partnership) a trade, profession or vocation (“the relevant activity”),

(b) the person makes a loss in the relevant activity in that tax year, and

(c) the loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.

(2) No sideways relief or capital gains relief may be given to the person for the loss (but subject to subsection (5)).

(3) In subsection (1) “relevant tax avoidance arrangements” means arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability by means of sideways relief or capital gains relief.

(4) In subsection (3) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(5) This section has no effect in relation to any loss that derives wholly from qualifying film expenditure (see section 74D).

(6) For the purposes of this section—

(a) capital gains relief is, in relation to a loss, the treatment of a loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and

(b) capital gains relief is given for a loss when it is so treated.

Restrictions on relief

127A

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership),

(b) the loss has a capital allowances connection (see section 123(2)), and

(c) the loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.

(2) No property loss relief against general income may be given to the person for so much of the applicable amount of the loss as is attributable to an annual investment allowance.

(3) For the purposes of subsection (2), the applicable amount of the loss is to be treated as attributable to capital allowances before anything else and to an annual investment allowance before any other capital allowance.

(4) In subsection (1) “relevant tax avoidance arrangements” means arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is being in a position to make use of an annual investment allowance in the obtaining of a reduction in tax liability by means of property loss relief against general income.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) In this section “the applicable amount of the loss” has the meaning given by section 122.

438A

(1) For the purposes of this Chapter the acquisition value of a qualifying investment disposed of by an individual is—

(a) where the qualifying investment was acquired by the individual within the period of 4 years ending with the day on which the disposal is made, the cost to the individual of acquiring it, or

(b) where something from which the qualifying investment derives or which it represents was so acquired, such proportion of the cost to the individual of acquiring that thing as is just and reasonable to attribute to the qualifying investment.

(2) A reference in subsection (1) to the cost to the individual of an acquisition is to—

(a) the consideration given by the individual for the acquisition, less

(b) any amount that is received in connection with the acquisition, by the individual or a person connected with the individual, as part of the scheme in question.

521A

(1) This section applies if gifts are made to charitable trusts by individuals and the gifts are donations for the purposes of Part 12 of ITEPA 2003 (payroll giving).

(2) Income tax is charged on the gifts under this section.

(3) It is charged on the full amount of the gifts arising in the tax year.

(4) But a gift is not taken into account in calculating total income so far as it is applied to charitable purposes only.

(5) The trustees of the charitable trust are liable for any tax charged under this section.

538A

(A1) This section applies to claims for—

(a) repayment of income tax treated as having been paid by virtue of section 520(4) (gift aid relief: income tax treated as paid by trustees of charitable trust), or

(b) repayment of income tax deducted at source from income to which any of the following applies—

(i) section 532 (exemption for savings and investment income),

(ii) section 533 (exemption for public revenue dividends),

(iii) section 536 (exemption for certain miscellaneous income), or

(iv) section 537 (exemption for income from estates in administration).

(1) This section also applies to claims for amounts to be exempt from tax by virtue of—

(a) section 521(4) (gifts entitling donor to gift aid relief: charitable trusts), or

(b) any of the provisions mentioned in subsection (A1)(b).

(2) A claim to which this section applies may be made—

(a) to an officer of Revenue and Customs, or

(b) by being included in a return under section 8A of TMA 1970 (trustee's self-assessment return).

(3) In this section—

“free-standing claim” means a claim made as mentioned in subsection (2)(a), and

“tax return claim” means a claim made as mentioned in subsection (2)(b).

(4) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision—

(a) limiting the number of free-standing claims that may be made by a person in a tax year, or

(b) requiring a claim for an amount below an amount specified in the regulations to be made as a tax return claim.

(5) The regulations may make different provision for different cases or purposes.

...

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

943B

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

943C

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

943D

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

180A

(1) The issuing company must meet the UK permanent establishment requirement throughout period B.

(2) The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom.

180B

(1) The issuing company must meet the financial health requirement at the beginning of period B.

(2) The financial health requirement is that the issuing company is not in difficulty.

(3) The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02) as those guidelines had effect in the United Kingdom immediately before IP completion day.

191A

(1) This section applies for the purposes of this Part.

(2) A company has a “permanent establishment” in the United Kingdom if (and only if)—

(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.

(3) For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)—

(a) a place of management,

(b) a branch,

(d) a factory,

(e) a workshop,

(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and

(g) a building site or construction or installation project.

(4) If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that—

(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

(b) an agent carries on activities there for and on behalf of the company.

(5) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

(6) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—

(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company,

(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery,

(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and

(d) purchasing goods or merchandise, or collecting information, for the company.

(7) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business.

(8) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that—

(a) is resident there, or

(b) carries on business there (whether through a permanent establishment or otherwise).

(9) The Treasury may by regulations amend this section.

286A

The requirement of this section, at any time on or after the issue of the relevant holding, is that the relevant company has a permanent establishment in the United Kingdom at all times from the issue of the holding to the time in question.

286B

(1) The requirement of this section is that the relevant company is not, at the time of the issue of the relevant holding, in difficulty.

(2) The relevant company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02) as those guidelines had effect in the United Kingdom immediately before IP completion day.

Time as from which VCT approval has effect

302A

(1) This section applies for the purposes of this Chapter.

(2) A company has a “permanent establishment” in the United Kingdom if (and only if)—

(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.

(3) For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)—

(a) a place of management,

(b) a branch,

(d) a factory,

(e) a workshop,

(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and

(g) a building site or construction or installation project.

(4) If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that—

(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

(b) an agent carries on activities there for and on behalf of the company.

(5) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

(6) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—

(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company,

(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery,

(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and

(d) purchasing goods or merchandise, or collecting information, for the company.

(7) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business.

(8) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that—

(a) is resident there, or

(b) carries on business there (whether through a permanent establishment or otherwise).

(9) The Treasury may by regulations amend this section.

838A

(1) The trustees of an asbestos compensation settlement are not liable to income tax in respect of the income of the trustees.

(2) In this section “asbestos compensation settlement” means a settlement—

(a) the sole or main purpose of which is making compensation payments to or in respect of individuals who have, or had before their death, an asbestos-related condition, and

(b) which is made before 24 March 2010 in pursuance of an arrangement within subsection (3).

(3) An arrangement is within this subsection if it is—

(a) a voluntary arrangement that has taken effect under Part 1 of the Insolvency Act 1986 or Part 2 of the Insolvency (Northern Ireland) Order 1989,

(b) a compromise or arrangement that has taken effect under section 425 of the Companies Act 1985, Article 418 of the Companies (Northern Ireland) Order 1986 or Part 26 of the Companies Act 2006, or

(c) an arrangement or compromise of a kind corresponding to any of those mentioned in paragraph (a) or (b) that has taken effect under, or as a result of, the law of a country or territory outside the United Kingdom.

963A

(1) The Commissioners for Her Majesty's Revenue and Customs may by regulations modify, replace or supplement any provision of section 963(2) to (4).

(2) Regulations under this section may only be made for the purpose of regulating the time at and manner in which persons making payments within section 963(1)(a) or (b) are to account for and pay income tax which is to be collected from them in respect of those payments.

(3) In particular, regulations under this section may, in relation to income tax for which a person is liable to account—

(a) modify any provision of Parts 2 to 6 of TMA 1970, or

(b) apply any such provision with or without modifications.

(4) Regulations under this section may—

(a) make different provision for different kinds of payer,

(b) make different provision for different circumstances, and

(c) authorise the Commissioners for Her Majesty's Revenue and Customs, if they think there are special circumstances justifying it, to make special arrangements in relation to income tax for which a person is liable to account.

(5) Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.

(6) The Commissioners for Her Majesty's Revenue and Customs must not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.

(7) References in this Act and in any other enactment to any of the provisions of section 963(2) to (4) are to be read as references to those provisions as modified, replaced or supplemented by provision made by regulations under this section.

The unquoted status requirement

1007A

(1) In the Income Tax Acts “permanent establishment”, in relation to a company, is to be read in accordance with Chapter 2 of Part 24 of CTA 2010.

(2) This section does not apply for the purposes of—

(a) Part 5 of this Act (see instead section 191A), or

(b) Chapter 4 of Part 6 of this Act (see instead section 302A).

127ZA

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

Put options

CHAPTER 8 — Tainted charity donations

Introduction

809ZH

(1) This Chapter makes provision for removing entitlement to income tax reliefs, and counteracting income tax advantages, where a person makes a relievable charity donation which is a tainted donation.

(2) See section 257A of TCGA 1992 and Part 21C of CTA 2010 for the removal of entitlement to other reliefs where a person makes a relievable charity donation which is a tainted donation.

809ZI

(1) In this Chapter “relievable charity donation” means a gift or other disposal which—

(a) is made by a person to a charity, and

(b) is eligible for tax relief.

(2) A gift or other disposal is eligible for tax relief if one or both of the following apply—

(a) (ignoring the tainted donation provisions) tax relief would be available in respect of it under a relevant relieving provision;

(b) the charity is entitled to claim a repayment of tax in respect of it.

(3) “The tainted donation provisions” are—

(a) this Chapter,

(b) section 257A of TCGA 1992 (tainted charity donations: disapplication of section 257), and

(4) The following are “relevant relieving provisions”—

(a) section 257 of TCGA 1992 (gifts of chargeable assets),

(b) section 63(2)(a), (aa) and (ab) of CAA 2001 (gifts of plant and machinery),

(d) section 108 of ITTOIA 2005 (gifts of trading stock),

(e) Chapters 2 and 3 of Part 8 of this Act (gift aid and gifts of shares),

(f) section 105 of CTA 2009 (gifts of trading stock), and

(g) Part 6 of CTA 2010 (charitable donations relief).

(5) For the purposes of this Chapter, an amount of income which arises under a UK settlement and to which a charity is entitled under the terms of the settlement is to be regarded as an amount gifted to the charity by the trustees of the settlement.

“UK settlement” has the same meaning as in section 628 of ITTOIA 2005.

Tainted donations

809ZJ

(1) For the purposes of this Chapter, a relievable charity donation is a tainted donation if (and only if) Conditions A, B and C are met.

(2) Condition A is that—

(a) a linked person enters into arrangements (whether before or after the donation is made), and

(b) it is reasonable to assume from either or both of—

(i) the likely effects of the donation and the arrangements, and

(ii) the circumstances in which the donation is made and the circumstances in which the arrangements are entered into,

that the donation would not have been made and the arrangements would not have been entered into independently of one another.

(3) “Linked person” means—

(a) the person who made the donation (“the donor”), or

(b) a person connected with the donor at a relevant time.

(4) In subsection (3) “relevant time” means a time during the period which begins with the earliest, and ends with the latest, of the following times—

(a) the time when the arrangements are entered into as mentioned in subsection (2);

(b) the time when the relievable charity donation is made;

(5) Condition B is that the main purpose, or one of the main purposes, of the linked person in entering into the arrangements is to obtain a financial advantage—

(a) directly or indirectly from the charity to which the donation is made or a connected charity,

(b) for one or more linked persons who are not charities (each of whom is referred to in this Chapter as “a potentially advantaged person”).

(6) Condition C is that the donor is not—

(a) a qualifying charity-owned company, or

(b) a relevant housing provider linked with the charity to which the donation is made.

(7) For the purposes of subsection (6)(b) a relevant housing provider is linked with the charity if (and only if)—

(a) one is wholly owned, or subject to control, by the other, or

(b) both are wholly owned, or subject to control, by the same person.

(8) In this section—

“qualifying charity-owned company”, in relation to a relievable charity donation, means a company which—is wholly owned by one or more charities, at least one of which is the charity to which the donation is made or a connected charity, andhas not previously been under the control of, and does not carry on a trade or business previously carried on by, one or more of the following—a potentially advantaged person;a person (other than a charity) who, at any time within the period of 4 years ending with the day on which paragraph (a) was first satisfied, was connected with a person who is a potentially advantaged person;

“relevant housing provider” means a body which is—a non-profit registered provider of social housing, orentered on a register maintained under section 1 of the Housing Act 1996, section 20 of the Housing (Scotland) Act 2010 (asp 17) or Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)).

(9) Section 200 of CTA 2010 (company wholly owned by a charity) applies for the purposes of subsection (8), and for those purposes references in that section to “charity” include a registered club within the meaning of section 658(6) of that Act.

(10) This section is subject to section 809ZL (certain financial advantages to be ignored).

809ZK

(1) This section applies for the purposes of Condition B.

(2) Subsection (3) applies where the arrangements entered into by the linked person (as mentioned in Condition A) involve a transaction to which—

(a) that or any other linked person (“X”), and

(b) another person (“Y”),

are parties.

(3) X obtains a financial advantage from the charity to which the donation is made or a connected charity if—

(a) the terms of the transaction are less beneficial to Y or more beneficial to X (or both) than those which might reasonably be expected in a transaction concluded between parties dealing at arm's length, or

(b) the transaction is not of a kind which a person dealing at arm's length and in place of Y might reasonably be expected to make.

(4) Nothing in this section is intended to limit the circumstances in which a linked person may be regarded as obtaining a financial advantage for the purposes of section 809ZJ.

(5) In this section—

“Condition A” and “Condition B” have the same meaning as in section 809ZJ;

“linked person” has the meaning given by section 809ZJ(3);

“transaction” includes (for example)—the sale or letting of property,the provision of services,the exchange of property,the provision of a loan or any other form of financial assistance, andinvestment in a business.

809ZL

(1) When determining whether a relievable charity donation is a tainted donation, a financial advantage within subsection (2), (3), (4) or (5) is to be ignored.

(2) A financial advantage is within this subsection if the person for whom it is obtained applies the advantage for charitable purposes only.

(3) A financial advantage is within this subsection if (ignoring the tainted donation provisions) it is—

(a) a benefit associated with a gift which is a qualifying donation for the purposes of Chapter 2 of Part 8 (gift aid), or

(b) a benefit associated with a payment which is a qualifying payment for the purposes of Chapter 2 of Part 6 of CTA 2010 (charitable donations relief: payments to charity).

(4) A financial advantage is within this subsection if (ignoring the tainted donation provisions)—

(a) the relievable charity donation is a disposal in respect of which tax relief would be available under Chapter 3 of Part 8 of this Act (gifts of shares, securities and real property to charities etc) or Chapter 3 of Part 6 of CTA 2010 (charitable donations: certain disposals to charity), and

(b) the advantage is a benefit the value of which would be taken into account in determining the relievable amount in respect of the disposal for the purposes of the Chapter in question.

(5) A financial advantage is within this subsection if (ignoring the tainted donation provisions)—

(a) the relievable charity donation is a gift in respect of which tax relief would be available under section 108 of ITTOIA 2005 or section 105 of CTA 2009 (gifts of trading stock to charities etc), and

(b) the advantage is a benefit attributable to the making of the gift in respect of which an amount would be brought into account under section 109 of ITTOIA 2005 or section 108 of CTA 2009 (receipt of benefits by donor or connected person).

(6) In this section—

“benefit associated with a gift” has the meaning given by section 417;

“benefit associated with a payment” has the meaning given by section 196 of CTA 2010;

“the tainted donation provisions” has the meaning given by section 809ZI(3).

Removal of reliefs and imposition of charge to tax

809ZM

(1) This section applies where a tainted donation is made by a person.

(2) Where (ignoring this Chapter) income tax relief would be available in respect of the tainted donation, that relief is not available.

(3) Where—

(a) (ignoring this Chapter) income tax relief would be available in respect of an associated donation, and

(b) entitlement to that relief is not withdrawn by subsection (2),

that relief is not available.

(4) In this section—

“associated donation”, in relation to a tainted donation, means a relievable charity donation made—in accordance with the relevant arrangements, andby a person, other than—a qualifying charity-owned company in relation to that relievable charity donation, ora relevant housing provider linked (within the meaning of section 809ZJ(7)) with the charity to which that donation is made;

“income tax relief” means relief under—section 63(2)(a), (aa) or (ab) of CAA 2001 (gifts of plant and machinery), so far as it applies in relation to income tax,Part 12 of ITEPA 2003 (payroll giving),section 108 of ITTOIA 2005 (gifts of trading stock),Chapter 2 of Part 8 of this Act (gift aid), orChapter 3 of that Part (gifts of shares etc);

“qualifying charity-owned company” has the meaning given by section 809ZJ(8) (except that paragraph (b) of that definition does not apply);

“relevant housing provider” has the meaning given by section 809ZJ(8);

“the relevant arrangements”, in relation to a tainted donation, means the arrangements by reference to which Conditions A and B in section 809ZJ are met.

(5) Where entitlement to relief is withdrawn under this section in respect of a donation—

(a) subsections (6) and (7) apply if the relief is under Chapter 2 of Part 8 (gift aid), and

(b) subsection (8) applies if the relief is under Part 12 of ITEPA 2003 (payroll giving).

(6) For the purposes of Step 2 in section 58(1), the donation is not a qualifying donation for the purposes of Chapter 2 of Part 8.

(7) But—

(a) the donation remains a qualifying donation for the purposes of—

(i) Part 10 (special rules about charitable trusts etc),

(ii) section 899(5) (meaning of “qualifying annual payment”),

(iii) Chapter 2 of Part 11 of CTA 2010 (charitable companies: gifts and other payments),

(iv) section 664 of that Act (community amateur sports clubs: exemption for interest and gift aid income), and

(b) accordingly, section 414(2)(a) (donation treated as made after deduction of basic rate income tax) applies for the purposes of section 520(4) (income tax treated as deducted to be treated as income tax paid by charitable trust).

(8) The donation remains a donation for the purposes of Part 12 of ITEPA 2003 for the purposes of—

(a) section 521A (gifts under payroll deduction scheme: income tax liability and exemption), and

(b) section 472A of CTA 2010 (gifts under payroll reduction scheme: corporation tax liability and exemption).

809ZN

(1) Income tax is charged under this section if—

(a) a person makes a tainted donation in a tax year,

(b) (ignoring this Chapter) relief would have been available under Chapter 2 of Part 8 in respect of the tainted donation or an associated donation (“the gift aid donation”), and

(c) the charity to which the gift aid donation is made is entitled to claim a repayment of tax in respect of that donation.

(2) The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the gift aid donation (whether or not such a claim is made).

(3) Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.

(4) The persons are—

(a) the donor in respect of the gift aid donation,

(b) if different, the donor in respect of the tainted donation,

(d) any charity to which the gift aid donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).

(5) A charity falls within this subsection if the charity—

(a) is or was party to the relevant arrangements relating to the tainted donation, and

(b) was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.

(6) No liability to income tax arises under this section in respect of a repayment of tax, if (and to the extent that) the repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.

(7) In this section—

“associated donation” has the same meaning as in section 809ZM;

“linked person” has the same meaning as in section 809ZJ;

“the relevant arrangements” has the same meaning as in section 809ZM.

809ZO

(1) Income tax is charged under this section if—

(a) a person makes a tainted donation in a tax year,

(b) the tainted donation or an associated donation is a payment by the trustees of a settlement of income arising under the settlement (“the trust donation”), and

(2) The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the trust donation (whether or not such a claim is made).

(3) Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.

(4) The persons are—

(a) the trustees of the settlement who made the trust donation,

(b) if different, the donor in respect of the tainted donation,

(c) if section 628 or 630 of ITTOIA 2005 (gifts from settlor-interested trusts etc) applies in relation to the income out of which the trust donation is made, the settlor in relation to the settlement,

(d) each potentially advantaged person under the relevant arrangements relating to the tainted donation,

(e) any beneficiary of the settlement who is party to those arrangements, and

(f) any charity to which the trust donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).

(5) A charity falls within this subsection if—

(a) the charity is or was party to the relevant arrangements relating to the tainted donation, and

(b) the charity was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.

(6) No liability to income tax arises under this section in respect of a repayment of tax if that repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.

(7) In this section—

“associated donation” has the same meaning as in section 809ZM;

“linked person” has the same meaning as in section 809ZJ;

“the relevant arrangements” has the same meaning as in section 809ZM;

“settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

Supplementary

809ZP

For the purposes of this Chapter, a “connected charity” in relation to another charity means a charity which is connected with that other charity in a matter relating to the structure, administration or control of either charity.

809ZQ

(1) Section 993 (meaning of “connected” persons) applies for the purposes of this Chapter—

(a) subject to section 809ZP, and

(b) as if, after subsection (7) there were inserted the provision in subsection (2).

(2) That provision is—

(8) A person who is a beneficiary of a settlement is connected with— (a) a person in the capacity as trustee of the settlement, and (b) the settlor in relation to the settlement. (9) For the purposes of this section— (a) two people living together as if they were a married couple or civil partners are treated as if they were spouses or civil partners of each other, and (c) “close company” includes a company that would be a close company if it were resident in the United Kingdom.

809ZR

(1) In this Chapter—

“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;

“charity” includes a registered club within the meaning of section 658(6) of CTA 2010 (meaning of “community amateur sports club” and “registered club”).

(2) In this Chapter, in the case of a charitable trust, references to a charity being entitled to a repayment of, or liable to pay, tax are to be read as references to the trustees of the trust being so entitled or liable.

256A

In this Part “the EIS original rate”, in relation to EIS relief, means the EIS rate for the tax year for which the EIS relief was obtained.

The default basic, higher and additional rates

Personal allowance

Meaning of “qualifying film expenditure”

Meaning of “qualifying 90% subsidiary”

Time as from which VCT approval has effect

98A

(1) Post-cessation trade relief is not available to a person in respect of a payment or an event which is made or occurs directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements (and, accordingly, no section 261D claim may be made in respect of the payment or event).

(2) For this purpose “relevant tax avoidance arrangements” means arrangements—

(a) to which the person is a party, and

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