Income Tax (Trading and Other Income) Act 2005

Part 1Income and Corporation Taxes Act 1988

1The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.

2In section 1(1) (the charge to income tax)—

(a)omit paragraph (a), and

(b)omit the word “and” at the end of paragraph (b) and after that paragraph insert—

“(ba)all amounts which are charged to tax under any of the following provisions of ITTOIA 2005—

(i)Part 2 (trading income),

(ii)Part 3 (property income),

(iii)Part 4 (savings and investment income), and

(iv)Part 5 (miscellaneous income), and”.

3(1)Amend section 1A (application of lower rate to income from savings and distributions) as follows.

(2)In subsection (1AA)—

(a)in paragraph (a) for “Schedule F” substitute “Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc., stock dividends from UK resident companies and loans to participators)”, and

(b)for paragraph (b) substitute—

“(b)dividends chargeable under Chapter 4 of Part 4 of that Act (dividends from non-UK resident companies) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).”

(3)In subsection (1A)—

(a)in paragraph (a)—

(i)for “Schedule F”, in the first place where it occurs, substitute “Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005”, and

(ii)for “Schedule F”, in the second place where it occurs, substitute “dividend”, and

(b)for paragraph (b) and the word “and” at the end of the paragraph substitute—

“(b)in the case of dividends chargeable under Chapter 4 of Part 4 of that Act or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act, the dividend ordinary rate; and”.

(4)In subsection (2)—

(a)in paragraph (a) for the words from “chargeable under” to “section 119” substitute

“(other than relevant foreign income) chargeable under—

(i)Chapter 2 of Part 4 of ITTOIA 2005 (charge on interest);

(ii)Chapter 7 of that Part of that Act (charge on purchased life annuity payments) other than income from annuities specified in section 718(2) of that Act; or

(iii)Chapter 8 of that Part of that Act (charge on profits from deeply discounted securities);”,

(b)in paragraph (aa) omit “under Case VI of Schedule D”,

(c)in paragraph (b) for “Schedule F” substitute “Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005”,

(d)in paragraph (c) for “equivalent foreign income” substitute “income falling within subsection (3) below”, and

(e)in paragraph (d) for “547(1)(a) (chargeable event gains on life policies etc)” substitute “465 of ITTOIA 2005 (gains from contracts for life insurance etc.)”.

(5)For subsection (3) substitute—

“(3)The income which falls within this subsection is any relevant foreign income which—

(a)would fall within subsection (2)(a) but for the exclusion of relevant foreign income;

(b)is a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005; or

(c)is a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act.”

(6)In subsection (4)—

(a)in paragraph (a), for the words from “income” to “Kingdom” substitute “relevant foreign income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis)”, and

(b)omit paragraph (b) and the word “or” at the end of paragraph (a).

(7)In subsection (5)—

(a)for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and

(b)in paragraph (b)(i) for “Schedule F” substitute “Chapter 3, 5 or 6 of Part 4 of ITTOIA 2005”, and

(c)in paragraph (b) for sub-paragraph (ii) substitute—

“(ii)dividends chargeable under Chapter 4 of Part 4 of that Act (if any) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (if any),”.

(8)In subsection (6) for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”.

(9)Omit subsection (7).

(10)After subsection (7) insert—

“(8)In this section “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a)is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b)would be chargeable under Chapter 3 of that Part of that Act if the company were resident in the United Kingdom.

(9)And, for the meaning of “relevant foreign income”, see section 832(1).”

4(1)Amend section 1B (rates of tax applicable to Schedule F income) as follows.

(2)In subsection (1)—

(a)for paragraphs (a) and (b) substitute—

“(a)income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.) (if any), and

(b)dividends chargeable under Chapter 4 of Part 4 of that Act (dividends from non-UK resident companies) (if any) or relevant foreign distributions chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged) (if any),” and

(b)for “Schedule F”, in the second place where it occurs, substitute “dividend”.

(3)In subsection (2) for “Schedule F”, in both places where it occurs, substitute “dividend”.

(4)After subsection (2) insert—

“(3)In this section “relevant foreign distribution” has the same meaning as in section 1A (see subsection (8) of that section).”

(5)In the side-note for the section for “Schedule F” substitute “distribution”.

5In section 4 (construction of references in Income Tax Acts to deduction of tax), omit subsection (1B).

6After section 6(4) (the charge to corporation tax and exclusion of income tax and capital gains tax) insert—

“(4A)In sections 74(1), 79(1), 79A(1), 79B(1), 83A(1), 84(1), 86(1), 86A(2)(a), 87(1), (2) and (4), 88, 89, 90(1) and (3), 94(1), 100(2)(b), 101, 102, 401(1), 491(10), 577(7)(b), 579(2), 588(3), 589A(8) and 817(2), and in paragraph 5(11) of Schedule 30, “profession” includes vocation.”

7(1)Amend section 9 (computation of income: application of income tax principles) as follows.

(2)After subsection (2) insert—

“(2A)But no income shall be computed, and no assessment shall be made, for purposes of corporation tax under ITTOIA 2005.

(2B)Instead, income shall continue to be computed, and the assessment shall continue to be made, for purposes of corporation tax under Schedules A and D and the Cases of Schedule D.

(2C)For (but only for) the purpose of continuing to apply for purposes of corporation tax, those Schedules and Cases are treated as if they were still part of income tax law (and therefore applied in accordance with subsection (1) above for purposes of corporation tax).”

(3)In subsection (3)(a)—

(a)for “, D and F,” substitute “and D”,

(b)for “those Schedules” substitute “Schedule D”, and

(c)omit “, as they apply for purposes of income tax”.

(4)In subsection (4) after “Acts” insert “(other than ITTOIA 2005)”.

(5)In subsection (6) omit “60 to 69,”.

8(1)Amend section 15 (Schedule A) as follows.

(2)In subsection (1A)—

(a)in paragraph (b) for “within the charge to income tax under Schedule A” substitute “the profits of a UK property business within the charge to income tax under Chapter 3 of Part 3 of ITTOIA 2005”, and

(b)for “as separate Schedule A businesses” substitute “for the purposes of those charges as separate businesses”.

(3)Before subsection (4) insert—

“(3A)Subsection (1) applies for corporation tax purposes (and does not apply for income tax purposes except so far as necessary to ensure its application for corporation tax purposes by virtue of section 9).”

(4)In subsection (4) at the end insert “and under Chapter 3 of Part 3 of ITTOIA 2005 (profits of a property business)”.

9(1)Amend section 18 (Schedule D) as follows.

(2)After subsection (4) insert—

“(4A)Subsections (1) to (4) apply for corporation tax purposes (and do not apply for income tax purposes except so far as necessary to ensure their application for corporation tax purposes by virtue of section 9).”

(3)In subsection (5) at the end insert “and under ITTOIA 2005 (see, in particular, the charge under Chapter 2 of Part 2 of that Act (trade profits))”.

(4)Omit subsection (6).

10Omit section 20 (Schedule F).

11Omit section 21 (persons chargeable and basis of assessment under Schedule A).

12(1)Amend section 21A (computation of amount chargeable under Schedule A) as follows.

(2)In subsection (2) omit “sections 112 and 113 of that Act (expenditure in connection with provision of security asset or service);”.

(3)In subsection (4)—

(a)omit “section 82 (interest paid to non-residents),”, and

(b)omit “section 96 (farming and market gardening: relief for fluctuating profits),”.

13In section 21B (application of other rules applicable to Case I of Schedule D)—

(a)omit “, 108, 109A”,

(b)after “(post-cessation receipts and expenses, etc)” insert “, with any reference to a trade within the charge to income tax being read as a reference to a UK property business”, and

(c)omit “section 113 (effect for income tax purposes of change in the persons engaged on trade);”.

14In section 21C (the Schedule A charge and mutual business)—

(a)in subsection (1) after “the charge to” insert “corporation”, and

(b)in subsection (4) from the beginning to “the person who would” substitute “The company to which the profit arises is the company which would”.

15(1)Amend section 30 (expenditure on making sea walls) as follows.

(2)In subsection (1) for “he shall be” substitute “that person shall be”.

(3)In subsection (2) for “he would be” substitute “that person would be”.

(4)After that subsection insert—

“(2A)If—

(a)the transferor is a company within the charge to corporation tax and the transferee is a person within the charge to income tax, or

(b)the transferor is a person within the charge to income tax and the transferee is a company within the charge to corporation tax,

subsection (2) above shall apply only for the purpose of determining the amount of the payment which the company is treated as making in any year of assessment.

For any entitlement of the person within the charge to income tax to a deduction for any of the expenditure, see sections 316 and 318 of ITTOIA 2005 (corresponding income tax provision).”

16Omit sections 31A and 31B (deductions for expenditure by landlords on energy-saving items).

17(1)Amend section 34 (treatment of premiums etc. as rent) as follows.

(2)In subsection (1) for “the purposes of the Tax Acts” substitute “corporation tax purposes”.

(3)In subsection (6)—

(a)for “that other person” substitute “if that other person is a company, the company”,

(b)for “tax” substitute “corporation tax”,

(c)for “he” substitute “the company”, and

(d)for “his” substitute “its”.

(4)In subsection (7A) for “chargeable” substitute “accounting”.

(5)In subsection (8)—

(a)for “person” substitute “company”,

(b)for “tax”, wherever it occurs, substitute “corporation tax”, and

(c)for “his” substitute “the company's”.

18(1)Amend section 35 (charge on assignment of lease granted at an undervalue) as follows.

(2)In subsection (2) for “him in consequence of his” substitute “the assignor in consequence of the assignor's”.

(3)In subsection (2A)(b) for “chargeable” substitute “accounting”.

(4)In subsection (3) for “tax” substitute “corporation tax”.

19(1)Amend section 36 (charge on sale of land with right to reconveyance) as follows.

(2)In subsection (1)—

(a)for “him”, in both places where it occurs, substitute “the vendor”, and

(b)for “his” substitute “the vendor's”.

(3)In subsection (2)(b)—

(a)for “tax” substitute “corporation tax”, and

(b)for “him” substitute “the vendor”.

(4)In subsection (3) for “him” substitute “the vendor”.

(5)In subsection (4A)(b) for “chargeable” substitute “accounting”.

20(1)Amend section 37 (premiums paid etc: deductions from premiums and rent received) as follows.

(2)In subsection (1)—

(a)omit “or” at the end of paragraph (a),

(b)after paragraph (b) insert—

“(c)any amount falls to be treated as a receipt of a UK property business by virtue of any of sections 277 to 282 of ITTOIA 2005 (receipts in respect of lease premiums, sums payable instead of rent, for surrender of lease and for variation or waiver of term of lease and assignments), or

(d)any amount would fall to be so treated but for the operation of the rule in section 288 of that Act (the additional calculation rule),”, and

(c)after “this section” insert “and section 37A”.

(3)In subsection (2)—

(a)for “person” substitute “company”, and

(b)for “he” substitute “the company”.

(4)In subsection (3)—

(a)for “person” substitute “company”, and

(b)for “he” substitute “the company”.

(5)In subsection (4)—

(a)for “the person” substitute “a company which is”, and

(b)for “he” substitute “the company”.

(6)In subsection (7)(b) after sub-paragraph (ii) insert—

“(iii)where it arose under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc.), shall be its receipt period (within the meaning of that Chapter (see section 288(6)).”

(7)In subsection (8) after “section 34(2)” insert “or under section 277 of ITTOIA 2005 by virtue of section 278 of that Act (amount treated as lease premium where work required)”.

(8)In subsection (9)—

(a)for “tax” substitute “income tax or corporation tax”, and

(b)at the end insert “or if it has been deducted under the rule in section 288 of ITTOIA 2005 (the additional calculation rule) in calculating the amount of a receipt of a property business (within the meaning of that Act) under Chapter 4 of Part 3 of that Act.”

(9)At end insert—

“(10)In the application of this section to Scotland the reference to a lease being granted out of the head lease is to the grant of a sublease of land subject to the head lease.”

21After section 37 insert—

“37ASection 37(4) and reductions in receipts under ITTOIA 2005

(1)This section applies if—

(a)in calculating the amount that falls to be treated as a receipt of a UK property business under Chapter 4 of Part 3 of ITTOIA 2005 (“the ITTOIA receipt”), there is a reduction under section 288 of that Act by reference to a taxed receipt, and

(b)the taxed receipt is the amount chargeable on the superior interest for the purposes of section 37.

(2)Section 37(4) shall apply for the period in respect of which the ITTOIA receipt arose only if the appropriate fraction of the amount chargeable on the superior interest exceeds the amount of the ITTOIA receipt given by the formula in section 277, 279, 280, 281 or 282 of ITTOIA 2005, as the case may be.

(3)Section 37(4) shall then apply as if the amount chargeable on the superior interest were reduced in the proportion which that excess bears to that appropriate fraction.

(4)Subsection (5) applies if—

(a)the ITTOIA receipt is in respect of a lease granted out of the taxed lease,

(b)the taxed lease is the head lease for the purposes of section 37, and

(c)the lease granted as mentioned in paragraph (a) does not extend to the whole of the premises subject to the head lease.

(5)Section 37(4) and subsections (2) and (3) above shall be applied separately to the part of the premises subject to the lease and to the remainder of the premises, but as if for any reference to the amount chargeable on the superior interest there were a reference to that amount proportionately adjusted.

(6)For the purposes of this section the appropriate fraction of the amount chargeable on the superior interest is the fraction—

(7)For the purposes of this section the period in respect of which an ITTOIA receipt arose is its receipt period (within the meaning of Chapter 4 of Part 3 of ITTOIA 2005 (see section 288(6))).

(8)In this section the following expressions have the same meaning as in Chapter 4 of Part 3 of ITTOIA 2005—

• “reduction under section 288 by reference to a taxed receipt” (see section 290(6) of that Act),

• “taxed lease” (see section 287(4) of that Act), and

• “taxed receipt” (see section 287(4) of that Act).

(9)In the application of this section to Scotland, references to a lease granted out of a taxed lease are to be construed as references to a sublease of land subject to the taxed lease.”

22(1)Amend section 38 (rules for ascertaining duration of leases) as follows.

(2)In subsection (2) for “tax” substitute “corporation tax”.

(3)In subsection (4) for “tax advantage in the application of this Part” substitute “corporation tax advantage in the application of this Part or an income tax advantage in the application of Chapter 4 of Part 3 of ITTOIA 2005”.

23In section 40 (tax treatment of receipts and outgoings on sale of land)—

(a)in subsection (1)—

(i)after “for the purposes of” insert “corporation”, and

(ii)for “him” substitute “the purchaser”,

(b)in subsection (2) after “for the purposes of” insert “corporation”, and

(c)in subsection (3)—

(i)after “for the purposes of” insert “corporation”, and

(ii)for “him” substitute “the vendor”.

24(1)Amend section 42 (appeals against determinations under sections 34 to 36) as follows.

(2)In subsection (1)—

(a)after “determination of” insert “—

(a)”,

(b)for “to tax” substitute “to corporation tax”, and

(c)after “35 or 36” insert “, or

(b)any amount that under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc.) is brought into account as a receipt in calculating the profits of a property business (within the meaning of that Act),”.

(3)At the end of the side-note insert “or Chapter 4 of Part 3 of ITTOIA 2005”.

25(1)Amend section 42A (non-residents and their representatives) as follows.

(2)In subsection (1) for “under Schedule A on the income of any person” substitute “—

(a)under Schedule A, or

(b)as the profits of a UK property business, under Chapter 3 of Part 3 of ITTOIA 2005,

on the income of any person”.

(3)In subsection (2)(a) after “Schedule A business” insert “, or a UK property business,”.

26In section 43B(2) (transfer of rent)—

(a)after “paragraph 1(1) of Schedule A” insert “or in the course of a UK property business”, and

(b)after “Schedule A business” insert “or the UK property business”.

27(1)Amend section 43C (transfer of rent: exceptions, etc.) as follows.

(2)In subsection (3)—

(a)omit “or” at the end of paragraph (a), and

(b)after paragraph (b) insert—

“(c)section 284 of ITTOIA 2005 applies, or

(d)that section would apply if the price at which an estate or interest is sold were to exceed the price at which it is to be reconveyed.”

(3)After subsection (4) insert—

“(4A)If—

(a)section 285 of ITTOIA 2005 would apply in relation to a finance agreement, and

(b)section 43B applies in relation to the agreement,

section 285 of ITTOIA 2005 shall not apply.”

(4)In subsection (6)—

(a)after “brought into account” insert—

(a)”, and

(b)at the end insert “or

(b)in computing under Chapter 2 of Part 2 of ITTOIA 2005 the profits of a trade carried on wholly or partly in the United Kingdom.”

28In section 43D(2) (interposed lease)—

(a)after “paragraph 1(1) of Schedule A” insert “or in the course of a UK property business”, and

(b)after “Schedule A business” insert “or the UK property business”.

29(1)Amend section 43E (interposed lease: exceptions, etc.) as follows.

(2)In subsection (4)—

(a)after “brought into account” insert “—

(a)”, and

(b)at the end insert “or

(b)in computing under Chapter 2 of Part 2 of ITTOIA 2005 the profits of a trade carried on wholly or partly in the United Kingdom.”

(3)In subsection (5) after “Section 34” insert “and sections 277 to 281 of ITTOIA 2005”.

30(1)Amend section 43G (interpretation) as follows.

(2)In subsection (2) in the definition of “rent” after “Schedule A” insert “or, as the profits of a UK property business, under Chapter 3 of Part 3 of ITTOIA 2005”.

(3)In subsection (2) in the definition of “premium”—

(a)after ““premium”” insert “—

(a)for the purposes of corporation tax”, and

(b)after “section 34, and” insert—

“(b)for the purposes of income tax has the meaning given by section 307(1) of ITTOIA 2005 (and, in relation to Scotland, section 307(3) of that Act), and includes—

(i)a sum payable by the tenant under the terms subject to which a lease is granted instead of the whole or a part of the rent for a period,

(ii)a sum payable by the tenant under those terms as consideration for the surrender (in Scotland, the renunciation) of the lease, and

(iii)a sum payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of a lease, and”.

31(1)Amend section 46 (savings certificates and tax reserve certificates) as follows.

(2)In subsection (1) after “liable to” insert “corporation”.

(3)In subsection (2) for “Tax” substitute “Corporation tax”.

(4)In subsection (4)(b) for “him and he” substitute “the holder and the holder”.

(5)After subsection (6) insert—

“(7)In this section “Ulster Savings Certificates” means savings certificates issued or treated as issued under section 15 of the Exchequer and Financial Provisions Act (Northern Ireland) 1950.”

32(1)Amend section 53 (farming and other commercial occupation of land (except woodlands)) as follows.

(2)In subsection (1) after “charged to” insert “corporation”.

(3)In subsection (2)—

(a)for “person or partnership or body of persons” substitute “company or partnership”, and

(b)after “trade” insert “for corporation tax purposes”.

(4)In subsection (3) after “charged to” insert “corporation”.

33In section 55(1) (mines, quarries and other concerns) after “charged to” insert “corporation”.

34(1)Amend section 56 (transactions in deposits with and without certificates or in debts) as follows.

(2)In subsection (2)—

(a)for “person”, in the first place where it occurs, substitute “company”, and

(b)for “tax” substitute “corporation tax”.

(3)In subsection (3)

(a)for “does” substitute “and section 551 of ITTOIA 2005 (charge to income tax on profits from disposal of deposit rights) do”, and

(b)in paragraph (a) for “person” substitute “company”.

35(1)Amend section 59 (persons chargeable: Schedule D) as follows.

(2)Omit subsections (1) and (2).

(3)In subsection (3)—

(a)for “that section” substitute “section 12 of ITTOIA 2005”, and

(b)omit “under Schedule D”.

(4)In subsection (4) for “Subsections (1) to (3)” substitute “Subsection (3)”.

36Omit sections 60 to 63A (basis of assessment for income tax: Cases I and II of Schedule D).

37Omit section 64 (Case III assessments).

38Omit section 65 (Cases IV and V assessments: general).

39Omit section 65A (Case V income from land outside UK: income tax).

40Omit section 68 (special rules where property etc. situated in Republic of Ireland).

41Omit sections 68A to 68C (share incentive plans).

42Omit section 69 (Case VI assessments).

43Omit section 71 (computation of income tax where no profits in year of assessment).

44In section 72(1) (apportionments etc for purposes of Cases I, II and VI)—

(a)after “chargeable” insert “to corporation tax”, and

(b)omit “income tax or” and “year of assessment,”.

45In section 74(1) (general rules as to deductions not allowable)—

(a)for “the Tax Acts” substitute “the Corporation Tax Acts”,

(b)after “computing the amount of the profits to be charged” insert “to corporation tax”,

(c)for “, profession or vocation”, in each place where it occurs, substitute “or profession”,

(d)omit paragraph (b),

(e)in paragraph (j) for “his” substitute “the creditor's”, and

(f)omit paragraph (o).

46In section 76A(1) (levies and repayments under FISMA 2000) after “to be charged” insert “to corporation tax”.

47Omit section 77 (incidental costs of obtaining loan finance).

48(1)Amend section 79 (contributions to local enterprise agencies) as follows.

(2)In subsection (1)—

(a)for “person” substitute “company”,

(b)for “trade, profession or vocation”, in both places where it occurs, substitute “trade or profession”,

(c)for “him” substitute “the company”, and

(d)before “tax” insert “corporation”.

(3)In subsection (3) for “any person if either he or any person connected with him” substitute “any company if either the company or any person connected with the company”.

(4)In subsection (9)—

(a)after “has been made” insert “by a company”,

(b)for “chargeable period”, in both places where it occurs, substitute “accounting period”,

(c)for “the contributor or any person connected with him” substitute “the company or any person connected with the company”,

(d)for “the contributor shall” substitute “the company shall”,

(e)before “tax”, in both places where it occurs, insert “corporation”, and

(f)for “he” substitute “the company”.

49(1)Amend section 79A (contributions to training and enterprise councils and local enterprise companies) as follows.

(2)In subsection (1)—

(a)for “person” substitute “company”,

(b)for “trade, profession or vocation”, in both places where it occurs, substitute “trade or profession”,

(c)for “him” substitute “the company”, and

(d)before “tax” insert “corporation”.

(3)In subsection (3) for “any person if either he or any person connected with him” substitute “any company if either the company or any person connected with the company”.

(4)In subsection (4)—

(a)after “in respect of a contribution” insert “made by a company”,

(b)for “chargeable period”, in both places where it occurs, substitute “accounting period”,

(c)for “the contributor or any person connected with him” substitute “the company or any person connected with the company”,

(d)for “the contributor shall” substitute “the company shall”,

(e)before “tax”, in both places where it occurs, insert “corporation”, and

(f)for “he” substitute “the company”.

50(1)Amend section 79B (contributions to urban regeneration companies) as follows.

(2)In subsection (1)—

(a)for “person” substitute “company”,

(b)for “trade, profession or vocation”, in both places where it occurs, substitute “trade or profession”,

(c)for “him” substitute “the company”, and

(d)before “if it would” insert “for the purposes of corporation tax”.

(3)In subsection (3) for “any person if either he or any person connected with him” substitute “any company if either the company or any person connected with the company”.

(4)In subsection (4)—

(a)after “in respect of a contribution” insert “made by a company”,

(b)for “chargeable period”, in both places where it occurs, substitute “accounting period”,

(c)for “the contributor or any person connected with him” substitute “the company or any person connected with the company”,

(d)for “the contributor shall” substitute “the company shall”,

(e)before “tax”, in both places where it occurs, insert “corporation”, and

(f)for “he” substitute “the company”.

51Omit section 80 (expenses connected with foreign trades etc).

52Omit section 81 (travel between trades etc).

53Omit section 82 (interest paid to non-residents).

54In section 82A(1) (expenditure on research and development)—

(a)for “person” substitute “company”,

(b)for “by him or on his behalf” substitute “by the company or on the company’s behalf”, and

(c)before “tax” insert “corporation”.

55In section 82B(1) (payments to research associations, universities etc.)—

(a)for “person” substitute “company”,

(b)for “he” substitute “the company”, and

(c)before “tax” insert “corporation”.

56In section 83 (patent fees etc. and expenses) after “the profits of a trade” insert “for the purposes of corporation tax”.

57(1)Amend section 83A (gifts in kind to charities etc.) as follows.

(2)In subsection (1) for “a person carrying on a trade, profession or vocation” substitute “a company carrying on a trade or profession”.

(3)In subsection (2) for “the donor in the course of his trade” substitute “the company in the course of its trade”.

(4)In subsection (3)—

(a)for “the donor's” substitute “the company's”,

(b)for “the purposes of the Tax Acts” substitute “corporation tax purposes”, and

(c)for “the donor” substitute “the company”.

(5)In subsection (4)—

(a)after “in respect of the gift of an article” insert “made by a company”,

(b)for “chargeable period”, in both places where it occurs, substitute “accounting period”,

(c)for “the donor or any person connected with him” substitute “the company or any person connected with the company”,

(d)for “the donor shall” substitute “the company shall”,

(e)before “tax”, in both places where it occurs, insert “corporation”, and

(f)for “he” substitute “the company”.

58(1)Amend section 84 (gifts to educational establishments) as follows.

(2)In subsection (1)—

(a)for “a person carrying on a trade, profession or vocation” substitute “a company carrying on a trade or profession”, and

(b)for “his trade” substitute “its trade”.

(3)In subsection (3)—

(a)for “the purposes of the Tax Acts” substitute “corporation tax purposes”, and

(b)for “his disposal” substitute “its disposal”.

(4)In subsection (3A) for “above is—” to the end substitute “the period of two years beginning at the end of the accounting period in which the gift is made.”

(5)Omit subsection (3B).

(6)In subsection (4)—

(a)after “in respect of the gift of an article” insert “made by the donor”,

(b)for “chargeable period”, in both places where it occurs, substitute “accounting period”,

(c)for “him” substitute “the donor”,

(d)before “tax”, in both places where it occurs, insert “corporation”, and

(e)for “he” substitute “the donor”.

59In section 84A(2)(a) (costs of establishing share option or profit sharing schemes: relief) after “Schedule D” insert “or Part 2 of ITTOIA 2005”.

60(1)Amend section 86 (employees seconded to charities and educational establishments) as follows.

(2)In subsection (1)—

(a)for “If a person (“the employer”) carrying on a trade, profession, vocation or business for the purposes of which he” substitute “If a company (“the employer”) carrying on a trade, profession or business for the purposes of which it”, and

(b)for “, profession or vocation” substitute “or profession”.

(3)In subsection (2), in the definition of “deductible”, after “charged” insert “to corporation tax”.

61In section 86A (charitable donations: contributions to agent’s expenses) —

(a)in subsection (1) for “a person” substitute “a company”, and

(b)in subsection (2)(a) for “, profession or vocation” substitute “or profession”.

62(1)Amend section 87 (taxable premiums etc.) as follows.

(2)In subsection (1)—

(a)for “trade, profession or vocation” substitute “trade or profession”,

(b)omit “or” at the end of paragraph (a),

(c)after paragraph (b) insert—

“(c)any amount falls to be treated as a receipt of a UK property business by virtue of any of sections 277 to 282 of ITTOIA 2005 (receipts in respect of lease premiums, sums payable instead of rent, for surrender of lease and for variation or waiver of term of lease and assignments), or

(d)any amount would fall to be so treated but for the operation of the rule in section 288 of that Act (the additional calculation rule),”, and

(d)after “below” insert “and in section 87A”.

(3)In subsection (2)—

(a)for “the person” substitute “a company which is”,

(b)for “trade, profession or vocation”, in both places where it occurs, substitute “trade or profession”,

(c)for “him” substitute “the company”,

(d)for “he” substitute “the company”, and

(e)for “tax” substitute “corporation tax”.

(4)In subsection (4)—

(a)for “person” substitute “company”,

(b)for “his” substitute “the company's”,

(c)for “trade, profession or vocation” substitute “trade or profession”, and

(d)for “him”, in both places where it occurs, substitute “the company”.

(5)In subsection (6)—

(a)for “chargeable period”, wherever it occurs, substitute “accounting period”,

(b)for “person” substitute “company”, and

(c)for “him” substitute “the company”.

(6)In subsection (7)—

(a)for “his” substitute “the company's”,

(b)for “person” substitute “company”,

(c)for “chargeable period”, wherever it occurs, substitute “accounting period”, and

(d)for “him”, in both places where it occurs, substitute “the company”.

(7)In subsection (8) after “section 34(2)” insert “or under section 277 of ITTOIA 2005 by virtue of section 278 of that Act (amount treated as lease premium where work required)”.

(8)In subsection (9) after paragraph (b) insert—

“(c)where the amount chargeable arose under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc.), its receipt period (within the meaning of that Chapter (see section 288(6)).”

(9)After subsection (9) insert—

“(9A)In the application of this section and section 87A to Scotland—

(a)the reference to a lease being granted out of the interest referred to in subsection (4) above is to the grant of a sublease of land subject to that interest, and

(b)references to the lease so granted are to be construed as references to the sublease.”

63After section 87 insert—

“87ASection 87(2) and (3) and reductions in receipts under ITTOIA 2005

(1)This section applies if—

(a)a lease has been granted out of the interest referred to in section 87(4),

(b)in calculating the amount that falls to be treated as a receipt of a UK property business under Chapter 4 of Part 3 of ITTOIA 2005 in respect of the lease, there is a reduction under section 288 of that Act by reference to a taxed receipt, and

(c)the taxed receipt is the amount chargeable for the purposes of section 87.

(2)Section 37A (section 37(4) and reductions in receipts under ITTOIA 2005) shall apply for modifying the operation of section 87(2) and (3) as it applies for modifying the operation of section 37(4).

(3)In this section the following expressions have the same meaning as in Chapter 4 of Part 3 of ITTOIA 2005—

• “reduction under section 288 by reference to a taxed receipt” (see section 290(6) of that Act), and

• “taxed receipt” (see section 287(4) of that Act).”

64In section 88 (payments to Export Credits Guarantee Department)—

(a)for “a person” substitute “a company”,

(b)for “trade, profession or vocation carried on by that person” substitute “trade or profession carried on by that company”, and

(c)for “if that person” substitute “if that company”.

65For section 89 (debts proving irrecoverable after event treated as discontinuance) substitute—

“89Debts proving to be irrecoverable after discontinuance etc

(1)This section applies if—

(a)section 337(1) applies to treat a trade as discontinued by reason of any event, or

(b)a person permanently ceases to carry on a trade or profession,

and a company carries on the trade or profession after that event or cessation.

(2)In computing for corporation tax purposes the profits of the trade or profession in any period after the event or cessation, there may be deducted a sum equal to any amount proved during that period to be irrecoverable in respect of any debts—

(a)which were credited in computing for tax purposes the profits for any period before the event or cessation, and

(b)in respect of which the benefit was assigned to the company carrying on the trade or profession after the event or cessation.

(3)Subsection (2) applies only so far as the total amount proved to be irrecoverable in respect of the debts exceeds any deduction allowed in respect of them under—

(a)section 74(1)(j), or

(b)section 35 of ITTOIA 2005,

in a computation for any period before the event or cessation.”

66(1)Amend section 90 (additional payments to redundant employees) as follows.

(2)In subsection (1)—

(a)for “, profession or vocation” substitute “or profession”, and

(b)for “profession, vocation or business”, in both places, substitute “profession or business”.

(3)In subsection (3)—

(a)for “profession, vocation or business” substitute “profession or business”, and

(b)omit “113(1) or”.

67(1)Amend section 91 (cemeteries) as follows.

(2)In subsection (1)—

(a)after “computing” insert “for corporation tax purposes”, and

(b)for “the person” substitute “the company”.

(3)In subsection (2) for “the person” substitute “the company”.

(4)In subsection (4)(a)(i)—

(a)after “above” insert “, or under section 170(2)(b) of ITTOIA 2005 (relief for income tax purposes)”, and

(b)after “computing” insert “for tax purposes”.

(5)In subsection (4)(a)(ii)—

(a)for “the person” substitute “the company”, and

(b)for “him” substitute “it”.

(6)In subsection (5)—

(a)for “the persons carrying on the trade after the change” substitute “the company carrying on the trade after the change”,

(b)for “they” substitute “the company”,

(c)for “their” substitute “its”, and

(d)for “them” substitute “it”.

(7)For subsection (6) substitute—

“(6)No expenditure shall be taken into account—

(a)under both paragraphs (a) and (b) of subsection (1) above, or

(b)under both subsection (1)(a) above and section 170(2)(b) of ITTOIA 2005 or under both subsection (1)(b) above and section 170(2)(a) of ITTOIA 2005,

whether for the same or different periods.”

68In section 91A (waste disposal: restoration payments)—

(a)in subsection (1) for “person” substitute “company”, and

(b)in subsection (2) omit “income tax or”.

69In section 91B (waste: disposal: preparation expenditure)—

(a)in subsection (1) for “person”, in both places where it occurs, substitute “company”,

(b)in subsection (2) omit “income tax or”,

(c)in subsection (4) for “person” substitute “company”,

(d)in subsection (5)(a) after “computing” insert “for the purposes of corporation tax or income tax”,

(e)in subsection (5)(b) after “made” insert “for the purposes of corporation tax or income tax”,

(f)in subsection (6) after “this section” insert “or section 165 of ITTOIA 2005 (relief for income tax purposes)” and after “computing” insert “for the purposes of corporation tax or income tax”, and

(g)in subsection (10A) for “person”, in both places where it occurs, substitute “company” and for “he” substitute “it”.

70In section 91BA (waste disposal: entitlement of successor to allowances)—

(a)in subsection (1) after “another person” insert “that is a company”, and

(b)in subsection (4) for “he” substitute “it”.

71In section 91C (mineral exploration and access) for “person” substitute “company” and for “tax” substitute “corporation tax”.

72In section 93(1) (other grants under Industrial Development Act 1982 etc.)—

(a)for “person” substitute “company”, and

(b)after “chargeable” insert “to corporation tax”.

73In section 94(1) (debts deducted and subsequently released)—

(a)for “tax purposes” substitute “corporation tax purposes”, and

(b)for “trade, profession or vocation”, wherever it occurs, substitute “trade or profession”.

74(1)Amend section 95 (taxation of dealers in respect of distributions etc.) as follows.

(2)In subsection (1) for “tax” substitute “corporation tax”.

(3)In subsection (1A) omit paragraph (a).

(4)In subsection (2) for “tax” substitute “corporation tax”.

75Omit section 95A (creative artists: relief for fluctuating profits).

76Omit section 96 (farming and market gardening: relief for fluctuating profits).

77In section 98(1) (tied premises: receipts and expenses treated as those of a trade)—

(a)after “This section applies” insert “for corporation tax purposes”,

(b)for “a person (“the trader”)” substitute “a company (“the trader”)”, and

(c)for “another person” substitute “a person other than the trader”.

78(1)Amend section 99 (dealers in land) as follows.

(2)In subsection (1) for “tax purposes” substitute “corporation tax purposes”.

(3)In subsection (2) for “tax” substitute “corporation tax”.

(4)In subsection (3)—

(a)for “tax”, in each place where it occurs, substitute “corporation tax”,

(b)for “chargeable periods” substitute “accounting periods”, and

(c)for “chargeable period” substitute “accounting period”.

79(1)Amend section 100 (valuation of trading stock at discontinuance of trade) as follows.

(2)In subsection (1) for “any tax purpose”, in the first place where it occurs, substitute “any corporation tax purpose”.

(3)In subsection (1A)—

(a)for “the person who” substitute “the company which”, and

(b)for “those persons” substitute “that person and that company”.

(4)In subsection (1C)(c) for “chargeable period” substitute “accounting period”.

(5)In subsection (1D) after “in computing for any” insert “corporation”.

(6)In subsection (1E)—

(a)for the words from the beginning to “subsections (1A) to (1C) above to be” substitute “Where the value of the trading stock is determined in accordance with subsections (1A) to (1C) above, or sections 176 to 178 of ITTOIA 2005 or section 127 of that Act (by virtue of section 175(3)) (corresponding provisions for income tax purposes),” and

(b)after “for the purpose of making” insert “for corporation tax purposes”.

(7)In subsection (2)(b) omit “or vocation” in both places where it occurs.

80(1)Amend section 101 (valuation of work in progress at discontinuance of profession or vocation) as follows.

(2)In subsection (1)—

(a)for “any tax purpose”, in the first place where it occurs, substitute “any corporation tax purpose”, and

(b)omit “or vocation”, wherever it occurs.

(3)In subsection (2) omit “or vocation” and for “person by whom” substitute “company by which”.

(4)In subsection (2A)—

(a)omit paragraph (a), and

(b)in paragraph (b), omit “in the case of an election for the purposes of corporation tax,” and “or vocation”.

(5)In subsection (3) omit “or vocation”, wherever it occurs.

81(1)Amend section 102 (provisions supplementary to sections 100 and 101) as follows.

(2)In subsection (1)—

(a)omit “or vocations”, and

(b)for “trade, profession or vocation” substitute “trade or profession”.

(3)In subsection (2)—

(a)omit “113 or”,

(b)for “trade, profession or vocation” substitute “trade or profession”,

(c)after “computing” insert “corporation”, and

(d)omit the words from “but those sections” to the end.

82(1)Amend section 103 (receipts after discontinuance: earnings basis charge and related charge affecting conventional basis) as follows.

(2)In subsection (1)—

(a)after “vocation” insert “carried on wholly or partly in the United Kingdom”,

(b)omit “under Case I or II of Schedule D”, and

(c)for “tax shall be charged under Case VI of that Schedule” substitute “corporation tax shall be charged under Case VI of Schedule D”.

(3)In subsection (3)—

(a)in paragraph (a)—

(i)for “person”, in the first place where it occurs, substitute “company”,

(ii)for “who” substitute “which”, and

(iii)for “his” substitute “its”,

(b)omit paragraphs (b) and (bb), and

(c)omit the words from “Paragraph (b) above shall” to the end.

(4)In subsection (5) at the end insert “above or under section 35 of ITTOIA 2005”.

83(1)Amend section 104 (conventional basis: general charge on receipts after discontinuance or change of basis) as follows.

(2)In subsection (1)—

(a)after “vocation” insert “carried on wholly or partly in the United Kingdom”,

(b)omit “under Case I or II of Schedule D”, and

(c)for “tax shall be charged under Case VI of that Schedule” substitute “corporation tax shall be charged under Case VI of Schedule D”.

(3)In subsection (3)—

(a)for “tax”, in the second place where it occurs, substitute “corporation tax”, and

(b)omit “and (b)”.

84(1)Amend section 105 (allowable deductions) as follows.

(2)In subsection (1)—

(a)for “tax”, in the first three places where it occurs, substitute “corporation tax”,

(b)for “person”, in the first place where it occurs, substitute “company”, and

(c)for “him” substitute “it”.

(3)In subsection (3) for “chargeable period”, in each place where it occurs, substitute “accounting period”.

85(1)Amend section 106 (application of charges where rights to payments transferred) as follows.

(2)In subsection (1) for “tax” substitute “corporation tax”.

(3)In subsection (2)—

(a)for “the persons carrying on the trade,” substitute “the company carrying on the trade,”

(b)for “tax” substitute “corporation tax”,

(c)for “those persons” substitute “that company”, and

(d)for “all purposes” substitute “corporation tax purposes”.

86Omit section 107 (treatment of receipts as earned income).

87Omit section 108 (election for carry-back).

88Omit section 109 (charge under section 104: relief for individuals born before 6th April 1917).

89(1)Amend section 109A (relief for post-cessation expenditure) as follows.

(2)Omit subsection (3).

(3)In subsection (4) omit the unnumbered paragraph beginning with “If any sum”.

(4)In subsection (4A) omit the unnumbered paragraph beginning with “If any sum”.

(5)In subsection (6) for “section 105” substitute “section 254 of ITTOIA 2005 (allowable deductions against post-cessation receipts charged to income tax)”.

(6)After subsection (6) insert—

“(6A)This section applies in relation to a UK property business as it applies in relation to a trade, profession or vocation.”

90In section 110 (interpretation etc) for subsection (2) substitute—

“(1A)In the case of a trade carried on by a person other than a company or a profession or vocation within the charge to income tax carried on by any person, any reference to the permanent discontinuance of a trade, profession or vocation includes a reference to—

(a)a person permanently ceasing to carry on a trade, profession or vocation, or

(b)in relation to a trade or profession carried on by a person in partnership with other persons, the occurrence of an event treated under section 246(4) of ITTOIA 2005 (basic meaning of “post-cessation receipt”) as a person permanently ceasing to carry on a trade or profession.

(1B)In the case of a trade carried on by a company, any reference to the permanent discontinuance of a trade includes a reference to the occurrence of an event treated under section 337(1) below as a discontinuance or treated under section 18 of ITTOIA 2005 (companies beginning or ceasing to carry on trade) as the company permanently ceasing to carry on the trade.

(1C)In the case of a UK property business carried on by a person other than a company, any reference to the permanent discontinuance of a UK property business includes a reference to—

(a)a person permanently ceasing to carry on a UK property business, or

(b)in relation to a UK property business carried on by a person in partnership with other persons, the occurrence of an event treated under section 353(3) of ITTOIA 2005 (basic meaning of “post-cessation receipt”) as a person permanently ceasing to carry on a UK property business.

(1D)In the case of a UK property business carried on by a company, any reference to the permanent discontinuance of a UK property business includes a reference to the occurrence of an event treated under section 362 of ITTOIA 2005 (companies beginning or ceasing to be within the charge to income tax) as the company permanently ceasing to carry on the business.”

91Omit section 110A (change of residence) and the italic cross-heading before it.

92(1)Amend section 111 (treatment of partnerships) as follows.

(2)In subsection (1) for “the purposes of the Tax Acts” substitute “corporation tax purposes”.

(3)Omit subsections (2) to (13).

93Omit section 112 (partnerships controlled abroad).

94Omit section 113 (effect for income tax of change in ownership of trade, profession or vocation).

95(1)Amend section 115 (provisions supplementary to section 114) as follows.

(2)For subsection (5) substitute—

“(5)Subsections (5A) and (5B) apply if—

(a)a company resident in the United Kingdom (“the resident partner”) is a member of a partnership which resides outside the United Kingdom or which carries on any trade, profession or business the control and management of which is situated outside the United Kingdom, and

(b)by virtue of any arrangements falling within section 788 (“the arrangements”) any of the income or capital gains of the partnership is relieved from corporation tax in the United Kingdom.

(5A)The arrangements do not affect any liability to corporation tax in respect of the resident partner’s share of any income or capital gains of the partnership (and section 114 has effect accordingly).

(5B)If the resident partner’s share of the income of the partnership consists of or includes a share in a qualifying distribution made by a company resident in the United Kingdom, the resident partner (and not the partnership) is, despite the arrangements, entitled to the share of the tax credit in respect of the distribution which corresponds to the partner’s share of the distribution (and section 114 has effect accordingly).”

96In section 116(4) (arrangements for transferring relief) before “tax” insert “corporation”.

97In section 118ZA (treatment of limited liability partnerships)—

(a)in subsection (1) for “the purposes of the Tax Acts” substitute “corporation tax purposes”, and

(b)in subsection (2) for “the Tax Acts” substitute “the Corporation Tax Acts”.

98(1)Amend section 118ZE (restriction on relief for non-active partners) as follows.

(2)In subsection (5) for the words from “sections 60 to 63” to the end substitute “Chapter 15 of Part 2 of ITTOIA 2005 as applied by section 853 of that Act”.

(3)In subsection (6)—

(a)for “section 61(1)” substitute “section 199(1) of ITTOIA 2005”, and

(b)after “to 118ZK” insert “below”.

99In section 118ZH(3) (“a significant amount of time”: recovery of relief) for “under Case VI of Schedule D” substitute “to income tax”.

100In section 118ZK(2)(b) and (5) (transitional provision for years after the first restricted year) after “1992” insert “or any of sections 138 to 140 of ITTOIA 2005”.

101In section 118ZL(6) (partnerships exploiting films)—

(a)in paragraph (b)—

(i)for “section 111(2)” substitute “section 849 of ITTOIA 2005 (calculation of firm’s profits or losses)”, and

(ii)for “section 41 or 42 of the Finance (No. 2) Act 1992” substitute “any of sections 137 to 140 of ITTOIA 2005”, and

(b)in paragraph (c)—

(i)for “section 41 or 42 of that Act” substitute “sections 137 to 140 of that Act”, and

(ii)for “either of” substitute “any of”.

102In section 118ZM(4) (partnerships exploiting films: supplementary) for “the acquisition of the master negative” to the end substitute “the acquisition of the original master version of the film; and this subsection is to be construed as if contained in Chapter 9 of Part 2 of ITTOIA 2005.”

103In section 119(1) (rent etc. payable in connection with mines, quarries and similar concerns) after “charged to” insert “corporation”.

104In section 120 (rent etc. payable in respect of electric line wayleaves)—

(a)in subsection (1) after “charged to” insert “corporation”,

(b)in subsection (1A) for “chargeable period” substitute “accounting period”, and

(c)in subsection (1A) after “charged to”, in both places where it occurs, insert “corporation”.

105In section 121 (management expenses of owner or mineral rights) omit subsection (1).

106(1)Amend section 122 (relief in respect of mineral royalties) as follows.

(2)In subsection (1)—

(a)for the words from “a person resident” to “year of assessment or” substitute “a company resident in the United Kingdom which in any”,

(b)omit “for the purposes of income tax, or as the case may be”,

(c)for “him” substitute “it”, and

(d)omit “year or” in both places where it occurs.

(3)In subsection (2)—

(a)omit the words from “brought into account” to “may be,”, and

(b)for “subsection (2)” substitute “subsection (3)”.

(4)Omit subsection (4).

107(1)Amend section 125 (annual payments for non-taxable consideration) as follows.

(2)In subsection (2) for paragraph (a) and the word “and” at the end of the paragraph substitute—

“(a)is not interest but is—

(i)an annuity or other annual payment charged with income tax under Part 5 of ITTOIA 2005 otherwise than as relevant foreign income; or

(ii)an annuity or other annual payment charged with corporation tax under Case III of Schedule D; and”.

(3)In subsection (3)(a) for “section 660A(8) or (9)(a)” substitute “section 627(1) or (2)(a) of ITTOIA 2005”.

108Omit section 127 (enterprise allowance).

109Omit section 127A (futures and options: transactions with guaranteed returns).

110In section 128 (commodity and financial futures etc: losses and gains) omit subsection (1).

111(1)Amend section 214 (chargeable payments connected with exempt distributions) as follows.

(2)In subsection (1)—

(a)in paragraph (a) omit “chargeable to tax under Case VI of Schedule D”, and

(b)after that paragraph insert—

“(ab)that income shall be chargeable to tax;”.

(3)After subsection (1) insert—

“(1A)Income tax chargeable by virtue of subsection (1) shall be charged on the full amount or value of the payment made in the year of assessment; and the person liable for any tax so charged is the person receiving or entitled to the payment.

(1B)Corporation tax chargeable by virtue of subsection (1) shall be charged under Case VI of Schedule D.”

112In section 230 (stock dividends: distributions) for the words from “as mentioned” to “that section)” substitute “in a case where section 410(2), (3) or (4) of ITTOIA 2005 applies”.

113(1)Amend section 231 (tax credits for certain recipients of qualifying distributions) as follows.

(2)In subsection (1)—

(a)for “sections” to “1993” substitute “sections 231AA and 231AB of this Act”,

(b)for the words from “where” to “charged” substitute “for corporation tax purposes where”, and

(c)omit “or a person resident in the United Kingdom, not being a company”.

(3)Omit subsections (3) and (3AA).

(4)In subsection (4) for “he” in both places where it occurs substitute “that person”.

114(1)Amend section 231AA (no tax credit for borrower under stock lending arrangement or interim holder under repurchase agreement) as follows.

(2)In subsection (1) after “section 231” insert “above or section 397(1) of ITTOIA 2005”.

(3)In subsection (1A)—

(a)for “a relevant person”, “section 233(1)” and “Schedule F” substitute “a person resident in the United Kingdom”, “section 399(2) of ITTOIA 2005” and “dividend” respectively, and

(b)omit the second sentence.

115(1)Amend section 231AB (no tax credit for original owner under repurchase agreement in respect of certain manufactured dividends) as follows.

(2)In subsection (1) after “section 231” insert “above or section 397(1) of ITTOIA 2005”.

(3)In subsection (1A)—

(a)for “a relevant person”, “section 233(1)” and “Schedule F” substitute “a person resident in the United Kingdom”, “section 399(2) of ITTOIA 2005” and “dividend” respectively, and

(b)omit the second sentence.

116In section 231B(4)(b) (consequences of certain arrangements to pass on value of a tax credit) for “section 231(3)” substitute “section 397(2) of ITTOIA 2005”.

117Omit section 232 (tax credits for non-UK residents).

118Omit section 233 (taxation of certain recipients of distributions and in respect of non-qualifying distributions).

119(1)Amend section 249 (stock dividends treated as income) as follows.

(2)In subsection (1) for “subsections (7) to (9) below, this section applies” substitute “subsections (8) and (9) below, this section applies (and accordingly section 230 above and section 410 of ITTOIA 2005 apply)”.

(3)Omit subsections (4) to (7).

(4)In subsection (8)—

(a)for “subsection (4)” substitute “section 410(2), (3) or (4) of ITTOIA 2005”, and

(b)omit the words from “and subsections (5)” onwards.

(5)In subsection (9)(b) for “an individual” to “an amount of income” substitute “income to be treated as arising to an individual as a result of section 410(2) of ITTOIA 2005”.

120(1)Amend section 250 (returns) as follows.

(2)In subsection (5)(c) for “the appropriate amount in cash” substitute “the cash equivalent of the share capital in accordance with section 412 of ITTOIA 2005”.

(3)In subsection (7) at the end insert “of this Act or Chapter 5 of Part 4 of ITTOIA 2005”.

121In section 251 (interpretation of sections 249 and 250), omit subsections (2) to (6).

122Omit sections 251A to 251D (approved share incentive plans).

123In section 271(1)(a) (deemed surrender in cases of certain loans) for “under section 547” substitute “by virtue of section 465 of ITTOIA 2005”.

124In section 273 (payments securing annuities)—

(a)renumber the existing text as subsection (1),

(b)in that subsection after “Subject to” insert “subsection (2) and”,

(c)in that subsection omit “, 617(3)”, and

(d)after that subsection insert—

“(2)No deduction may be made under this section in respect of any contribution paid by any person under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.”

125In section 282A(4)(b) (jointly held property) for “section 111” substitute “Part 9 of ITTOIA 2005 (partnerships)”.

126In section 291A(3)(f) (connected persons: directors)—

(a)in sub-paragraph (i) after “trade or profession” insert “carried on wholly or partly in the United Kingdom”, and

(b)in sub-paragraph (ii) for the words from “in computing” to the end substitute “in calculating for tax purposes the profits of that trade or profession”.

127In section 307(1) (withdrawal of enterprise investment scheme relief) for “to tax under Case VI of Schedule D” substitute “to income tax”.

128Omit section 314 (divers and diving supervisors).

129Omit section 322 (consular officers and employees).

130Omit section 324 (designated international organisations).

131Omit section 325 (interest on deposits with National Savings Bank).

132Omit section 326 (interest etc. under contractual savings schemes).

133Omit sections 326A to 326D (tax-exempt special savings accounts).

134Omit section 327 (disabled person’s vehicle maintenance grant).

135Omit section 327A (payments to adopters).

136Omit sections 329 to 329AB (exemption of interest on damages for personal injury and personal injury damages in the form of periodical payments).

137Omit section 331 (scholarship income).

138Omit section 331A (student loans: certain interest to be disregarded).

139Omit section 332(3) (expenditure and houses of ministers of religion).

140In section 332A (venture capital trusts: reliefs) omit “and distributions by such trusts”.

141For section 333 substitute—

“333Investment plan regulations

Regulations under Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) may include provision generally for the purpose of the administration of corporation tax in relation to plans.”

142Omit section 333A (personal equity plans: tax representatives).

143(1)Amend section 333B (involvement of insurance companies with plans and accounts) as follows.

(2)In subsections (1), (2)(b) and (3) for “section 333 business” substitute “plan business”.

(3)In subsection (4)—

(a)after “this section” insert “or Chapter 3 of Part 6 of ITTOIA 2005 (except sections 697 and 698)”, and

(b)for “section 333A” substitute “section 697 or 698 of ITTOIA 2005 (requirements concerning foreign plan managers)”.

(4)In subsection (5)(a) and (b) for “section 333 business” substitute “plan business”.

(5)In subsection (8) for “section 333 business” substitute “plan business”.

(6)In subsection (9)—

(a)after the definition of “long-term insurance fund” insert—

““plan business”, in relation to an insurance company, means the business of the company that is attributable to the making of investments with that company under plans for which provision is made by regulations under Chapter 3 of Part 6 (except sections 697 and 698) of ITTOIA 2005 (income from individual investment plans)”, and

(b)omit the definition of “section 333 business”.

144In section 336(1A) (exception from certain charges for temporary residents in the United Kingdom) for paragraph (a) substitute—

“(a)any charge under ITTOIA 2005 on relevant foreign income,”.

145(1)Amend section 337 (company beginning or ceasing to carry on trade) as follows.

(2)In subsection (1) after “shall be computed” insert “for the purposes of corporation tax”.

(3)In subsection (2) after “overseas property business” insert “(within the meaning given by section 70A(4))”.

146(1)Amend section 347A (general rule: annual payments) as follows.

(2)In subsection (1)(b)—

(a)after “not” insert “, for the purposes of corporation tax,”,

(b)for “the person” substitute “any company”, and

(c)for “other person” substitute “other company”.

(3)After subsection (2) insert—

“(2A)This section applies to any annual payment made by an individual which—

(a)arises in the United Kingdom, and

(b)is exempt from any charge under Part 5 of ITTOIA 2005 (miscellaneous income) as a result of section 727 of that Act.”

(4)Omit subsections (4) and (5).

(5)In subsection (6) after “(2)” insert “or (2A)”.

147(1)Amend section 348 (payments out of profits or gains brought into charge to income tax: deduction of tax) as follows.

(2)In subsection (1A), after paragraph (a), insert—

“(aa)which—

(i)is charged with tax under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), Chapter 10 of that Part (distributions from unauthorised unit trusts), section 579 of that Act (royalties etc. from intellectual property), Chapter 4 of Part 5 of that Act (certain telecommunication rights: non-trading income) or Chapter 7 of Part 5 of that Act (annual payments not otherwise charged), and

(ii)is not relevant foreign income,”.

(3)After subsection (3) insert—

“(4)For the purposes of this section and section 349(1), the following income shall be treated as not brought into charge to income tax—

(a)income on which income tax is treated as paid under section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK resident companies etc. on which there is no tax credit),

(b)income on which an individual is liable to income tax as a result of section 413(2) of that Act or trustees are so liable as a result of section 413(3) of that Act (stock dividend income),

(c)income on which any person is liable to income tax under Chapter 6 of Part 4 of that Act (release of loan to participator in close company),

(d)income on which an individual is liable to income tax as a result of section 465 of that Act or trustees are so liable as a result of section 467 of that Act (gains from contracts for life insurance etc.), being income to which section 530 of that Act applies (income tax treated as paid etc.), and

(e)income which is included in the aggregate income of an estate as a result of section 664(2)(c), (d) or (e) of that Act (income arising to personal representatives and corresponding to income within paragraph (b), (c) or (d)).”

148(1)Amend section 349 (payments not out of profits or gains brought into charge to income tax, and annual interest) as follows.

(2)In subsection (1A), after paragraph (a), insert—

“(aa)which—

(i)is charged with tax under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), Chapter 10 of that Part (distributions from unauthorised unit trusts), section 579 of that Act (royalties etc. from intellectual property), Chapter 4 of Part 5 of that Act (certain telecommunication rights: non-trading income) or Chapter 7 of Part 5 of that Act (annual payments not otherwise charged), and

(ii)is not relevant foreign income,”.

(3)In subsection (2) for “chargeable to” substitute “which falls within Chapter 2 of Part 4 of ITTOIA 2005 (interest) (excluding anything specially exempted from income tax and discounts treated as interest by section 381 of that Act) or which is chargeable to corporation”.

(4)In subsection (3) before paragraph (a) insert—

“(za)to interest chargeable to income tax as relevant foreign income; or”.

(5)In subsection (4)—

(a)insert the following definitions in the appropriate places—

““certificate of deposit” means a document falling within the definition of that expression in section 56(5) above or section 552(2) of ITTOIA 2005;”,

““uncertificated eligible debt security units” has the same meaning as in section 552(2) of ITTOIA 2005;”,

(b)in the definition of “qualifying certificate of deposit”—

(i)omit “, as defined in section 56(5),”, and

(ii)after “under which” insert “, or uncertificated eligible debt security units under which”, and

(c)in the definition of “qualifying deposit right”—

(i)at the end of paragraph (a) insert “above or is an uncertificated right, as defined in section 552(2) of ITTOIA 2005”, and

(ii)in paragraph (b) omit “, as defined in section 56(5),” and after “issued” insert “, and no uncertificated eligible debt security units have been issued,”.

(6)For subsection (7) substitute—

“(7)This section is subject to section 101 of the Finance Act 2004 (payment of royalties without deduction at source).”

149After section 349 insert—

“349ZAExtension of section 349: proceeds of sale of UK patent rights

(1)Subsection (2) applies if—

(a)a person who is a non-UK resident is chargeable to tax under section 587 of ITTOIA 2005 on profits from the sale of the whole or part of any patent rights, and

(b)the net proceeds of the sale consist wholly or partly of a capital sum.

(2)Subsection (1) of section 349 of this Act applies to any payment of the net proceeds of sale, or of an instalment of them, as if the net proceeds or instalment were, so far as consisting of the capital sum—

(a)an annual sum to which paragraph (a) of that subsection applies, and

(b)payable otherwise than out of profits or gains charged to income tax.

(3)For the purposes of this section the net proceeds of the sale is the amount of the proceeds net of any incidental expenses of the sale which are deducted before payment.

(4)Sections 597 to 599 of ITTOIA 2005 (licences connected with patents etc.) apply for the purposes of this section as they apply for the purposes of sections 587 to 596 of that Act.

(5)Section 4 of the Capital Allowances Act 2001 (meaning of “capital sums” etc.) applies in relation to this section as it applies in relation to Chapter 2 of Part 5 of ITTOIA 2005 (receipts from intellectual property).

(6)In this section “a non-UK resident” means a person who is not resident in the United Kingdom.”

150In section 349A(3) (exceptions to section 349 for payments between companies etc.) for “524(3)(b)” substitute “349ZA(2)”.

151(1)Amend section 349B (conditions mentioned in section 349A(1)) as follows.

(2)In subsection (4)(b) for “section 333 (personal equity plans and individual savings accounts)” substitute “Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans)”.

(3)Omit subsection (5).

152In section 353(1) (relief for payments of interest) after “sections 359 to 368” insert “of this Act and section 52 of ITTOIA 2005”.

153In section 360A(2)(b) (meaning of “material interest” in section 360) for “Chapter 1A of Part XV (see section 660G(1) and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.

154(1)Amend section 368 (exclusion of double relief etc) as follows.

(2)In subsection (3) for “for the purposes of Schedule A or Case I or II of Schedule D” substitute “of any trade, profession or vocation, or of any UK property business or overseas property business,”.

(3)Omit subsection (4).

(4)In subsection (5)—

(a)for “subsections (3) and (4)” substitute “subsection (3)”, and

(b)for “those subsections” substitute “that subsection”.

(5)For subsection (6) substitute—

“(6)Any reference in subsection (3) above to an amount taken into account is a reference to an amount taken into account in an assessment which has been finally determined.”

155In section 370(2)(b) (relevant loan interest) for the words from “either” to the end substitute “would be eligible for relief under section 353”.

156(1)Amend section 379A (Schedule A losses) as follows.

(2)In subsection (1) for “Schedule A business” substitute “UK property business”.

(3)In subsection (2) for “Schedule A business”, in both places where it occurs, substitute “UK property business”.

(4)In subsection (3) for “Schedule A business” substitute “UK property business”.

(5)In subsection (4) for “Schedule A business” substitute “UK property business”.

(6)In subsection (7)—

(a)for “Schedule A business” substitute “UK property business”, and

(b)for “applicable to” to the end substitute “applicable to UK property businesses”.

(7)In the side-note for “Schedule A losses” substitute “Losses from UK property business”.

(8)In the italic cross-heading before the section for “Schedule A” substitute “UK property”.

157In section 379B (losses from overseas property business)—

(a)after “overseas property business” insert “(within the meaning given by Chapter 2 of Part 3 of ITTOIA 2005)”, and

(b)for “Schedule A business” substitute “UK property business”.

158In section 382(3) (provisions supplementary to sections 380 and 381) omit “under the provisions of the Income Tax Acts applicable to Case I or II of Schedule D”.

159(1)Amend section 384 (restrictions on right of set-off for trade etc. losses) as follows.

(2)In subsection (4) for the words from “a trade” to “subsections (1) to (3) above” substitute “—

(a)a trade is carried on for part only of a year of assessment by reason of its being set up and commenced, or discontinued, or both, in that year, or

(b)a person carries on, or is treated as carrying on, a trade for part only of a year of assessment by reason of—

(i)a succession to the trade during the year which involves all the persons carrying it on before the succession permanently ceasing to carry it on, or

(ii)a change of residence within section 17 of ITTOIA 2005,

subsections (1) to (3) above”.

(3)In subsection (8) for “under Case VI of Schedule D” substitute “to income tax”.

160In section 384A(6) (restriction of set-off of allowances against general income) for “under Case VI of Schedule D” substitute “to income tax”.

161In section 385(4) (carry-forward against subsequent profits) omit “under Case I of Schedule D” and, in both places where it occurs, “under that Case”.

162In section 386(1) (carry-forward where business transferred to a company) omit “under Schedule D”.

163In section 387(3)(d) (carry-forward as losses of amounts taxed under section 350) for “under section 349(1) by virtue of section 524” substitute “under section 349(1) of this Act by virtue of section 595 of ITTOIA 2005”.

164(1)Amend section 388 (carry-back of terminal losses) as follows.

(2)In subsection (1) omit “under Schedule D”.

(3)In subsection (4) omit “under Schedule D” and, in both places where it occurs, “under Case I of Schedule D”.

(4)In subsection (7) for “under the provisions of the Income Tax Acts applicable to Cases I and II of Schedule D” substitute “of a trade, profession or vocation under Part 2 of ITTOIA 2005”.

165In section 389 (supplementary provisions relating to carry-back of terminal losses) for subsection (4) substitute—

“(4)For the purposes of this section and section 388 references to the permanent discontinuance of a trade, profession or vocation include—

(a)a person permanently ceasing to carry on a trade, profession or vocation, and

(b)a partner permanently ceasing to carry on a notional trade in accordance with section 852(4) of ITTOIA 2005.”

166In section 390(a) (treatment of interest as a loss for purposes of carry-forward and carry-back) for “the profits of which are chargeable to tax under Case I or II of Schedule D” substitute “carried on wholly or partly in the United Kingdom”.

167For section 391 (losses from trade etc carried on abroad) substitute—

“391Losses from trade etc. carried on abroad

In the case of a loss sustained in a trade, profession or vocation carried on wholly outside the United Kingdom, relief under any of sections 380 to 386, 388 and 389 is given only on—

(a)the profits of a trade, profession or vocation carried on wholly outside the United Kingdom, or

(b)income falling within section 23, 355, 575, 613, 615, 631 or 635 of ITEPA 2003,

but no relief is to be given on income which is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).”

168For section 392 (Case VI losses) substitute—

“392Losses from miscellaneous transactions

(1)A person may make a loss relief claim if —

(a)in any year of assessment he sustains a loss in any transaction (whether he was engaged in it solely or in partnership), and

(b)the transaction is of such a nature that, if any profits or other income had arisen from it, he would have been liable to be assessed to income tax in respect of the income under or by virtue of any provision to which section 836B applies.

(2)A loss relief claim is a claim requiring—

(a)that the amount of the loss sustained by him is, as far as may be, to be deducted from or set off against the total of the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed for that year under or by virtue of any such provision, and

(b)that any portion of the loss for which relief is not so given is, as far as may be, to be carried forward and deducted from or set off against the total of the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed for a subsequent year of assessment under or by virtue of any such provision.

(3)If a partner in a partnership sustains a loss, the expression “the amount of any profits or other income or gains arising from any transaction in respect of which he is assessed” is to be read in accordance with subsection (4).

(4)In respect of any year that expression means such portion of the amount on which the partnership is assessed under or by virtue of any provision to which section 836B applies in respect of any transaction as falls to be taken into account in computing the partner’s total income for that year.

(5)Any relief under this section by way of the carrying forward of the loss is to be given as far as possible—

(a)from the first subsequent assessment in respect of any profits or other income or gains arising from any transaction in respect of which he is assessed under or by virtue of any provision to which section 836B applies for any year, and

(b)so far as it cannot be so given, from the next such assessment, and so on.

(6)So far as a loss relief claim concerns the amount of the loss for any year of assessment it must be made on or before the fifth anniversary of the 31st January next following the year of assessment in question.

(7)But the question whether and, if so, how much relief on that amount should be given under this section against tax for any year of assessment may be the subject of a separate claim made on or before the fifth anniversary of the 31st January next following that year of assessment.

(8)Any portion of a loss sustained by any person in any transaction (whether he was engaged in it solely or in partnership)—

(a)which was of such a nature that, if any profits had arisen from it, he would have been liable to be assessed to income tax in respect of the profits under Case VI of Schedule D for any year of assessment before the year 2005-06, and

(b)which did not fall within section 34, 35 or 36,

is (so far as relief for that portion has not previously been given) to be treated as a loss to be carried forward and deducted in accordance with subsection (2)(b) above.”

169(1)Amend section 397 (restriction of relief in case of farming and market gardening) as follows.

(2)In subsection (5) (restriction of relief in case of farming and market gardening) for the definitions of “farming” and “market gardening” substitute—

““farming” and “market gardening” shall be construed—

(a)for income tax purposes, in accordance with the definitions in section 876 of ITTOIA 2005, and

(b)for corporation tax purposes, in accordance with the definitions in section 832 but as if those definitions were not restricted to activities in the United Kingdom.”

(3)In subsection (7) after “the rules applicable to” insert “the calculation of the profits of a trade in Part 2 of ITTOIA 2005 or to”.

(4)In subsection (8) for the words from “, a trade shall be treated” to the end substitute “—

(a)a trade shall be treated as discontinued, and a new trade set up, in any event which under any of the provisions of the Tax Acts is to be treated as equivalent to the permanent discontinuance or setting up of a trade; and

(b)without prejudice to paragraph (a), a trade shall be treated as discontinued, and a new trade set up, at any time when there is a change in the persons carrying on the trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on.”

(5)In subsection (10) for the words from the beginning to “any discontinuance, and as if” substitute “Where at any time there has been a change in the persons carrying on a trade, this section shall, notwithstanding subsection (8) above, apply as if”.

170In section 398 (loss relief for transactions in deposits with and without certificates or in debts)—

(a)after “56(2)”, in the first place where it occurs, insert “above or Chapter 11 of Part 4 of ITTOIA 2005 (transactions in deposits)”,

(b)after “56(2)”, in the second place where it occurs, insert “above or that Chapter”, and

(c)for “tax under Schedule D” substitute “corporation tax under Schedule D or income tax under that Act”.

171(1)Amend section 399 (dealings in commodity futures etc: withdrawal of loss relief) as follows.

(2)Omit subsections (1) and (1A).

(3)In subsection (3) for “under Case VI of Schedule D” substitute “(in the case of corporation tax, under Case VI of Schedule D)”.

(4)In subsection (5) omit the words from “and the reference” to the end.

172In section 401(1) (relief for pre-trading expenditure)—

(a)for “person” substitute “company”,

(b)for “trade, profession or vocation”, wherever it occurs, substitute “trade or profession”,

(c)for “he” substitute “the company”,

(d)for “his” substitute “the company's”, and

(e)for “him” substitute “the company”.

173In section 417(3)(b) (meaning of “associate” etc.) for “Chapter 1A of Part XV (see section 660G(1) and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.

174(1)Amend section 421 (taxation of borrower where loan under section 419 released etc.) as follows.

(2)In subsection (1)—

(a)for “advance and” substitute “advance made to the trustees of a trust and after the trust has ended”,

(b)in paragraph (a) for “the total income of the person to whom the loan or advance was made”, “him” and “Schedule F” substitute “the income of the person from whom the debt was due (“the debtor”) for corporation tax purposes”, “the debtor” and “dividend” respectively,

(c)in paragraph (b) for “he shall not be liable to pay income tax at the Schedule F” substitute “the debtor shall not be liable to pay corporation tax at the dividend”, and

(d)omit paragraphs (c) and (d).

(3)Omit subsections (2) and (3).

175In section 431(2) (interpretative provisions relating to insurance companies) in the definition of “annuity business” for the words “section 580C” substitute “section 725 of ITTOIA 2005 (immediate needs annuities)”.

176In section 431D(3)(b) (meaning of “overseas life assurance business”) after “Chapter II of Part XIII” insert “or Chapter 9 of Part 4 of ITTOIA 2005”.

177In section 434 (franked investment income etc.) omit subsection (1A).

178(1)Amend section 437 (general annuity business) as follows.

(2)In subsection (1C)(b)(ii) after “capital elements” insert “and amounts exempt under section 717 of ITTOIA 2005”.

(3)Omit “and” at the end of subsection (1C)(b).

(4)After subsection (1C)(c) insert “and

(d)the amounts exempt under section 717 of ITTOIA 2005 shall be determined in accordance with Chapter 7 of Part 6 of that Act, but for this purpose—

(i)it is immaterial whether or not an annuitant claims any relief to which the annuitant is entitled under that section; and

(ii)where, by virtue of section 718 of that Act, section 717 does not apply to an annuity, the annuity shall be treated as being exempt to the same extent that it would have been apart from that section.”

179(1)Section 468J (dividend distributions of authorised unit trusts) is amended as follows.

(2)In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.

(3)At the end of subsection (4) insert “(including a dividend treated as paid to a unit holder who is not liable to corporation tax)”.

180(1)Section 468L (interest distributions of authorised unit trusts) is amended as follows.

(2)In subsection (1A) after “this Chapter” insert “and Chapter 2 of Part 4 of ITTOIA 2005 (interest)”.

(3)In subsection (2) for “Tax Acts” substitute “Corporation Tax Acts”.

(4)At the end of subsection (3) insert “(including a payment of interest treated as made to a unit holder who is not liable to corporation tax)”.

181(1)Amend section 469 (other unit trusts) as follows.

(2)In subsection (2A) for “section 231(1)” substitute “section 397(1) of ITTOIA 2005”.

(3)For subsection (2B) substitute—

“(2B)Section 348(4)(a) above and sections 399(2) and (6) and 400(2) and (3) of ITTOIA 2005 shall not apply where the recipient of the distribution in question is the trustees of the scheme.”

(4)In subsection (3)—

(a)after “the Tax Acts” insert “other than ITTOIA 2005”, and

(b)at the end insert “(and see Chapter 10 of Part 4 of that Act for their treatment under that Act)”.

(5)In subsection (9) for “paragraph 7 of Schedule 5AA” substitute “section 568 of ITTOIA 2005”.

182In section 472A (trading profits etc. from securities: taxation of amounts taken to reserves)—

(a)in subsection (1) for “person” substitute “company”, and

(b)in subsection (2) for “person's” substitute “company's”.

183In section 473(1) and (4) (conversion etc. of securities held as circulating capital) for “person” substitute “company”.

184(1)Amend section 477A (building societies: regulations for deduction of tax) as follows.

(2)In subsection (4)—

(a)for “terminal bonus” substitute “interest”, and

(b)for “contractual savings scheme” substitute “SAYE savings arrangement”.

(3)Omit subsections (5) and (6).

(4)In subsection (9) omit the words from “but” to the end of the subsection.

(5)In subsection (10) after “this section—” insert—

““certified SAYE savings arrangement” has the meaning given by section 703 of ITTOIA 2005”.

185Omit section 480C (relevant deposits: computation of tax on interest).

186(1)Amend section 481 (“deposit-taker”, “deposit” and “relevant deposit”) as follows.

(2)In subsection (1A) for “sections 480A and 480C” substitute “section 480A”.

(3)In subsection (5A)—

(a)at the end of paragraph (a) insert “above or an uncertificated right falling within section 552(1)(c) of ITTOIA 2005”, and

(b)in paragraph (c)—

(i)for “, as defined in section 56(5), has” substitute “or uncertificated eligible debt security units have”, and

(ii)omit “or 480C”.

(4)In subsection (6) omit the word “, 480C”.

187(1)Amend section 482 (supplementary provisions) as follows.

(2)In subsection (6)—

(a)after “481(5)” insert “and (5A)”,

(b)after the definition of “appropriate person” insert—

““certificate of deposit” for corporation tax purposes has the meaning given in section 56(5) above and for income tax purposes has the meaning given in section 552(2) of ITTOIA 2005,”

(c)in the definition of “qualifying certificate of deposit” for “, as defined in section 56(5), which is” substitute “or uncertificated eligible debt security units, being a certificate or units”, and

(d)after the definition of “qualifying time deposit” insert—

““uncertificated eligible debt security units” has the meaning given in section 552(2) of ITTOIA 2005”.

(3)In subsection (8) for “section 56(5)” substitute “subsection (6) above”.

188(1)Section 486 (industrial and provident societies and co-operative associations) is amended as follows.

(2)In subsection (1)—

(a)after “distribution” insert “for the purposes of corporation tax”, and

(b)for “the purposes of corporation tax” substitute “those purposes”.

(3)In subsection (4) at the end insert “for the purposes of corporation tax”.

(4)Omit subsection (5).

189(1)Amend section 491 (distribution of assets of body corporate carrying on mutual business) as follows.

(2)In subsection (1) for “any person” substitute “any company”.

(3)In subsection (2) for “the person” substitute “the company”.

(4)In subsection (3)—

(a)for “the purposes of tax”, wherever it occurs, substitute “the purposes of corporation tax”,

(b)for “the recipient”, wherever it occurs, substitute “the recipient company”,

(c)after “be charged” insert “to corporation tax”, and

(d)for “chargeable period” substitute “accounting period”.

(5)In subsection (4) omit “113 or”.

(6)Omit subsection (5).

(7)In subsection (10) omit “or vocation”.

190(1)Amend section 492 (treatment of oil extraction activities etc for tax purposes) as follows.

(2)In subsection (1) for “for all purposes of income tax, and for the purposes of the charge of corporation tax on income,” substitute “for the purposes of the charge of corporation tax on income”.

(3)In subsection (4)—

(a)in paragraph (a) after “are treated by virtue of” insert “section 16(1) of ITTOIA 2005 or”,

(b)in paragraph (a) for “the purposes specified in that subsection” substitute “income tax purposes or (as the case may be) for the purposes of the charge of corporation tax on income”,

(c)in paragraph (b) after “but which, apart from” insert “section 16(1) of ITTOIA 2005 or”, and

(d)after “notwithstanding anything in that” insert “section or”.

191In section 493(2)(a)(i) (valuation of oil disposed of or appropriated in certain circumstances) for “falling within section 492(1)(a) or (b)” substitute “falling within the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within section 492(1)(a) or (b) above”.

192In section 495(2) (regional development grants) for “section 492(1)” substitute “section 16(1) of ITTOIA 2005 or section 492(1) above”.

193In section 496(1)(c) (tariff receipts and tax-exempt tariffing receipts) for “section 492(1)” substitute “section 16(1) of ITTOIA 2005 or section 492(1) above”.

194In section 502(1) (interpretation of Chapter 5), in the definition of “ring fence trade”—

(a)in paragraph (a) for “any of paragraphs (a) to (c) of subsection (1) of section 492” substitute “the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within section 492(1) above”, and

(b)in paragraph (b) for “that subsection” substitute “section 16(1) of ITTOIA 2005 or section 492(1) above”.

195(1)Amend section 503 (letting of furnished holiday accommodation treated as a trade for certain purposes) as follows.

(2)In subsection (1)—

(a)for “specified in subsection (2)” substitute “of Chapter 2 of Part 10 (loss relief for corporation tax)”,

(b)omit “in the United Kingdom”,

(c)after “chargeable to” insert “corporation”, and

(d)for “particular person or partnership or body of persons” substitute “particular company or partnership”.

(3)Omit subsections (2) and (3).

(4)In subsection (5)—

(a)for “Part X” substitute “Chapter 2 of Part 10”, and

(b)after “other provision of the” insert “Corporation”.

(5)In the side-note after “certain” insert “corporation tax”.

196(1)Amend section 504 (meaning of the “commercial letting of furnished accommodation”) as follows.

(2)Omit subsection (4).

(3)In subsection (6)—

(a)omit “year of assessment or”,

(b)for “person” substitute “company”,

(c)omit “year or” in each place where it occurs,

(d)for “he” substitute “the company”, and

(e)for “him” substitute “the company”.

(4)In subsection (6A) for “above is—” to the end substitute “above is the period of two years beginning at the end of the accounting period in which the accommodation was let.”

(5)In subsection (7)—

(a)omit “year of assessment or”, and

(b)omit “year or” in both places where it occurs.

(6)In subsection (8) omit “year of assessment or”.

(7)In subsection (9)—

(a)for “a person” substitute “a company”, and

(b)for “he” substitute “it”.

197After section 504 insert—

“504ALetting of furnished holiday accommodation treated as trade for certain income tax purposes

(1)For the purposes specified in subsection (2)—

(a)a UK property business which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation is treated as if it were a trade the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005, and

(b)all such lettings made by a particular person or partnership or body of persons are treated as one trade.

The “commercial letting of furnished holiday accommodation” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.

(2)Subsection (1) applies for the purposes of—

(a)Chapter 1 of Part 10 (loss relief for income tax),

(b)section 833(4)(c) (income regarded as earned income), and

(c)section 189(2)(b) of the Finance Act 2004 (income regarded as relevant UK earnings for pension purposes).

(3)Chapter 1 of Part 10 as applied by this section has effect with the following adaptations—

(a)no relief is to be given to an individual under section 381 (relief for losses in early years of trade) in respect of a year of assessment if any of the accommodation in respect of which the trade is carried on in that year was first let by that person as furnished accommodation more than three years before the beginning of that year of assessment;

(b)section 384 (restrictions on right of set-off) has effect with the omission of subsections (6) to (8) (which relate to certain losses attributable to capital allowances);

(c)section 390 (treatment of interest as loss) has effect as if the reference to a trade carried on wholly or partly in the United Kingdom were a reference to the UK property business so far as it is treated as a trade.

(4)If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

(5)Relief is not to be given for the same loss, or the same portion of a loss, both under a provision of Chapter 1 of Part 10 as applied by this section and under any other provision of the Income Tax Acts.”

198(1)Amend section 505 (charities: general) as follows.

(2)In subsection (1)—

(a)in paragraph (a) after “Schedules A and D” insert “, or under Parts 2 and 3 of ITTOIA 2005,”,

(b)in paragraph (c)(ii) after “Schedule D” insert “or under Chapter 2, 7, 8 or 10 of Part 4 of ITTOIA 2005 (interest, purchased life annuity payments, profits from deeply discounted securities and distributions from unauthorised unit trusts), section 579 of that Act so far as it relates to annual payments (royalties etc. from intellectual property), Chapter 4 of Part 5 of that Act so far as it relates to annual payments (certain telecommunication rights: non-trading income) or Chapter 7 of Part 5 of that Act (annual payments not otherwise charged)”,

(c)in paragraph (c)(iia) omit “IV or”,

(d)after paragraph (c)(iia) insert—

“(iiaa)from tax under Chapter 4 of Part 4 of ITTOIA 2005 (dividends from non-UK resident companies) or from tax under Chapter 8 of Part 5 of that Act (income not otherwise charged) so far as it applies to relevant foreign distributions,”,

(e)in paragraph (c)(iib) from “income” to “and” at the end of sub-paragraph (iib) substitute “such dividends as would, in the case of income tax, be chargeable to tax under Chapter 4 of Part 4 of ITTOIA 2005 or such distributions (other than dividends) as would, in the case of income tax, be chargeable to tax under Chapter 8 of Part 5 of that Act so far as it would apply to what would be a relevant foreign distribution,”,

(f)in paragraph (c)(iii) for “Schedule F” substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”,

(g)in paragraph (d) after “Schedule D” insert “or Chapter 2 of Part 4 of ITTOIA 2005 (interest)”,

(h)in paragraph (e) after “Schedule D” insert “or Part 2 of ITTOIA 2005 (trading income)”, and

(i)in paragraph (f) after “Schedule D” insert “or Part 2 or 5 of ITTOIA 2005 (trading and miscellaneous income)”.

(3)After subsection (1) insert—

“(1AA)In subsection (1)(c)(iiaa) and (iib) “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a)is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b)would be chargeable under Chapter 3 of that Part of that Act if the company were resident in the United Kingdom.”

(4)In subsection (2) after “chargeable to”, in the second place where it occurs, insert “income tax under Chapter 7 of Part 5 of ITTOIA 2005 (annual payments not otherwise charged) so far as it does not apply to relevant foreign income and shall be chargeable to corporation”.

199In section 512(1) (exemptions for Atomic Energy Authority and National Radiological Protection Board)—

(a)in paragraph (a) after “under” insert “Part 3 of ITTOIA 2005 so far as it relates to the profits of a UK property business and under”,

(b)in paragraph (b)—

(i)after “under” insert “ITTOIA 2005 and”, and

(ii)after “dividends” insert “or income within Chapter 10 of Part 4 of ITTOIA 2005 (distributions from unauthorised unit trusts)”, and

(c)in paragraph (c) for “Schedule F” substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”.

200Omit section 514 (funds for reducing the national debt).

201(1)Amend section 524 (taxation of receipts from sale of patent rights) as follows.

(2)In subsection (1)—

(a)for “person”, “he” and “him” substitute “company”, “the company” and “it” respectively,

(b)for “tax” substitute “corporation tax”, and

(c)for “chargeable”, in both places where it occurs, substitute “accounting”.

(3)In subsection (2)—

(a)for “person” substitute “company”,

(b)after “charged to”, in both places where it occurs, insert “corporation”, and

(c)for “chargeable” substitute “accounting”.

(4)In subsection (2A)—

(a)omit paragraph (a), and

(b)in paragraph (b) omit “in the case of an election for the purposes of corporation tax,”.

(5)In subsection (3)—

(a)for the words from the beginning to “in the United Kingdom” substitute “Where a relevant non-resident company”, and

(b)in paragraph (a), for “he shall be chargeable to tax” substitute “the company shall be chargeable to corporation tax”.

(6)Omit subsection (4).

(7)For subsection (5) substitute—

“(5)In subsection (3) above “relevant non-resident company” means a company not resident in the United Kingdom which would be within the charge to corporation tax in respect of any proceeds of the sale of the patent rights not consisting of a capital sum.”

(8)In subsection (6) omit “subsection (4) shall not apply, but”.

(9)In subsection (7)—

(a)for “person” substitute “company”,

(b)for “him”, in both places where it occurs, substitute “it”, and

(c)for “he” substitute “it”.

(10)In subsection (8) for “him” substitute “it”.

202(1)Amend section 525 (receipts from sale of patent right: death, winding up or partnership change) as follows.

(2)For subsection (1) substitute—

“(1)Where a body corporate on which, by reason of the receipt of a capital sum, a charge falls or would otherwise fall to be made under section 524 commences to be wound up—

(a)no sums shall be charged under that section on that body for any accounting period subsequent to that in which the winding up commences; and

(b)the amount falling to be charged for the accounting period in which the winding up commences shall be increased by the total amounts which, but for the winding up, would have fallen to be charged for subsequent accounting periods.”

(3)Omit subsection (2).

(4)In subsection (4)—

(a)in paragraph (a)—

(i)for “chargeable period” substitute “accounting period”,

(ii)omit “(or, if he is dead, his personal representatives)”, and

(iii)for “his” substitute “its”, and

(b)omit paragraph (b) and the word “and” immediately preceding it.

(5)In the sidenote omit “death,”.

203(1)Amend section 526 (relief for expenses) as follows.

(2)In subsection (1)—

(a)for “person” substitute “company”,

(b)for “him”, in the first place where it occurs, substitute “it”,

(c)for “him”, in the second place where it occurs, substitute “the company for the purposes of corporation tax”, and

(d)for “chargeable” substitute “accounting”.

(3)Omit subsection (2).

204In section 527(4) (spreading of royalties over several years) at the end insert “of this Act or by virtue of section 595 of ITTOIA 2005”.

205(1)Amend section 528 (manner of making allowances under section 526) as follows.

(2)Omit subsection (2).

(3)In subsection (3) omit “as that provision applies for the purposes of corporation tax”.

(4)In subsection (3A) omit “a person’s or” and “479 or”.

206Omit section 529 (patent income to be earned income in certain cases).

207(1)Amend section 531 (disposals of know-how) as follows.

(2)In subsection (1)—

(a)for “a person” substitute “a company”,

(b)for “him”, in both places where it occurs, substitute “the company”,

(c)for “tax”, in both places where it occurs, substitute “corporation tax”, and

(d)for “all purposes” substitute “the purposes of corporation tax”.

(3)For subsection (2) substitute—

“(2)Subject to subsection (3) below, where—

(a)a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b)the know-how is disposed of as part of the disposal of all or part of the trade,

the consideration shall for the purposes of corporation tax be treated as a payment for goodwill in relation both to the person making the disposal and to the person acquiring the know-how (if that person provided the consideration).”

(4)In subsection (3)(a) for “to either of the persons concerned if they so elect” substitute “if, in the case of the person disposing of the know-how being within the charge to corporation tax, that person and the person acquiring the know-how (whether or not within the charge to corporation tax) elect for that subsection not to apply”.

(5)After subsection (3) insert—

“(3A)If—

(a)an election is made under section 194 of ITTOIA 2005 (provision corresponding to subsections (2) and (3) of this section for the purposes of income tax), and

(b)the person making the acquisition mentioned in that section is within the charge to corporation tax,

the persons making the election under that section are treated as also making an election under subsection (3) of this section (even though the person disposing of the know-how is not within the charge to corporation tax).”

(6)In subsection (4)—

(a)for “person” substitute “company”,

(b)for “him” substitute “the company”, and

(c)for “tax”, in both places where it occurs, substitute “corporation tax”.

(7)In subsection (5)—

(a)for “person” substitute “company”, and

(b)for “tax” substitute “corporation tax”.

(8)Omit subsection (6).

(9)In subsection (7) for “(6)” substitute “(5)”.

208In section 532 (application of Capital Allowances Act) for “529” substitute “528”.

209(1)Amend section 533 (interpretation of intellectual property provisions) as follows.

(2)In subsection (1)—

(a)for “529” substitute “528”, and

(b)for the definition of “income from patents” substitute—

““income from patents” means—

(a)any royalty or other sum paid in respect of the use of a patent; and

(b)any amount on which tax is payable for any accounting period by virtue of section 524 or 525 above or section 472(5) of, or paragraph 100 of Schedule 3 to, the Capital Allowances Act,

but does not include any amount chargeable to income tax.”

(3)In each of subsections (2) to (5) for “529” substitute “528”.

210(1)Amend section 539 (life policies, life annuities and capital redemption policies: introductory) as follows.

(2)In subsection (1) for “tax” substitute “corporation tax”.

(3)In subsection (3) for the definition of “life annuity” substitute—

• ““life annuity” means—

  (a)

  any annuity to which section 656 (as read with section 657) applies, or

  (b)

  any annuity that—

  (i)

  is a purchased life annuity for the purposes of Chapter 7 of Part 4 of ITTOIA 2005 (see section 423 of that Act), and

  (ii)

  is not specified in section 718 of that Act (annuities the payments under which are not within section 717 of that Act (exemption for part of purchased life annuity payments));”.

(4)Omit subsection (8).

211After that section insert—

“539ZAApplication of this Chapter etc. to policies and contracts in which persons other than companies are interested

(1)This section applies where, for the purposes of determining the application of this Chapter in relation to a policy or contract at any time, it is necessary to have regard to its application at another time.

(2)It makes no difference to the application of this Chapter at that other time whether liability in respect of a gain arising at that time would have arisen or (as the case may be) would arise because of the application of this Chapter or Chapter 9 of Part 4 of ITTOIA 2005 (which makes provision for income tax purposes corresponding to that made by this Chapter).

(3)References in this section to this Chapter include references to paragraph 20 of Schedule 15 to this Act and section 79 of the Finance Act 1997 (payments under certain life insurance policies).”

212In section 543(1)(a)(i) (life annuity contracts: computation of gain) for “one or more payments” to the end of the sub-paragraph substitute “any payments have been made on account of the annuity, by so much of those payments as is determined to be the capital element in them under section 656 of this Act or is exempt under section 717 of ITTOIA 2005; and”.

213In section 544(6)(a) (second and subsequent assignment of life policies and contracts) for “section 547(1)(a)” substitute “section 547A(17)”.

214In section 545(1)(a) (capital redemption policies) for “to tax” to the end of the paragraph substitute “—

(i)to corporation tax under Schedule D,

(ii)to income tax under Part 9 of ITEPA 2003 (pension income) because section 609, 610 or 611 of that Act applies to them (certain employment related annuities), or

(iii)to income tax under Chapter 7 of Part 4 (purchased life annuity payments) or Chapter 7 of Part 5 (annual payments not otherwise charged) of ITTOIA 2005;”.

215In section 546C(8) (charging the section 546 excess to tax where section 546B applies)—

(a)for “any provision of section 547” substitute “section 547(1)(b)”,

(b)for “body or person” substitute “company”,

(c)omit paragraph (a) and the word “or” at the end of it,

(d)in paragraph (b) for “it” substitute “the chargeable event in question”, and

(e)omit “year of assessment or”.

216(1)Amend section 547 (method of charging gain to tax) as follows.

(2)In subsection (1) omit paragraph (a) and paragraphs (c) to (e).

(3)In paragraph (b) of that subsection for “that event, those rights” substitute “the chargeable event in question, the rights conferred by the policy or contract”.

(4)In subsection (1A)—

(a)for “their” substitute “its”, and

(b)for “and subsections (9) to (11) below are” substitute “is”.

(5)Omit subsections (4A) to (7A) and (9) to (14).

217(1)Amend section 547A (method of charging gain to tax: multiple interests) as follows.

(2)For subsection (1) substitute—

“(1)If—

(a)immediately before the happening of a chargeable event, two or more persons have relevant interests in the rights conferred by the policy or contract in question, and

(b)any of those persons is a company,

section 547 shall have effect in relation to each such company as if it had been the only person with a relevant interest in those rights, but with references to the amount of the gain construed as references to the company’s proportionate share of the amount of the gain.”

(3)In subsection (15) for the definition of “foreign institution” substitute—

““foreign institution” means a person which is a company or other institution resident or domiciled outside the United Kingdom;”.

(4)For subsection (16) substitute—

“(16)For the purposes of this section, property held for the purposes of a foreign institution shall be regarded as in the beneficial ownership of the foreign institution.

(17)Any reference in this section to trusts created by an individual includes a reference to trusts arising under—

(a)section 11 of the Married Women’s Property Act 1882;

(b)section 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880; or

(c)section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964;

and references to the settlor or to the person creating the trusts shall be construed accordingly.”

218In section 548(1) (deemed surrender of certain loans) for paragraph (a) substitute—

“(a)a gain arising in connection with a policy or contract would be—

(i)treated as forming part of the income of a company under section 547(1)(b), or

(ii)a gain for which an individual is, or any trustees are, liable to tax under Chapter 9 of Part 4 of ITTOIA 2005; and”.

219Omit section 549 (certain deficiencies allowable as deductions).

220Omit section 550 (relief where gain charged at a higher rate).

221Omit section 551 (right of individual to recover tax from trustees).

222(1)Amend section 552 (information: duty of insurers) as follows.

(2)In subsection (1) omit “within the meaning of this Chapter”.

(3)In subsection (5)—

(a)in paragraph (b)(ii) for “, the date” to the end of the sub-paragraph substitute “of this Act and section 514(1) of ITTOIA 2005 (chargeable events where transaction-related calculations show gains), the date on which the year and the insurance year end;”,

(b)in paragraph (c)—

(i)after “this Chapter” insert “and Chapter 9 of Part 4 of ITTOIA 2005”,

(ii)after “relevant capital payments” insert “and the amount or value of any capital sums of a kind referred to in section 492(1)(b) to (e) of ITTOIA 2005”,

(iii)in sub-paragraph (iii) after “annuity” insert “determined in accordance with section 656 and the amount of so much of any payment previously made on account of an annuity as is exempt under section 717 of ITTOIA 2005”, and

(iv)in sub-paragraph (v) after “year” insert “and the total of the amounts of gains treated as arising on previous chargeable events within section 509(1) or 514(1) of ITTOIA 2005”,

(c)for paragraph (e) substitute—

“(e)the number of years relevant for computing the annual equivalent of the amount of the gain for the purposes of subsection (1) of section 536 of ITTOIA 2005 (top slicing relieved liability: one chargeable event), apart from subsections (6) and (8) of that section;”, and

(d)for paragraph (f) substitute—

“(f)on the assumption that section 465 of ITTOIA 2005 (person liable: individuals) has effect in relation to the gain —

(i)whether an individual would fall to be treated as having paid income tax at the lower rate on the amount of the gain in accordance with section 530 of that Act; and

(ii)if so, except in a case where paragraph (c) above applies, the amount of such tax that would fall to be so treated as paid.”

(4)In subsection (6)—

(a)in paragraph (b)—

(i)after “section 546C(7)(a)” insert “of this Act (and section 514(1) of ITTOIA 2005)”, and

(ii)after “year” insert “(and the insurance year)”, and

(b)in paragraph (c) after “section 546C(7)(a)” insert “of this Act (and section 514(1) of ITTOIA 2005)”.

(5)In subsection (7)(b)—

(a)after “section 546C(7)(a)” insert “of this Act (and section 514(1) of ITTOIA 2005)”, and

(b)after “year” insert “(and the insurance year)”.

(6)In subsection (9)(a)—

(a)after “section 546C(7)(b)” insert “of this Act (and section 514(1) of ITTOIA 2005)”, and

(b)after “occurs” insert “(and the end of the insurance year mentioned in section 514(3) and (4) of ITTOIA 2005)”.

(7)In subsection (10)—

(a)in the definition of “amount” after “section 553(3)” insert “of this Act and section 528 of ITTOIA 2005”, and

(b)insert in the appropriate place—

““chargeable event” means an event which is a chargeable event within the meaning of this Chapter and Chapter 9 of Part 4 of ITTOIA 2005;”.

223In section 552ZA(3) (information: supplementary provisions) after “section 546C(7)(a)” insert “of this Act and section 514(1) of ITTOIA 2005”.

224(1)Amend section 552A (tax representatives) as follows.

(2)In subsection (5) omit “in relation to which this Chapter has effect and”.

(3)In subsection (12) insert in the appropriate place—

““capital redemption policy” means a capital redemption policy in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;”,

““contract for a life annuity” means a contract for a life annuity in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;”, and

““policy of life insurance” means a policy of life insurance in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;”.

225In section 552B (duties of overseas insurers' tax representatives) after subsection (5) insert—

“(5A)In subsection (5) “chargeable event” has the same meaning as in section 552 (see subsection (10) of that section).”

226(1)Amend section 553 (non-resident policies and off-shore capital redemption policies) as follows.

(2)For subsection (4) substitute—

“(4)The number of days in the period referred to in subsection (3) shall be calculated, where appropriate, from the issue of the earliest related policy, that is, any policy in relation to which the policy is a new policy within the meaning of paragraph 17 of Schedule 15, any policy in relation to which that policy is such a policy, and so on.”

(3)Omit subsections (6) to (9).

(4)In subsection (10) in the definition of “foreign institution” for “section 547” substitute “section 547A”.

227(1)Amend section 553A (overseas life insurance business) as follows.

(2)Omit subsection (3).

(3)In subsection (4), in the definition of “new non-resident policy”, for “subsections (2) and (3)” substitute “subsection (2)”.

228(1)Amend section 553C (personal portfolio bonds) as follows.

(2)In subsection (1) for “tax” substitute “corporation tax”.

(3)In subsection (2) for “tax”, in both places where it occurs, substitute “corporation tax”.

(4)In subsection (3)(a) for “tax”, in the first place where it occurs, substitute “corporation tax”.

(5)In subsection (4)—

(a)for “tax” substitute “corporation tax”,

(b)after paragraph (b) insert “or”,

(c)in paragraph (c) for the words from “person or body of persons” to the end of the paragraph substitute “company”, and

(d)omit paragraph (d) and the word “or” before it.

(6)After subsection (9) insert—

“(9A)The Treasury may by regulations make provision, in relation to any policy or contract to which this subsection applies, for—

(a)treating an event described in the regulations as if it were a chargeable event, and

(b)treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event.

(9B)Regulations under subsection (9A) may make such provision for the purposes only of enabling the gain to be taken into account in the application of this Chapter to the policy or contract on the later happening of a chargeable event.

(9C)Regulations under subsection (9A) may make any provision for the calculation of the amount of the gain which regulations under subsection (1) may make for the calculation of the amount charged to corporation tax by virtue of regulations under that subsection.

(9D)Subsections (6), (8) and (9) apply to regulations under subsection (9A).

(9E)Subsection (9A) applies to a policy or contract if—

(a)it is a personal portfolio bond, and

(b)liability in respect of a gain arising in relation to it would arise by virtue of any of sections 464 to 468 of ITTOIA 2005 (persons liable for tax under Chapter 9 of Part 4 of that Act).”

229Omit section 554 (borrowings on life policies to be treated as income in certain cases).

230(1)Amend section 556 (activity treated as trade etc. and attribution of income) as follows.

(2)Omit subsection (1).

(3)For subsection (2) substitute—

“(2)If—

(a)under section 13(5) of ITTOIA 2005 a payment made to a person is treated as made instead to the performer, and

(b)the person to whom the payment is actually made is a company within the charge to corporation tax,

the company is treated for corporation tax purposes as if the payment had not been made to it.”

(4)In subsection (3)—

(a)omit paragraph (a), and

(b)in paragraph (b) for “tax (whether of the entertainer or sportsman or of another person)” substitute “corporation tax”.

231Omit section 557 (charge on profits).

232In section 568(1) (deductions from profits of contributions paid under certified schemes)—

(a)after “section 74” insert “of this Act or section 33 of ITTOIA 2005”, and

(b)after “Case I of Schedule D,” insert “or under Part 2 of ITTOIA 2005,”.

233In section 570(4) (payments under certified schemes which are not repayments of contributions) for “any of the provisions of section 113 or section 337(1)” substitute “section 337(1) above or section 18 of ITTOIA 2005 (companies beginning or ceasing to carry on trade)”.

234In section 571(1) (cancellation of certificates) for “under Case VI of Schedule D” substitute “(in the case of corporation tax, under Case VI of Schedule D)”.

235(1)Amend section 577 (business entertaining expenses) as follows.

(2)In subsection (1)(a)—

(a)for “tax” substitute “corporation tax”, and

(b)for “the Tax Acts” substitute “the Corporation Tax Acts”.

(3)In subsection (3)—

(a)for “any person” substitute “any company”,

(b)for “by him”, in the first and second places where it occurs, substitute “by the company”, and

(c)for “a member of his staff” substitute “an employee of the company”.

(4)In subsection (5)—

(a)for “a person” substitute “a company”,

(b)for “a member of his staff” substitute “an employee of the company”,

(c)for “that person” substitute “the company”,

(d)for “him” substitute “the company”, and

(e)for “members of his staff” substitute “employees of the company”.

(5)In subsection (7)—

(a)in paragraph (b) for “, profession or vocation” substitute “or profession”, and

(b)in paragraph (c)—

(i)for “the members of a person’s staff” substitute “a company’s employees”,

(ii)for “that person” substitute “the company”, and

(iii)for “a company”, in both places where it occurs, substitute “the company”.

(6)In subsection (8)(b)—

(a)for “him”, in both places where it occurs, substitute “the donor”, and

(b)for “relevant tax period” substitute “accounting period”.

(7)Omit subsection (8A).

(8)In subsection (10)—

(a)for “any person” substitute “any company”,

(b)for “his trade” substitute “its trade”, and

(c)for “by him” substitute “by the company”.

236(1)Amend section 577A (expenditure involving crime) as follows.

(2)In subsections (1) and (1A) for “tax” substitute “corporation tax”.

(3)In subsection (2)(a) for “the Tax Acts” substitute “the Corporation Tax Acts”.

237In section 578(1) (housing grants) for “any tax purpose” substitute “corporation tax purposes”.

238In section 578A(1) (expenditure on car hire) for “tax” substitute “corporation tax”.

239(1)Amend section 579 (statutory redundancy payments) as follows.

(2)In subsection (2)—

(a)after “payment is made” insert “by a company”,

(b)for “trade, profession or vocation”, in each place, substitute “trade or profession”, and

(c)for “the employer” substitute “the company”.

(3)In subsection (3)—

(a)after “payment is made” insert “by a company”, and

(b)for “the employer” substitute “the company”.

(4)In subsection (5) for “tax purposes” substitute “corporation tax purposes”.

(5)In subsection (6) for “the employer”, in both places, substitute “the company”.

240Omit sections 580A to 580C (relief from tax on annual payments under certain insurance policies and immediate needs annuities).

241Omit section 581 (borrowing in foreign currency by local authorities and statutory corporations).

242After section 581 insert—

“581AInterest on foreign currency securities etc.

Interest within section 755(1) of ITTOIA 2005 (interest on foreign currency securities etc.) shall be paid without deduction of income tax.”

243(1)Section 582 (funding bonds issued in respect of interest on certain debts) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a) for “all the purposes of the Tax Acts” substitute “all the purposes of the Corporation Tax Acts”, and

(b)in paragraph (b) at the beginning insert “where paragraph (a) above or section 380 of ITTOIA 2005 (which makes provision similar to that paragraph for income tax purposes) applies”.

(3)In subsection (2)—

(a)after “subsection (1) above” insert “or section 380 of ITTOIA 2005”, and

(b)in paragraph (b)(ii)—

(i)after “this section” insert “or section 380 of ITTOIA 2005”, and

(ii)after “Case VI of Schedule D” insert “(corporation tax) or under Chapter 2 of Part 4 of ITTOIA 2005 (income tax)”.

244Omit section 583 (Inter-American Development Bank).

245(1)Section 584 (relief for unremittable overseas income) is amended as follows.

(2)In subsection (1)—

(a)for “a person is chargeable to tax” substitute “a company is chargeable to corporation tax”,

(b)for “for the purposes of tax” substitute “for the purposes of corporation tax”, and

(c)for “he”, in each place where it occurs, substitute “the company”.

(3)In subsection (2)—

(a)for “a person” substitute “a company”,

(b)for “his” substitute “its”, and

(c)for the words from “and tax” to “assessable,” substitute “and corporation tax shall be assessable”.

(4)In subsection (4) for “a person becomes chargeable to income tax or” substitute “a company becomes chargeable to”.

(5)Omit subsections (6)(a) and (7).

246Omit section 585 (relief from tax on delayed remittances).

247In section 586(1) (disallowance of deductions for war risk premiums) for “tax purpose” substitute “corporation tax purpose”.

248(1)Amend section 587 (disallowance of certain payments in respect of war injuries to employees) as follows.

(2)In subsection (1) omit “, or total income,” and for “tax purpose” substitute “corporation tax purpose”.

(3)In subsection (2)(b) for “section 121” substitute “section 121(3).”

249In section 587B(2) (gifts of shares, securities and real property to charities etc.)—

(a)in paragraph (b) after “section 83A” insert “of this Act, section 108 of ITTOIA 2005”, and

(b)for “section 550(2)(a) or (b)” substitute “sections 535 to 537 of ITTOIA 2005”.

250(1)Amend section 588 (training courses for employees) as follows.

(2)In subsection (1) for “person” substitute “company”.

(3)In subsection (3) for “trade, profession or vocation” substitute “trade or profession”.

(4)In subsection (5)—

(a)for “tax” substitute “corporation tax”,

(b)for “year” substitute “accounting period”,

(c)for “he” substitute “it”,

(d)omit “section 29(1) of the Management Act, or”, and

(e)for “chargeable period” substitute “accounting period”.

(5)In subsection (7) for “he” substitute “it”.

251(1)Amend section 589A (counselling services for employees) as follows.

(2)In subsection (7)—

(a)for “(8) to (10)” substitute “(8) and (9)”, and

(b)for “person under whom” substitute “company under which”.

(3)In subsection (8) for “trade, profession or vocation” substitute “trade or profession”.

252(1)Amend section 591C (cessation of approval: tax on certain schemes) as follows.

(2)In subsection (1) for “tax shall be charged” substitute “income tax shall be charged under and”.

(3)In subsection (2) omit “under Case VI of Schedule D”.

(4)In subsection (6A)(c)(iii) for “Schedule D” substitute “Part 2 of ITTOIA 2005”.

253(1)Amend section 592 (exempt approved schemes) as follows.

(2)In subsection (3)—

(a)after “the schemes” insert “, are not relevant foreign income”, and

(b)for “Case VI of Schedule D” substitute “Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged)”.

(3)In subsection (4)(a) after “for the purposes of” insert “Part 2 of ITTOIA 2005 or”.

254(1)Amend section 598 (charge to tax: repayment of employee’s contributions) as follows.

(2)In subsection (1) after “this section,” insert “income”.

(3)In subsection (2) for the words from the beginning to “Schedule D” substitute “The person liable for any tax chargeable under this section shall be the administrator of the scheme”.

255(1)Amend section 599 (charge to tax: commutation of entire pension in special circumstances) as follows.

(2)In subsection (1) after “whether wholly or not, under the rule,” insert “income”.

(3)In subsection (1B) before “tax” insert “income”.

(4)In subsection (3) for the words from the beginning to “Schedule D on that amount,” substitute “The person liable for any tax chargeable under this section shall be the administrator of the scheme”.

256In section 599A (charge to tax: payments out of surplus funds) for subsection (2) substitute—

“(2)On the making of a payment to which subsection (1) above applies—

(a)income tax is charged at the relevant rate on such amount as, after deduction of tax at that rate, would equal the amount of the payment, and

(b)the person liable for the tax so charged is the administrator of the scheme.”

257In section 601(5)(b) (charge to tax: payments to employers) for “to tax on the amount of the payment under Case VI of Schedule D” substitute “—

(i)to income tax on the full amount of the payment arising in the year of assessment; or

(ii)to corporation tax on the amount of the payment under Case VI of Schedule D”.

258In section 602(1)(a) (regulations relating to pension fund surpluses) omit “under Case VI of Schedule D”.

259(1)Amend section 607 (pilots' benefit fund) as follows.

(2)In subsection (2)(c) for “the provisions of Case II of Schedule D” substitute “such of the provisions of Part 2 of ITTOIA 2005 as apply in calculating the profits of a profession”.

(3)In subsection (3)(a) for “in assessing tax under Schedule D” substitute “in calculating the profits of the profession”.

260In section 608(2) (superannuation funds approved before 6th April 1980)—

(a)in paragraph (b)—

(i)after “commissions” insert “which are not relevant foreign income and”, and

(ii)for “Case VI of Schedule D” substitute “Chapter 8 of Part 5 of ITTOIA 2005”, and

(b)in paragraph (c) for the words from “under” onwards substitute “under Chapter 11 of Part 4 of ITTOIA 2005 (transactions in deposits) by virtue of a disposal of deposit rights falling within section 552(1)(a) or (b) of that Act”.

261In section 614(2A) (exemptions and reliefs in respect of income from investments etc. of certain pension schemes) for the words from “paragraph 1” to “(relevant” substitute “Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply”.

262(1)Amend section 617 (social security benefits and contributions) as follows.

(2)In subsection (3)—

(a)for “subsection (4) below” substitute “subsections (4) and (5) below”, and

(b)after “allowed” insert “for corporation tax purposes”.

(3)In subsection (4)—

(a)at the end of paragraph (b) insert “or”, and

(b)omit paragraphs (d) and (e).

(4)After subsection (4) insert—

“(5)Subsection (3) above shall not apply for the purposes of deductions under Chapter 2 of Part 5 of ITEPA 2003 (in relation to which section 360A of that Act applies).”

263(1)Amend section 623 (relevant earnings) as follows.

(2)In subsection (2)—

(a)in paragraph (c) for “Schedule D” substitute “Part 2 of ITTOIA 2005”, and

(b)for paragraph (d) substitute—

“(d)income to which section 833(5B) (patent income) applies;”.

(3)In subsection (6)—

(a)in paragraph (a) for “section 74(m), (p) or (q)” substitute “section 51 of ITTOIA 2005”, and

(b)after the “or” at the end of that paragraph insert—

“(aa)deductions in respect of any annuity or other annual payment (other than interest) payable out of his profits; or”.

264In section 644(2) (meaning of “relevant earnings”)—

(a)in paragraph (c) for “Schedule D” substitute “Part 2 of ITTOIA 2005”, and

(b)for paragraph (d) substitute—

“(d)income to which section 833(5B) (patent income) applies.”

265In section 646(2) (meaning of “relevant net earnings”)—

(a)in paragraph (a) for “section 74(m), (p) or (q)” substitute “section 51 of ITTOIA 2005”,

(b)after that paragraph insert—

“(aa)deductions in respect of any annuity or other annual payment (other than interest) payable out of his profits;”, and

(c)in paragraph (bb) for “section 332(3) of this Act” substitute “section 159 of ITTOIA 2005”.

266(1)Amend section 648B (return of contributions after pension date) as follows.

(2)In subsection (1) for “Tax” substitute “Income tax”.

(3)In subsection (2) for the words from the beginning to “Schedule D” substitute “The person liable for any tax chargeable under this section shall be the administrator of the scheme”.

267(1)Amend section 650A (charge on withdrawal of approval from arrangements) as follows.

(2)In subsection (1) for “tax shall be charged” substitute “income tax shall be charged under and”.

(3)In subsection (2) omit “under Case VI of Schedule D”.

268(1)Amend section 656 (purchased life annuities other than retirement annuities) as follows.

(2)In subsection (1)—

(a)for “Tax Acts”, in the first place where it occurs, substitute “Corporation Tax Acts”, and

(b)for “other purposes of the Tax Acts” substitute “other corporation tax purposes”.

(3)In subsections (5) and (6) for “he”, in each place it occurs, substitute “the person”.

269In section 657(2)(a) (purchased life annuities to which section 656 does not apply) for “Tax Acts” substitute “Corporation Tax Acts”.

270(1)Amend section 658 (supplementary provisions about purchased life annuities) as follows.

(2)In subsection (5)—

(a)for “If any person” substitute “Any person who”, and

(b)omit “for himself or for any other person” and “, he”.

(3)After subsection (5) insert—

“(6)It does not matter for whom that relief or repayment is to be obtained.”

271Omit sections 660A and 660B (income arising under settlement where settlor retains an interest and payments to unmarried minor children of settlor).

272(1)Amend section 660C (nature of charge on settlor) as follows.

(2)Omit subsections (1) to (2).

(3)In subsection (3)—

(a)for “this Chapter” substitute “section 624 or 629 of ITTOIA 2005 (income where settlor retains an interest or income paid to unmarried minor children of settlor)”, and

(b)for “this section” substitute “section 619 of that Act (charge to tax under Chapter 5 of Part 5 of that Act) so far as relating to income so treated”.

(4)After subsection (3) insert—

“(4)Income which is treated for income tax purposes as the income of the settlor alone by virtue of section 624 or 629 of ITTOIA 2005 is accordingly not the income of any company for corporation tax purposes.”

273Omit sections 660D to 660G (settlements: supplementary provisions etc.).

274Omit section 677 (sums paid to settlor otherwise than as income).

275Omit section 678 (capital sums paid by body connected with settlement).

276Omit sections 682 and 682A (ascertainment of undistributed income and supplementary provisions for Chapter 1B).

277(1)Amend section 686 (accumulation and discretionary trusts: special rates of tax) as follows.

(2)In subsection (1) for “Schedule F” substitute “dividend”.

(3)In subsection (1AA)(a)—

(a)for “Schedule F”, in the first place where it occurs, substitute “distribution”, and

(b)for “Schedule F”, in the second place where it occurs, substitute “dividend”.

(4)In subsection (1A) for “Schedule F” substitute “dividend”.

(5)In subsection (2AA) for “Schedule F” substitute “dividend”.

(6)In subsection (5A) for ““Schedule F type” substitute ““distribution type” and for paragraphs (a) to (g) substitute—

“(a)income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.);

(b)income chargeable under Chapter 4 of that Part (dividends from non-UK resident companies);

(c)income treated as arising to the trustees under Chapter 5 of that Part (stock dividends from UK resident companies);

(d)income chargeable under Chapter 6 of that Part (release of loan to participator in close company);

(e)a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged); or

(f)any amount which, by virtue of section 686A of this Act, is treated for the purposes of the Tax Acts as if it were income to which this section applies.”

(7)After that subsection insert—

“(5B)In subsection (5A) “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a)is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b)would be chargeable under Chapter 3 of that Part if the company were resident in the United Kingdom.”

(8)In subsection (6) for “Part XVI” substitute “Chapter 6 of Part 5 of ITTOIA 2005”.

278(1)Amend section 687 (payments under discretionary trusts) as follows.

(2)In subsection (1)(b) for “section 660B” substitute “section 629 of ITTOIA 2005 (income paid to unmarried minor children of settlor)”.

(3)In subsection (3)(a) for “Schedule F” substitute “dividend”.

(4)In subsection (3)(a1)—

(a)for “Schedule F”, in the first two places where it occurs, substitute “dividend”, and

(b)for “Schedule F”, in the third place where it occurs, substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”.

(5)In subsection (3)(a2)—

(a)for “233(1A)” substitute “399 of ITTOIA 2005 (non-UK residents other than eligible non-UK residents receiving qualifying distributions)”, and

(b)for “Schedule F”, in both places where it occurs, substitute “dividend”.

(6)In subsection (3)(aa)—

(a)for “233(1B)” substitute “400 of that Act (non-qualifying distributions)”, and

(b)for “Schedule F”, in both places where it occurs, substitute “dividend”.

(7)In paragraphs (b), (bb) and (bc) of subsection (3) for “Schedule F”, in each place where it occurs, substitute “dividend”.

(8)In subsection (3)(b) for “section 249(6)” substitute “section 410(3) of ITTOIA 2005 (when stock dividend income arises)”.

(9)In subsection (3)(bb) for “section 421(1)(a)” substitute “416(3) of ITTOIA 2005 (income charged on release of loan to participator in close company)”.

(10)In subsection (3) after paragraph (k) insert—

“(l)the amount of any tax on an amount which is treated as income of the trustees by virtue of Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) and is charged to tax at the rate applicable to trusts by virtue of section 457of that Act.”

279Omit section 688 (schemes for employees and directors to acquire shares).

280(1)Amend section 689B (order in which expenses to be set against income: trust management expenses) as follows.

(2)In subsection (2) for paragraphs (za) to (c) substitute—

“(a)so much of the income of the trustees as is income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.);

(b)income treated as arising to the trustees under Chapter 5 of that Part (stock dividends from UK resident companies); or

(c)income chargeable under Chapter 6 of that Part (release of loan to participator in close company).”

(3)In subsection (2A) for “income to which section 1A applies” to the end substitute “—

(a)income chargeable under Chapter 4 of Part 4 of ITTOIA 2005 (dividends from non-UK resident companies); or

(b)a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).”

(4)After that subsection insert—

“(2B)In subsection (2A) “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a)is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b)would be chargeable under Chapter 3 of that Part if the company were resident in the United Kingdom.”

281In section 691(2)(b)(ii) (certain income not to be income of settlor etc.) for “section 677” substitute “section 633 of ITTOIA 2005 (capital sums paid to settlor by trustees of settlement)”.

282In section 692(1) (reimbursement of settlor) for “Schedule A business” substitute “UK property business”.

283In section 694(3) (trustees chargeable to income tax in certain cases at higher rate reduced by rate applicable to trusts) for “Chapter IA of this Part” substitute “section 624 or 629 of ITTOIA 2005 (income where settlor retains an interest in settlement or income paid to unmarried minor children of settlor)”.

284(1)Amend section 695 (estates of deceased persons in course of administration: limited interests in residue) as follows.

(2)In subsection (1) for “person who” substitute “company which”.

(3)In subsection (2)—

(a)for “all tax” substitute “corporation tax”,

(b)for “person” substitute “company”, and

(c)for “year of assessment”, in both places where it occurs, substitute “accounting period”.

(4)In subsection (3)—

(a)for “all tax” substitute “corporation tax”,

(b)for “person” substitute “company”,

(c)for “year of assessment”, in both places where it occurs, substitute “accounting period”, and

(d)for “that period” substitute “the administration period”.

(5)In subsection (4)—

(a)for “person” substitute “company”,

(b)for “for any year” substitute “for any accounting period”,

(c)in paragraph (a) for “that year” substitute “the relevant year of assessment”, and

(d)in paragraph (b), omit the words from “and shall” to the end of the paragraph.

(6)In subsection (5)—

(a)for “person” substitute “company”,

(b)for “income tax for any year” substitute “corporation tax for any accounting period”,

(c)for “him”, in both places where it occurs, substitute “it”, and

(d)for “that year” substitute “the relevant year of assessment”.

(7)In subsection (6)—

(a)for “he” substitute “the company”,

(b)for “to income tax” substitute “to corporation tax”, and

(c)omit “, for the purpose of computing his total income,”.

(8)After subsection (6) insert—

“(7)In this section “the relevant year of assessment”, in relation to an amount deemed to have been paid to a company as income for an accounting period by virtue of this section, means the year of assessment for which the amount would have been deemed to have been paid as income if references to accounting periods in subsections (2) and (3) were references to years of assessment.”

285(1)Amend section 696 (absolute interests in residue) as follows.

(2)In subsection (1) for “person who” substitute “company which”.

(3)In subsection (2)—

(a)for “person”, wherever it occurs, substitute “company”, and

(b)at the end add “; and references to the residuary income of a company for an accounting period are to be construed in accordance with subsection (8)”.

(4)In subsection (3)—

(a)for “all tax” substitute “corporation tax”,

(b)for “person” substitute “company”, and

(c)for “year of assessment” substitute “accounting period”.

(5)In subsection (3A)—

(a)for “person”, in both places where it occurs, substitute “company”,

(b)at the end of paragraph (b) insert “(whether or not the company was a company liable to corporation tax at the time of payment)”, and

(c)for “year of assessment” substitute “accounting period”.

(6)In subsection (3B) for—

(a)“person”, in both places where it occurs,

(b)“year of assessment”, in both places where it occurs,

(c)“years of assessment”,

(d)“each year”,

(e)“his”, in both places where it occurs, and

(f)“that year”, wherever it occurs in paragraph (a) and (b),

substitute “company”, “accounting period”, “accounting periods”, “each accounting period”, “its” and “that accounting period” respectively.

(7)In subsection (4) for “person”, “any year” and “that year” substitute “company”, “any accounting period” and “that accounting period” respectively.

(8)In subsection (5) for—

(a)“person”, in both places where it occurs, and

(b)“year of assessment”,

substitute “company” and “accounting period” respectively.

(9)In subsection (6)—

(a)for “person” substitute “company”,

(b)for “year” substitute “accounting period”, and

(c)omit the words from “and shall” to the end of the subsection.

(10)In subsection (7) for—

(a)“person”,

(b)“income tax for any year”,

(c)“that year”, and

(d)“him”, in both places where it occurs,

substitute “company”, “corporation tax for any accounting period”, “the relevant year of assessment” and “it” respectively.

(11)In subsection (8) omit the words from the beginning to “this section”.

(12)After subsection (8) insert—

“(9)In subsection (7) “the relevant year of assessment”, in relation to an amount deemed to have been paid to a company as income for an accounting period by virtue of this section, means the year of assessment for which the amount would have been deemed to have been paid as income if references in subsections (3) to (6) to accounting periods were references to years of assessment.”

286(1)Amend section 697 (supplementary provisions as to absolute interests in residue) as follows.

(2)In subsection (2)—

(a)for “person”, in both places, substitute “company”, and

(b)for “his”, in both places where it occurs, substitute “its”.

(3)In subsection (4), omit the words from “, and the residuary income” to the end of the subsection.

(4)After that subsection insert—

“(5)If the amount resulting from the computation mentioned in subsection (4) is greater than the total amount of the reduction which can be made under subsection (2), the share of the residuary income of the estate of the last previous holder of the interest for the last year in which that person had that interest is to be reduced, and so on.”

287(1)Amend section 698 (special provisions as to certain interests in residue) as follows.

(2)In subsection (1B)(c)(ii) for “year of assessment” substitute “accounting period”.

(3)In subsection (2)(b) for “year” substitute “accounting period”.

(4)In subsection (3)—

(a)for “all tax” substitute “corporation tax”, and

(b)for “year of assessment” substitute “accounting period”.

(5)After subsection (3) insert—

“(4)Subsection (5) applies in any case where—

(a)successively during the administration period there are different persons with absolute interests in the residue of the estate of a deceased person, or in parts of such a residue, and

(b)some, but not all are companies liable to corporation tax in respect of income within this Part.

(5)References in this section—

(a)to sums deemed to be paid as income for an accounting period to a person who is not such a company,

(b)to the residuary income for any accounting period of such a person, or

(c)to amounts deemed to be paid to such a person as income,

are references to sums that would be so deemed, to the income that would be such residuary income or, as the case may be, to the amounts that would be so deemed if the assumptions in subsection (6) were made.

(6)The assumptions are—

(a)that each of the persons who is not a company liable to corporation tax in respect of income within this Part is such a company, and

(b)that in the case of each person who is not a company, the person’s accounting periods correspond with years of assessment.”

288(1)Amend section 698A (taxation of income of beneficiaries at lower rate or at rates applicable to Schedule F income) as follows.

(2)In subsection (1) for “Schedule F” substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”.

(3)In subsection (2)—

(a)for “Schedule F”, in the first place where it occurs, substitute “dividend”, and

(b)for “Schedule F”, in the second place where it occurs, substitute “Chapter 3 of Part 4 of ITTOIA 2005”.

(4)In subsection (3)—

(a)after “section 698(3)” insert “above or of section 662 of ITTOIA 2005 read with section 656(3) or 657(4) of that Act”,

(b)for “Schedule F”, in the first place where it occurs, substitute “dividend”,

(c)for “Schedule F”, in the second place where it occurs, substitute “Chapter 3 of Part 4 of ITTOIA 2005”,

(d)for “Schedule F”, in the third place where it occurs, substitute “dividend”, and

(e)for “Schedule F”, in the fourth place where it occurs, substitute “Chapter 3 of Part 4 of ITTOIA 2005”.

(5)In the side-note for “Schedule F” substitute “distribution”.

289Omit section 699 (relief from higher rate tax for inheritance tax on accrued income).

290(1)Amend section 699A (untaxed sums comprised in the income of the estate) as follows.

(2)In subsection (1)(a) for “sections 249(5), 421(2) and 547(1)(c)” substitute “paragraphs (c) to (e) of section 701(8) below”.

(3)In subsection (1A)—

(a)in paragraph (a) for “Schedule F” substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”, and

(b)omit paragraph (b) and the word “or” immediately preceding it.

(4)In subsection (4)—

(a)in paragraph (a) for “section 249(5) or 421(2), at the Schedule F” substitute “section 701(8)(c) or (d), at the dividend”,

(b)in paragraph (b) for “section 547(1)(c)” substitute “section 701(8)(e)”, and

(c)in paragraph (c) for “Schedule F” substitute “dividend”.

(5)Omit subsection (6).

291(1)Amend section 700 (adjustments and information) as follows.

(2)In subsection (1)—

(a)for “person” substitute “company”,

(b)for “year of assessment” substitute “accounting period”,

(c)for “him”, wherever it occurs, substitute “it”,

(d)for “that year”, wherever it occurs, substitute “that accounting period”,

(e)for “tax” substitute “corporation tax”, and

(f)for “he” substitute “it”.

(3)In subsection (2)—

(a)for “person”, in both places where it occurs, substitute “company”,

(b)for “year of assessment” substitute “accounting period”,

(c)for “him”, wherever it occurs, substitute “it”,

(d)for “that year”, wherever it occurs, substitute “that accounting period”, and

(e)for “tax” substitute “corporation tax”.

(4)In subsection (3) for “year of assessment” substitute “accounting period”.

(5)In subsection (4) after “this Part” insert “or Chapter 6 of Part 5 of ITTOIA 2005”.

(6)In subsection (5)—

(a)in paragraph (a) for “a year of assessment” substitute “an accounting period”,

(b)omit “and” at the end of paragraph (a),

(c)after paragraph (a) insert—

“(aa)the amount treated as estate income under Chapter 6 of Part 5 of ITTOIA 2005 in respect of that interest or the exercise of that discretion for which he is liable to income tax for a year of assessment, and”,

(d)in paragraph (b) after “paragraph (a)” insert “or (aa)”,

(e)for “any year of assessment” substitute “any accounting period under this Part or treated as estate income under that Chapter”,

(f)after “the purposes of this Part” insert “or that Chapter”, and

(g)for “paragraphs (a) and (b)” substitute “paragraphs (a) to (b)”.

292(1)Amend section 701 (interpretation) as follows.

(2)In subsection (3A) for “Schedule F”, wherever it occurs, substitute “dividend”.

(3)In subsection (8)—

(a)omit “and” at the end of paragraph (a),

(b)after paragraph (b) insert—

“(c)any amount of income treated as arising to the personal representatives under section 410(4) of ITTOIA 2005 (stock dividends) that would be charged to income tax under Chapter 5 of Part 4 of that Act if income arising to personal representatives were so charged (see section 413 of that Act);

(d)in a case where section 419(2) of that Act applies (release of loans to participator in close company: debts due from personal representatives), the amount that would be charged to income tax under Chapter 6 of Part 4 apart from that section; and

(e)any amount that would have been treated as income of the personal representatives as such under section 466 of that Act if the condition in section 466(2) had been met (gains from contracts for life insurance);”, and

(c)omit the second sentence.

(4)In subsection (9) after “year of assessment” insert “or accounting period”.

(5)In subsection (10) after “year of assessment” insert “or accounting period”.

293In section 703(3) (cancellation of tax advantage) after “being chargeable” insert “in the case of corporation tax”.

294(1)Amend section 710 (meaning of “securities”, transfer etc. for purposes of sections 711 to 728) as follows.

(2)In subsection (3)—

(a)after “Ulster Savings Certificates” insert “, as defined in section 693(7) of ITTOIA 2005”,

(b)after paragraph (c) insert—

“(ca)uncertificated eligible debt security units within the meaning of section 552(2) of that Act;”,

(c)in paragraph (d) for “section 56(5)” substitute “section 552(2) of that Act”,

(d)in paragraph (da) for the words from “fulfils” to “of it” substitute “is a right falling within section 552(1)(c) of that Act”, and

(e)for paragraph (f) substitute—

“(f)any security that is a deeply discounted security for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 (see section 430 of that Act).”

(3)After subsection (3) insert—

“(3A)Paragraph (f) of subsection (3) does not apply to a security on the transfer of which Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) would apply subject to the rules in sections 454 to 456 of that Act (see section 453(2) and (3) of that Act).”

(4)In subsection (5)—

(a)omit “and” at the end of paragraph (a), and

(b)at the end of paragraph (b) insert “and

(c)does not include any transfer of a security to which Chapter 8 of Part 4 of ITTOIA 2005 applies subject to the rules in sections 454 to 456 of that Act.”

295(1)Amend section 714 (treatment of deemed sums and reliefs) as follows.

(2)In subsection (2)—

(a)for “annual profits or gains whose amount” substitute “income of an amount which”,

(b)for “the profits or gains” substitute “the income”,

(c)omit “under Case VI of Schedule D”, and

(d)for “they are” substitute “it is”.

(3)After subsection (2) insert—

“(2A)Income tax chargeable by virtue of subsection (2) shall be charged on the full amount of the income treated as received.

(2B)The person liable for any tax so charged shall be the person treated as receiving the income.”

296In section 715(1)(j) (exceptions from sections 713 and 714) for the words from “chargeable” to “United Kingdom” substitute “charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis)”.

297(1)Amend section 716 (transfer of unrealised interest) as follows.

(2)In subsection (3)—

(a)for “annual profits or gains” substitute “income”,

(b)for “the profits or gains” substitute “the income”,

(c)omit “under Case VI of Schedule D”, and

(d)for “they are” substitute “it is”.

(3)After subsection (3) insert—

“(3A)Income tax chargeable by virtue of subsection (3) shall be charged on the full amount of the income treated as received.

(3B)The person liable for any tax so charged shall be the person treated as receiving the income.”

298(1)Amend section 720 (transfers of securities: nominees, trustees etc.) as follows.

(2)In subsection (5)—

(a)for “Annual profits or gains” substitute “Income”, and

(b)for “are treated” substitute “is treated”.

(3)In subsection (6)—

(a)in paragraph (a) for “annual profits or gains” substitute “income”,

(b)in paragraph (b) for “annual profits or gains or annual profits or gains” substitute “income or income”, and

(c)for “Chapters 1A, 1B and 1C of Part XV” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor) and Chapter 1C of Part 15 of this Act (liability of trustees)”.

(4)In subsection (7) for “Chapters 1A, 1B and 1C of Part XV” substitute “Chapter 5 of Part 5 of ITTOIA 2005 and Chapter 1C of Part 15 of this Act”.

(5)In subsection (8)(a) for “Chapter 1A of Part XV (see section 660G(1) and (2))” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)”.

299(1)Amend section 723 (foreign securities: delayed remittances) as follows.

(2)In subsection (2)—

(a)for “any annual profits or gains” substitute “any income”, and

(b)for “the profits or gains” substitute “that income”.

(3)In subsection (4) for “under Case VI of Schedule D on the amount” substitute “on the full amount”.

300(1)Amend section 730 (transfers of income arising from securities) as follows.

(2)In subsection (2)—

(a)after “chargeable to” insert “income tax under Chapter 13 of Part 4 of ITTOIA 2005 or to corporation”, and

(b)after “section 18(3B)” insert “of this Act”.

(3)In subsection (4)—

(a)for “tax by virtue of section 18(3B)” substitute “income tax under Chapter 13 of Part 4 of ITTOIA 2005 (sales of foreign dividend coupons)”, and

(b)for “then the owner or beneficiary” to the end substitute “then that interest shall be charged to income tax.

(4A)The income tax chargeable by virtue of subsection (4) above shall, subject to subsection (5) below, be charged on the full amount of the interest arising in the year of assessment.

(4B)The person liable for any tax chargeable by virtue of subsection (4) above is the owner or beneficiary, but he shall be entitled to credit for any tax which the interest is shown to have borne.”

(4)In subsection (5)—

(a)for “For the purposes of subsection (4) above” substitute “But”,

(b)for “chargeable under Case IV or V of Schedule D” substitute “relevant foreign income”, and

(c)for “the tax under Case VI” substitute “the income tax chargeable by virtue of subsection (4) above”.

(5)In subsection (8)—

(a)after “charged to” insert “income tax under Chapter 13 of Part 4 of ITTOIA 2005 or to corporation”, and

(b)after “section 18(3B)” insert “of this Act”.

301Omit section 730C (exchanges of gilts: traders etc.).

302In section 731 (application and interpretation of sections 732 to 734: purchase and sale of securities)—

(a)in subsection (7) after “set up and commenced” insert “, or when a trade is subject to a relevant change,”, and

(b)after that subsection insert—

“(7A)For the purposes of subsection (7) above a trade is subject to a relevant change—

(a)when there is a change in the persons carrying on the trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on, or

(b)when a company starts to be within the charge to income tax under Chapter 2 of Part 2 of ITTOIA 2005 in respect of the trade.”

303In section 732(1A) (dealers in securities) for the words from “by virtue of” to the end substitute “either—

(a)by virtue of section 366(1) of ITTOIA 2005 in computing profits chargeable to income tax under Chapter 2 of Part 2 of that Act, or

(b)by virtue of section 95(1) of this Act in computing profits chargeable to corporation tax in accordance with the provisions of this Act applicable to Case I or II of Schedule D.”

304(1)Amend section 740 (liability of non-transferors) as follows.

(2)In subsection (2)—

(a)in paragraph (a) after “for that year” insert “and be charged to income tax on that individual for that year”, and

(b)in paragraph (b) after “his income for the next following year” insert “and be charged to income tax on him for that year”.

(3)Omit subsection (4).

(4)In subsection (5) for the words from “; and subsections (6) to (9)” to the end substitute “; and sections 833 and 834 of ITTOIA 2005 shall apply for the purposes of this subsection as they would apply for the purposes of section 832 (remittance basis) of that Act if the benefit were relevant foreign income.”

305(1)Amend section 743 (transfer of assets abroad: supplemental provision) as follows.

(2)In subsection (1) for “Schedule F” substitute “dividend” and for “income tax so chargeable shall be charged” to the end substitute “income to which section 739 applies shall be charged to income tax.”

(3)After subsection (1) insert—

“(1ZA)The charge to income tax under subsection (1) above operates on income falling within subsection (1A) below by treating the income as if it were income to which section 1A applies by virtue of subsection (2)(b) of that section.”

(4)In subsection (1A) for paragraphs (a) to (g) substitute—

“(a)income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.);

(b)income chargeable under Chapter 4 of that Part (dividends from non-UK resident companies);

(c)income chargeable under Chapter 5 of that Part (stock dividends from UK resident companies);

(d)income chargeable under Chapter 6 of that Part (release of loan to participator in close company); or

(e)a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).”

(5)After that subsection insert—

“(1B)In subsection (1A) “relevant foreign distribution” means any distribution of a company not resident in the United Kingdom which—

(a)is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b)would be chargeable under Chapter 3 of that Part if the company were resident in the United Kingdom.”

306In section 745(6) (transfer of assets abroad: information powers) for “section 660G(1) and (2)” substitute “section 620 of ITTOIA 2005”.

307(1)Amend section 746 (persons resident in the Republic of Ireland) as follows.

(2)Renumber the existing text as subsection (1).

(3)In that subsection for “any provision of section 34, 35 or 36” substitute “the lease premium rules”.

(4)After that subsection insert—

“(2)Corporation tax chargeable by virtue of subsection (1)(b) above shall be charged under Case VI of Schedule D.

(3)In this section “the lease premium rules” means any provision of sections 277 to 285 of ITTOIA 2005 or sections 34 to 36 of this Act.”

308(1)Amend section 761 (charge to income tax or corporation tax of offshore income gain) as follows.

(2)In subsection (1) for the words from “of that gain shall be treated for all” to the end substitute “of that gain—

(a)shall be treated for all the purposes of the Tax Acts as income arising at the time of the disposal to the person making the disposal, and

(b)shall be charged—

(i)to income tax for the year of assessment in which the disposal is made, or

(ii)to corporation tax as a profit or gain under Case VI of Schedule D for the accounting period in which the disposal is made.”

(3)After that subsection insert—

“(1A)The income tax charged by virtue of subsection (1)(b)(i) above shall be charged on the full amount of the income treated as arising in the year of assessment.”

309In section 762(6) (offshore income gains accruing to persons resident or domiciled abroad)—

(a)after “740” insert “above”, and

(b)for “Part XV” substitute “Chapter 5 of Part 5 of ITTOIA 2005”.

310In section 774(1) (transactions between dealing company and associated company)—

(a)after “shall be chargeable” insert “to tax”, and

(b)for “under Case VI of Schedule D” substitute “(in the case of corporation tax, under Case VI of Schedule D)”.

311(1)Amend section 775 (sale by individual of income derived from his personal activities) as follows.

(2)In subsection (2) omit the words from “, and which is” to the end.

(3)After subsection (2) insert—

“(2A)Any such earned income shall be charged to income tax on the individual and the tax so charged shall be charged on the full amount of the earned income treated as arising in the year of assessment.”

312(1)Amend section 776 (transactions in land: taxation of capital gains) as follows.

(2)In subsection (3)(a) omit the words from “, and which constitutes” to “period in which the gain is realised”.

(3)After subsection (3) insert—

“(3A)The gain treated as income shall be charged—

(a)to income tax for the year of assessment in which the gain is realised, or

(b)to corporation tax as profits or gains under Case VI of Schedule D for the accounting period in which the gain is realised.

(3B)The income tax charged by virtue of subsection (3A)(a) shall be charged on the full amount of the income treated as arising in the year of assessment; and the person liable for any tax so charged is the person whose income it is.”

(4)In subsection (6)—

(a)in paragraph (a) after “the profits under” insert “Part 2 of ITTOIA 2005 or”, and

(b)in paragraph (b) for “subsections (2) and (3) of section 99” substitute “section 158 of ITTOIA 2005 or (as the case may be) subsections (2) and (3) of section 99 above”.

(5)In subsection (7) after “the treatment under” insert “Part 2 of ITTOIA 2005 or”.

313(1)Amend section 777 (tax avoidance: provisions supplementary to sections 775 and 776) as follows.

(2)In subsection (9) after “tax under” insert “Chapter 7 of Part 5 of ITTOIA 2005 (annual payments not otherwise charged) or”.

(3)In subsection (10) for “Part XV” substitute “Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor)”.

314(1)Amend section 779 (sale and lease-back: limitation on tax reliefs) as follows.

(2)In subsection (10)—

(a)after “include references to” insert “—

(a)”,

(b)after “section 37” insert “or under section 37A”,

(c)after “87” insert “or 87A”,

(d)after “comprised in the lease,” insert “and

(b)expenses which the tenant under the lease is treated as incurring in respect of the land subject to the lease under sections 61 to 67 or 292 to 297 of ITTOIA 2005,”, and

(e)at end insert “and such expenses shall be treated for those purposes as having been paid as soon as they have been incurred.”

(3)In subsection (13)—

(a)after paragraph (a) insert—

“(aa)a deduction in calculating the profits of a UK property business;”,

(b)in paragraph (c) omit “392 or”, and

(c)after that paragraph insert—

“(ca)a deduction in computing profits or other income or gains chargeable to income tax under or by virtue of any provision to which section 836B applies, or in computing any loss for which relief is allowable under section 392;”.

315(1)Amend section 780 (sale and lease-back: taxation of consideration received) as follows.

(2)In subsection (3)(b) for “a profit or gain chargeable under Case VI of Schedule D” substitute “an amount chargeable to tax in accordance with subsection (3A)”.

(3)After subsection (3) insert—

“(3A)The amount shall be charged—

(a)to income tax, or

(b)to corporation tax as a profit or gain under Case VI of Schedule D.

(3B)The income tax charged by virtue of subsection (3A)(a) above shall be charged on the full amount of the proportion of the consideration concerned arising in the year of assessment; and the person liable for any tax so charged is the lessee.”

316(1)Amend section 781 (assets leased to traders and others) as follows.

(2)In subsection (1) for “under Case VI of Schedule D for the chargeable period in which the sum is obtained with tax” substitute “to tax (in the case of corporation tax, under Case VI of Schedule D) for the chargeable period in which the sum is obtained”.

(3)In subsection (4) after paragraph (a) insert—

“(ab)a deduction in computing profits or other income or gains chargeable to income tax under or by virtue of any provision to which section 836B applies, or in computing any loss for which relief is allowable under section 392;”.

(4)In subsection (4)(b) omit “392 or”.

317In section 782(9) (leased assets: special cases) for “section 113 or 337(1)” substitute “section 18 of ITTOIA 2005 or section 337(1) above (companies beginning or ceasing to carry on trade)”.

318In section 783(10)(b) (leased assets: supplemental) for “section 660G(1) and (2)” substitute “section 620 of ITTOIA 2005”.

319In section 785 (meaning of “asset”, “capital sum” and “lease” for purposes of sections 781 to 784), in the definition of “capital sum”, after “chargeable” insert “to income tax under or by virtue of any provision to which section 836B applies or to corporation tax”.

320(1)Amend section 786 (transactions associated with loans or credit) as follows.

(2)In subsection (3) for the words from “annuity” to “Schedule D” substitute “relevant annual payment”.

(3)After that subsection insert—

“(3A)In subsection (3) “relevant annual payment” means 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 chargeable to corporation tax under Case III of Schedule D.”

(4)In subsection (5) for “he shall be chargeable to tax under Case VI of Schedule D on a sum” substitute “he shall be chargeable—

(a)to income tax, or

(b)to corporation tax under Case VI of Schedule D,

on a sum”.

(5)After that subsection insert—

“(5A)Income tax charged by virtue of subsection (5)(a) above shall be charged on the full amount of the income assigned, surrendered, waived or forgone in the year of assessment.”

321(1)Amend section 788 (relief by agreement with other territories) as follows.

(2)In subsection (3)(d) for “section 231” substitute “section 397(1) of ITTOIA 2005”.

(3)In subsection (7) after “and, in the case of an assessment” insert “to corporation tax”.

322In section 790(11) (unilateral relief) after “and, in the case of an assessment” insert “to corporation tax”.

323(1)Amend section 804 (relief against income tax in respect of earlier years of commencement) as follows.

(2)In subsections (5)(b) and (5A)(b) for “section 63A(1) or (3)” substitute “section 205 or 220 of ITTOIA 2005”.

(3)In subsection (5B)(a)—

(a)for “under Case VI of Schedule D” substitute “to income tax”, and

(b)after “equal to the excess” insert “and be liable for any tax so chargeable”.

(4)In subsection (5C) for “section 63A(1)” substitute “section 220 of ITTOIA 2005”.

(5)In subsection (8), in the definition of “overlap profit” for “sections 60 to 62” substitute “Chapter 15 of Part 2 of ITTOIA 2005”.

324In section 806K(2) (application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere) after paragraph (b) insert—

“(bb)in relation to income tax, take any reference to a dividend chargeable under Case V of Schedule D as a reference to a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005;”.

325In section 807(1)(b) (sale of securities with or without accrued interest) for “Case IV or V of Schedule D” substitute “ITTOIA 2005 on relevant foreign income”.

326In section 812(1) (withdrawal of right to tax credit of certain non-resident companies connected with unitary states)—

(a)for “section 231(3)” substitute “section 397(2)(a) of ITTOIA 2005”, and

(b)for “or, where” substitute “nor, by virtue of section 30(9) of the Finance (No. 2) Act 1997, where”.

327(1)Amend section 817 (deductions not to be allowed in computing profits or gains) as follows.

(2)In subsection (1)—

(a)before “tax purposes” insert “corporation”, and

(b)for “the Tax Acts” substitute “the Corporation Tax Acts”.

(3)In subsection (2)—

(a)after “profits or gains” insert “for corporation tax purposes”,

(b)for “the Tax Acts” substitute “the Corporation Tax Acts”,

(c)omit “or employment”, and

(d)for “or in any profession, employment or vocation” substitute “or profession”.

328(1)Amend section 818 (arrangements for payments of interest less tax or of fixed net amount) as follows.

(2)In subsection (2) for the words from “interest”, in the first place where it occurs, to “and” substitute “relevant interest”.

(3)After subsection (2) insert—

“(3)In subsection (2) “relevant interest” means—

(a)interest on which the recipient is chargeable to income tax, which falls within Chapter 2 of Part 4 of ITTOIA 2005 but which is not relevant foreign income, or

(b)interest on which the recipient is chargeable to corporation tax under Case III of Schedule D.”

329In section 819(2) (old references to standard rate tax) for “Schedule F”, in both places where it occurs, substitute “dividend”.

330In section 821(1) (under-deductions from payments made before passing of annual Act)—

(a)after “assessment” insert “or accounting period”,

(b)after “quarterly payments” insert “(or half-periodic or quarterly payments)”,

(c)after “income” insert “or corporation”,

(d)after “year”, in the second and third places where it occurs, insert “or period”,

(e)after “charged”, in the fourth place where it occurs, insert “in respect of those payments to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest) or shall be charged to corporation tax under”, and

(f)omit “in respect of those payments”.

331(1)Section 824 (repayment supplements: individuals and others) is amended as follows.

(2)In subsection (4A)(b) for “section 231” substitute “section 397(1) of ITTOIA 2005”.

(3)Omit subsection (8).

(4)In subsection (9) for “to (8)” substitute “to (7)”.

332In section 827 (VAT penalties etc.)—

(a)for “for any tax purposes”, in each place where it occurs, substitute “for any corporation tax purposes (but see also subsection (3)(a) below)”,

(b)in subsection (2) for “and income tax” substitute “(but see also subsection (3)(b) below)”, and

(c)at the end insert—

“(3)For income tax purposes—

(a)provision corresponding to that made by this section (other than subsection (2) above) is made by sections 54 and 869 of ITTOIA 2005, and

(b)provision corresponding to that made by subsection (2) above is made by section 777 of ITTOIA 2005 (as read with Chapter 10 of Part 6 of that Act).”

333After section 827 insert—

“827ATerritorial scope of charges under certain provisions to which section 836B applies

(1)This section applies in relation to any amount chargeable to income tax under or by virtue of any provision to which section 836B applies (other than a provision listed in Part 2 of the table in that section).

(2)An amount arising to a person who is resident in the United Kingdom is chargeable to tax whether or not it is from a source in the United Kingdom.

(3)An amount arising to a person who is not resident in the United Kingdom is chargeable to tax only if it is from a source in the United Kingdom.

(4)References in this section to amounts which are from a source in the United Kingdom include, in the case of any amount which does not have a source, references to amounts which have a comparable connection to the United Kingdom.

(5)This section is subject to any express or implied provision to the contrary in any provision of the Income Tax Acts.

(6)This section does not apply for the purposes of corporation tax.”

334(1)Amend section 828 (orders and regulations made by the Treasury or the Board) as follows.

(2)In subsection (4) omit “324,”.

(3)In subsection (5)—

(a)after “section 717 of ITEPA 2003” insert “or section 873 of ITTOIA 2005”,

(b)after “under ITEPA 2003” insert “or ITTOIA 2005”, and

(c)for “that Act” substitute “either of those Acts”.

335In section 830(3) (territorial sea and designated areas) omit “income tax or”.

336In section 831(3) (interpretation of ICTA) after the entry relating to “ITEPA 2003” insert—

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

337In section 832(1) (interpretation of the Tax Acts)—

(a)for the definition of “overseas property business” substitute—

““overseas property business”—

(a)for the purposes of income tax, has the meaning given by Chapter 2 of Part 3 of ITTOIA 2005;

(b)for the purposes of corporation tax, has the meaning given by section 70A(4);”,

(b)in the appropriate place insert—

““relevant foreign income” has the meaning given by subsections (1) to (3) of section 830 of ITTOIA 2005 but also includes, for any purpose mentioned in any provision listed in subsection (4) of that section, income treated as relevant foreign income for that purpose by that provision;”.

(c)in the definition of “Schedule A business” for “income tax” substitute “corporation tax”,

(d)in the definitions of “the Schedule F ordinary rate”, “the Schedule F trust rate” and “the Schedule F upper rate” for “Schedule F” substitute “dividend”,

(e)for the definition of “tax credit” substitute—

““tax credit” means—

(a)a tax credit under section 231 for the purposes of corporation tax; and

(b)a tax credit under section 397(1) of ITTOIA 2005 for the purposes of income tax;”,

(f)in the appropriate place insert—

““UK property business” has the meaning given by Chapter 2 of Part 3 of ITTOIA 2005;”, and

(g)omit the definition of “Ulster Savings Certificates”.

338(1)Amend section 833 (interpretation of Income Tax Acts) as follows.

(2)In subsection (3)—

(a)for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and

(b)in paragraph (b)—

(i)for “547(1)(a)” substitute “465 of ITTOIA 2005”, and

(ii)for “547(5)” substitute “530 of that Act”.

(3)In subsection (4)—

(a)for “and” in the first place where it occurs substitute “to”, and

(b)in paragraph (c) for the words from “under” to “D” substitute “under Part 2 of ITTOIA 2005 (trading income)”.

(4)In subsection (5) for “income which is earned income by virtue of section 529” substitute “—

(a)income to which subsection (5A) applies, and

(b)income to which subsection (5B) applies.”

(5)After that subsection insert—

“(5A)This subsection applies to income arising to the individual if—

(a)it is charged to tax under section 583 of ITTOIA 2005 (income from disposals of know-how), and

(b)the individual, alone or jointly, devised the know-how in question.

(5B)This subsection applies to income arising to the individual if—

(a)it is patent income, and

(b)the individual, alone or jointly, devised the invention for which the patent in question was granted.

This is subject to subsection (5C).

(5C)If—

(a)any part of the rights in respect of the patent, or of any rights out of which they were granted, has at any time belonged to any other person, and

(b)any part of the income is properly attributable to the rights which have belonged to that other person,

subsection (5B) does not apply to that part of the income (and so it is not earned income).

(5D)In subsection (5B) “patent income” means—

(a)royalties or other sums paid in respect of the use of a patent charged to tax under section 579 of ITTOIA 2005,

(b)amounts on which tax is payable under section 587 or 593 of ITTOIA 2005, and

(c)amounts on which tax is payable under—

(i)section 472(5) of the Capital Allowances Act (patent allowances: balancing charges), or

(ii)paragraph 100 of Schedule 3 to that Act (balancing charges in respect of pre-1st April 1986 expenditure on the purchase of patent rights).

(5E)References in subsection (5C) to the rights in respect of the patent are to any right to do or authorise the doing of anything which would, but for the right, be an infringement of the patent.”

339In section 835(6)(a) (“total income” in the Income Tax Acts) for “Schedule F” substitute “Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.)”.

340After section 836A insert—

“836BTable of provisions to which this section applies

(1)In the Tax Acts references to any provision to which this section applies are references to any provision listed in the following table so far as it relates to income tax (but subject to any applicable limitation in subsections (3) to (5)).

(2)This is the table—