Income Tax (Trading and Other Income) Act 2005

Part 8 Miscellaneous income

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

129 Section 604 applies with the omission of subsection (3)(b) in relation to contributions made before 27th July 1989.

Certain telecommunication rights

130 Chapter 4 of Part 5 does not apply to an indefeasible right to use a telecommunications cable system (“IRU”) acquired before 21st March 2000.

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

(2) In sub-paragraph (1)—

• “associate” has the meaning given by section 417(3) and (4) of ICTA, and

• “associated company”—

  (a)

  in relation to another company, has the meaning given by section 416(1) of that Act, and

  (b)

  in relation to any other person, means a company of which that person has control within the meaning of subsections (2) to (6) of that section.

Income treated as income of settlor: exception for pension income

132 (1) Subject to sub-paragraph (4), section 627 applies before 6th April 2006 with the following amendments.

(2) In subsection (2)(c) for “a relevant pension scheme” substitute “an approved pension arrangement”.

(3) For subsection (3) substitute—

“(3) In subsection (2) an “approved pension arrangement” means—

(a) an approved scheme or exempt approved scheme,

(b) a relevant statutory scheme,

(c) a retirement benefits scheme set up by a government outside the United Kingdom for the benefit, or primarily for the benefit, of its employees,

(d) a contract or scheme which is approved under Chapter 3 of Part 14 of ICTA (retirement annuities),

(e) a personal pension scheme which is approved under Chapter 4 of that Part,

(f) an annuity purchased for the purpose of giving effect to rights under a scheme falling within any of paragraphs (a) to (c) and (e), or

(g) any pension arrangements of any description prescribed by regulations made under section 11(2)(h) of the Welfare Reform and Pensions Act 1999 (c. 30) or Article 12(2)(h) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11)).

(4) In subsection (3) “approved scheme”, “exempt approved scheme”, “relevant statutory scheme” and “retirement benefits scheme” have the same meaning as in Chapter 1 of Part 14 of ICTA (retirement benefit schemes).”

(4) The power of the Treasury to make an order under section 281 or 283 of FA 2004 has effect as if Schedule 35 to that Act contained an amendment substituting section 627 of this Act for that section as amended by sub-paragraphs (2) and (3) above.

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

133 (1) In relation to income which—

(a) arises under a settlement made or entered into before 9th March 1999, and

(b) does not arise directly or indirectly from funds provided on or after that date,

section 629 applies with the omission from subsection (1) of paragraph (b) and the word “or” before that paragraph.

(2) Where subsection (1) of section 629 applies for a tax year only in relation to such income as is mentioned in sub-paragraph (1), that section applies with the substitution for subsections (3) and (4) of—

“(3) Income paid to or for the benefit of a child of a settlor is not treated as provided in subsection (1) for a tax year in which the total amount paid to or for the benefit of that child which but for this subsection would be so treated does not exceed £100.”

(3) Where subsection (1) of section 629 applies for a tax year in relation to such income as is mentioned in sub-paragraph (1) above and other income, that section applies with the substitution for subsection (4) of—

“(4) In subsection (3) a child’s “relevant settlement income” means income which (apart from that subsection) would be treated as income of the settlor under subsection (1) and which—

(a) so far as consisting of such income as is mentioned in paragraph 133 of Schedule 2, is income paid to or for the benefit of the child, and

(b) so far as consisting of other income, is income paid to or for the benefit of, or otherwise treated as income of, the child.”

(4) Any apportionment required for the purposes of sub-paragraph (1)(b) is to be made on a just and reasonable basis.

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

134 (1) In relation to any case which involves any previous tax years before 1995-96, subsection (3) of section 635 applies in accordance with sub-paragraphs (2) and (3) below.

(2) So far as that subsection applies in relation to those previous tax years, for paragraph (c) substitute—

“(c) so much of any income arising under the settlement in any previous year which has not been distributed as is shown to consist of income which has been treated as income of the settlor by virtue of section 671, 672, 674, 674A or 683 of ICTA,

(d) any income arising under the settlement in any previous year which has been treated as the income of the settlor by virtue of section 673 of ICTA,

(e) any sums paid by virtue or in consequence of the settlement, to the extent that they are not allowable, by virtue of section 676 of ICTA, as deductions in computing the settlor’s income for any previous year,

(f) any sums paid by virtue or in consequence of the settlement in any previous year which have been treated as the income of the settlor by virtue of section 664(2)(b) of ICTA,

(g) any sums included in the income arising under the settlement as amounts which have been or could have been apportioned to a beneficiary as mentioned in section 681(1)(b) of ICTA, and”.

(3) For paragraph (d) of that subsection substitute—

“(h) an amount equal to the sum of tax at the rate applicable to trusts on—

(i) the total amount of income arising under the settlement in that year and any previous year which has not been distributed, less

(ii) the total amount of the income and sums referred to in paragraph (c) (in relation to tax years 1995-96 onwards) and paragraphs (c), (d), (e), (f) and (g) as substituted by paragraph 134 of Schedule 2 (in relation to tax years before 1995-96).”

(4) In relation to any sum paid before 6th April 1995, subsection (3) of section 634 applies with the substitution of “in one of the events specified in section 673(3) of ICTA” for paragraphs (a) and (b).

(5) Subsection (5)(a) of section 634 does not apply if the direction or assignment was given or made before 6th April 1981.

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

135 In relation to any capital sum paid to the settlor before tax year 1995-96, section 641 applies with the insertion after subsection (6) of—

“(6A) Where a capital sum is paid to the settlor in a tax year by a body corporate connected with the settlement in that year it is to be assumed until the contrary is shown that an associated payment of an amount not less than that of the capital sum has been made to that body by the trustees of the settlement.”

Beneficiaries' income from estates in administration: basic amounts

136 (1) Sub-paragraph (2) applies if any previous tax year to which regard is to be had for the purposes of section 665 (assumed income entitlement) is a tax year before 2005-06 (an “old tax year”).

(2) In relation to the old tax year, the reference in step 4 in subsection (1) of that section to basic amounts relating to the person’s absolute interest in respect of which the person is liable to income tax for that year is to be taken as a reference to the amount deemed to have been paid to that person as income for that year in respect of that interest by virtue of section 696 of ICTA.

(3) Sub-paragraph (4) applies if one or more of the absolute interests referred to in section 671(1) (successive absolute interests) was held in one or more old tax years.

(4) The reference in section 671(2)(b) to the basic amounts relating to any previous such interest includes a reference to the amounts deemed to have been paid to the previous holder as income for the old tax years in respect of that interest by virtue of section 696 of ICTA.

(5) Sub-paragraph (6) applies if any of the limited interests referred to in section 672(1)(d) (successive interests: assumed income entitlement of holder of absolute interest following limited interest) was held in one or more old tax years.

(6) The reference in section 672(4) to the basic amounts relating to any previous such interest includes a reference to the amounts deemed to have been paid to the holders of any such interests as income for the old tax years in respect of those interests by virtue of section 695 of ICTA.

(7) In the case of a UK estate, references in this paragraph to the amounts deemed to have been paid are references to the amounts that would be deemed to have been paid apart from sections 695(4)(a) and 696(4) of ICTA (grossing up).

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

137 A sum treated as part of the aggregate income of an estate by virtue of section 547(1)(c) of ICTA (gains from life insurance contracts etc.) as the result of an event that occurred before 6th April 2004 is treated for the purposes mentioned in section 680 of this Act as bearing income tax at the basic rate.