Income Tax (Trading and Other Income) Act 2005

Capital Allowances Act 2001 (c. 2) U.K.

524 U.K. The Capital Allowances Act 2001 is amended as follows.

525 U.K. In section 4 (capital expenditure) for subsection (5) substitute—

“(5) Subsection (4) does not apply to any expenditure or sum in the case of which a deduction of income tax falls or may fall to be so made as a result of section 595(2) of ITTOIA 2005 or section 524(3)(b) of ICTA (receipts from sale of patent rights by person not resident in the UK: income and corporation tax).”

526 (1) Amend section 15 (qualifying activities) as follows. U.K.

(2) In subsection (1)—

(a) in paragraph (b) for “Schedule A” substitute “ property ”,

(b) in paragraph (f) after “listed in” insert “ section 12(4) of ITTOIA 2005 or ”.

(3) In subsection (3)(a) for “Schedule A” substitute “ property ”.

527 (1) Amend section 16 (ordinary Schedule A businesses) as follows. U.K.

(2) For ““ordinary Schedule A” substitute “ “ordinary property ”.

(3) For “means a Schedule A business” substitute “ means a UK property business, or a Schedule A business, ”.

(4) In the side-note for “Schedule A” substitute “ property ”.

528 (1) Amend section 17 (furnished holiday lettings businesses) as follows. U.K.

(2) In subsection (1) for “a Schedule A business in so far” to the end substitute “ a UK property business, or a Schedule A business, which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation ”.

(3) For subsection (3) substitute—

“(3) For the purposes of income tax 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.

For the purposes of corporation tax the “commercial letting of furnished holiday accommodation” has the meaning given by section 504 of ICTA.”

529 U.K. In section 20(1) (employments and offices) for “section 314 of ICTA” substitute “ section 15 of ITTOIA 2005 ”.

530 U.K. In section 23(2) (expenditure unaffected by sections 21 and 22) before “40D” insert “ 143 of ITTOIA 2005 or section ”.

531 U.K. In section 28(2) (thermal insulation of industrial buildings) for “Schedule A” substitute “ property ”.

532 U.K. In section 33(8)(b) (personal security) for “Schedule A” substitute “ property ”.

533 U.K. In section 35(1)(a) (expenditure on plant or machinery for use in dwelling-house not qualifying expenditure in certain cases) for “Schedule A” substitute “ property ”.

534 U.K. In section 38(a) (production of animals etc)—

(a) after “to which” insert “ section 30 or Chapter 8 of Part 2 of ITTOIA 2005 or ”, and

(b) after “purposes of” insert “ Part 2 of ITTOIA 2005 or ”,

535 (1) Amend section 63 (cases in which disposal value is nil) as follows. U.K.

(2) In subsection (2)(c) after “within the meaning of” insert “ section 110 of ITTOIA 2005 or ”.

(3) In subsection (3)(b) for “Schedule A” substitute “ property ”.

(4) In subsection (4) after “to be read with” insert “ section 109 of ITTOIA 2005 and ”.

536 (1) Amend section 106 (the designated period) as follows. U.K.

(2) In subsection (3)(b) for the words from “the qualifying activity” to the end substitute “—

(i) there was a change in the persons carrying on the qualifying activity which did not involve all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was treated as continuing under section 114(1) of ICTA (effect of partnership changes involving companies).”

(3) Omit subsection (4).

537 (1) Amend section 108 (effect of disposal to connected person on overseas leasing pool) as follows. U.K.

(2) In subsection (1) for paragraph (b) and the word “and” at the end of that paragraph substitute—

“(b) the disposal is one on the occasion of which—

(i) there was a change in the persons carrying on the qualifying activity which involved all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was not treated as continuing under section 114(1) or 343(2) of ICTA (effect of partnership changes involving companies or of company reconstructions), and”.

(3) Omit subsection (4).

538 (1) Amend section 112 (excess allowances: connected persons) as follows. U.K.

(2) In subsection (1) for paragraph (b) and the word “and” at the end of that paragraph substitute—

“(b) the transaction (or each of the transactions) is one—

(i) which involved all of the persons carrying on the qualifying activity before the transaction permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity carried on by the person making the disposal was not treated as continuing under section 114(1) or 343(2) of ICTA (effect of partnership changes involving companies or of company reconstructions), and”.

(3) Omit subsection (5).

539 (1) Amend section 115 (prohibited allowances: connected persons) as follows. U.K.

(2) In subsection (1) for paragraph (c) and the word “and” at the end of that paragraph substitute—

“(c) the transaction (or each of the transactions) is one—

(i) which involved all of the persons carrying on the qualifying activity before the transaction permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity carried on by the person making the disposal was not treated as continuing under section 114(1) or 343(2) of ICTA (effect of partnership changes involving companies or of company reconstructions), and”.

(3) Omit subsection (3).

540 (1) Amend section 122 (short-term leasing by buyer, lessee etc) as follows. U.K.

(2) In subsection (2) for paragraph (c) substitute—

“(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which—

(i) there was a change in the persons carrying on the qualifying activity which did not involve all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was treated as continuing under section 114(1) of ICTA (effect of partnership changes involving companies);”.

(3) Omit subsection (3).

541 (1) Amend section 125 (other qualifying purposes) as follows. U.K.

(2) In subsection (3) for paragraph (c) substitute—

“(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which—

(i) there was a change in the persons carrying on the qualifying activity which did not involve all of the persons carrying on that activity before the change permanently ceasing to carry it on, or

(ii) the qualifying activity carried on by the person making the disposal was treated as continuing under section 114(1) of ICTA (effect of partnership changes involving companies).”

(3) Omit subsection (5).

542 U.K. In section 154(3) (further registration requirement) for paragraph (b) substitute—

“(b) the only changes in the persons carrying it on between the time that B does so and the time that A or a person connected with A does so are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

543 U.K. In section 155(1) (changes in the persons carrying on qualifying activity) for paragraph (b) substitute—

“(b) the only changes in the persons carrying on the qualifying activity since the shipowner carried it on are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

544 U.K. In section 156 (connected persons) for subsection (2) substitute—

“(2) The condition is that the only changes in the persons carrying on the qualifying activity since A carried it on are changes—

(a) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(b) in respect of which the qualifying activity is treated as continuing under section 343(2) of ICTA.”

545 U.K. In section 162(2) (ring fence trade a separate qualifying activity)—

(a) in paragraph (a), after “fall within” insert “ the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within ”, and

(b) in paragraph (b), after “as a result of” insert “ section 16(1) of ITTOIA 2005 or ”.

546 U.K. In section 248 (ordinary Schedule A businesses)—

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

(b) in the side-note for “Schedule A” substitute “ property ”.

547 U.K. In section 252 (mines, transport undertakings etc)—

(a) after “is a concern listed in” insert “ section 12(4) of ITTOIA 2005 or ”, and

(b) after “the profits of the concern under” insert “ Chapter 2 of Part 2 of ITTOIA 2005 or, as the case may be, under ”.

548 U.K. In section 258(4) (special leasing: income tax) for “taxed under Case VI of Schedule D” substitute “ assessed to income tax ”.

549 (1) Amend section 263 (qualifying activities carried on in partnership) as follows. U.K.

(2) In subsection (1) for paragraph (c) substitute—

“(c) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

(a) the change does not involve all of the partners permanently ceasing to carry on the qualifying activity, or

(b) the change does not result in the qualifying activity being treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.).”

550 (1) Amend section 265 (successions: general) as follows. U.K.

(2) In subsection (1) for paragraph (b) substitute—

“(b) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

(a) all of the persons carrying on the qualifying activity before the succession permanently cease to carry it on, or

(b) the qualifying activity is treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.).”

551 U.K. In 268(1) (successions by beneficiaries) for paragraph (b) and the word “and” at the end of that paragraph substitute—

“(b) all of the persons carrying on the qualifying activity before the succession permanently cease to carry it on, and”.

552 U.K. In section 282 (buildings outside the United Kingdom) for “applicable to Case I of Schedule D” substitute “ that apply in calculating trade profits for income tax purposes or that apply to Case I of Schedule D for corporation tax purposes ”.

553 U.K. In section 326(1) (interpretation of section 325) in the definition of “premium”—

(a) after “corresponds to” insert “—

(a)  ”, and

(b) at end insert “, or

(b) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum;”.

554 U.K. In section 331(1)(b) (capital value provisions: interpretation)—

(a) after “corresponds to” insert “—

(i)  ”, and

(b) at end insert “, or

(ii) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum.”

555 (1) Amend section 353 (lessors and licensors) as follows. U.K.

(2) In subsection (2) for “a Schedule A business” substitute “ a UK property business, or a Schedule A business, ”.

(3) After subsection (3) insert—

“(3A) If the person is within the charge to income tax in respect of the allowance or charge and his interest in the building is not an asset of any property business carried on by him at any time in the relevant period, the allowance or charge is to be given effect by treating him as if he had been carrying on a UK property business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.”

(4) In subsection (4)—

(a) for “the person's” substitute “ the person is a company within the charge to corporation tax in respect of the allowance or charge and its ”,

(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 ”, and

(d) for “he” substitute “ it ”.

556 (1) Amend section 354 (buildings temporarily out of use) as follows. U.K.

(2) In subsection (3)—

(a) after “as may be made under” insert “ section 254 of ITTOIA 2005 or ”, and

(b) after “chargeable to tax under” insert “ Chapter 18 of Part 2 of ITTOIA 2005 or, as the case may be, under ”.

(3) In subsection (5) for “section 113(1)” to the end substitute “ section 18 of ITTOIA 2005 or section 337(1) of ICTA (effect of company ceasing to trade etc). ”

557 U.K. In section 390(1) (interpretation of section 389) in the definition of “premium”—

(a) after “corresponds to” insert “—

(a)  ”, and

(b) at end insert “, or

(b) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum;”.

558 (1) Amend section 392 (Schedule A businesses) as follows. U.K.

(2) In subsection (2) for “a Schedule A business” substitute “ a UK property business, or a Schedule A business, ”.

(3) After that subsection insert—

“(2A) If the person is within the charge to income tax in respect of the allowance or charge and he was not carrying on a UK property business at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on such a business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.”

(4) In subsection (3)—

(a) after “the person” insert “ is a company within the charge to corporation tax in respect of the allowance or charge and it ”,

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

(c) for “he” substitute “ it ”.

(5) In the sidenote for “Schedule A” substitute “ UK property and Schedule A ”.

559 U.K. In section 393B(4) (meaning of “qualifying expenditure”) after “the profits of a” insert “ UK property business or ”

560 (1) Amend section 393T (giving effect to allowances and charges) as follows. U.K.

(2) In subsection (2) for “a Schedule A business” substitute “ a UK property business, or a Schedule A business, ”.

(3) After that subsection insert—

“(2A) If the person is within the charge to income tax in respect of the allowance or charge and his interest in the flat is not an asset of a UK property business carried on by him at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on a UK property business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.”

(4) In subsection (3)—

(a) for “the person's” substitute “ the person is a company within the charge to corporation tax in respect of the allowance or charge and its ”,

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

(c) for “he” substitute “ it ”.

561 (1) Amend section 406 (reduction where premium relief previously allowed) as follows. U.K.

(2) In subsection (1) for “section 87 of ICTA” substitute “ sections 60 to 67 of ITTOIA 2005 or under sections 87 and 87A of ICTA ”.

(3) In subsection (2) for “section 87 of ICTA” substitute “ sections 60 to 67 of ITTOIA 2005 or under sections 87 and 87A of ICTA ”.

562 U.K. In section 454(1)(c) (qualifying expenditure) after “an election under” insert “ section 194 of ITTOIA 2005 or under ”.

563 U.K. In section 455(4) (excluded expenditure) after “goodwill under” insert “ section 194(3) of ITTOIA 2005 or under ”.

564 U.K. In section 462(3) (disposal values) after “goodwill under” insert “ section 194(2) of ITTOIA 2005 or under ”.

565 U.K. In section 479(4) (persons having qualifying non-trade expenditure: income tax) for “taxed under Case VI of Schedule D” substitute “ assessed to income tax ”.

566 U.K. In section 481(5)(b) (anti-avoidance: limit on qualifying expenditure) after “in accordance with section” insert “ 587 of ITTOIA 2005 or section ”.

567 U.K. In section 483(c) (meaning of “income from patents”) after “payable under” insert “ section 587, 593 or 594 of ITTOIA 2005 or under ”.

568 U.K. In section 488(3)(a) (balancing allowances) for “section 113(1)” to “to trade etc.)” substitute “ section 18 of ITTOIA 2005 or section 337(1) of ICTA (effect of company ceasing to trade etc.) ”.

569 (1) Amend section 529 (giving effect to allowances and charges) as follows. U.K.

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

(3) After that subsection insert—

“(1A) If the person entitled or liable to an allowance or charge for a chargeable period is within the charge to income tax in respect of the allowance or charge and he was not carrying on a UK property business at any time in that period, the allowance or charge is to be given effect by treating him as if he had been carrying on such a business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.”

(4) In subsection (2)—

(a) for the words from the beginning to “chargeable period” substitute “ If the person entitled or liable to an allowance or charge for a chargeable period is a company within the charge to corporation tax in respect of the allowance or charge and it ”,

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

(c) for “he” substitute “ it ”.

570 U.K. In section 536(5)(a) (contributions not made by public bodies and not eligible for tax relief)—

(a) in sub-paragraph (i) for “Schedule A” substitute “ property ”, and

(b) in sub-paragraph (v) after “listed in” insert “ section 12(4) of ITTOIA 2005 or ”.

571 U.K. In section 558(1)(c) (effect of partnership changes) for the words from “result in” to the end substitute “—

(i) involve all of the persons carrying on the relevant activity before the change permanently ceasing to carry it on, or

(ii) result in the relevant activity being treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.).”

572 (1) Amend section 559 (effect of successions) as follows. U.K.

(2) In subsection (1) for paragraph (b) substitute—

“(b) the following condition is met.”

(3) After that subsection insert—

“(1A) The condition is that—

(a) all of the persons carrying on the relevant activity before the succession permanently cease to carry it on, or

(b) the relevant activity is treated under section 18 or 362 of ITTOIA 2005 as permanently ceasing to be carried on by a company or treated as discontinued under section 337(1) of ICTA (companies beginning or ceasing to carry on trade etc.).”

573 U.K. In section 577(1) (definitions) in the definition of “property business” after “means” insert “ a UK property business, ”.

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

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

“ITTOIA 2005

The Income Tax (Trading and Other Income) Act 2005”.

(3) In Part 2—

(a) in the entry for “ordinary Schedule A business” for “Schedule A” substitute “ property ”,

(b) in the entry for “overseas property business” for “65A(4), 70A(4) and 832(1) of ICTA” substitute “ 70A(4) and 832(1) of ICTA and Chapter 2 of Part 3 of ITTOIA 2005 ”, and

(c) in the appropriate place insert—

“UK property business

section 832(1) of ICTA and Chapter 2 of Part 3 of ITTOIA 2005”.