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Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(4) The Treasury may designate an international organisation for the purposes of this section only if the United Kingdom is a member of the organisation.

992 Meaning of "company"

(1) In the Income Tax Acts "company" means any body corporate or unincorporated association, but does not include a partnership, a local authority or a local authority association.

(2) Subsection (1) needs to be with read with section 468 of ICTA (authorised unit trusts).

(3) This section does not apply for the purposes of--

(a) Part 6 (venture capital trusts),

(b) Chapters 1, 3 and 4 of Part 13 (transactions in securities and land and sales of income from occupation), and

(c) sections 993 and 994 (meaning of "connected" persons).

993 Meaning of "connected" persons

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

(2) An individual ("A") is connected with another individual ("B") if--

(a) A is B's spouse or civil partner,

(b) A is a relative of B,

(c) A is the spouse or civil partner of a relative of B,

(d) A is a relative of B's spouse or civil partner, or

(e) A is the spouse or civil partner of a relative of B's spouse or civil partner.

(3) A person, in the capacity as trustee of a settlement, is connected with--

(a) any individual who is a settlor in relation to the settlement,

(b) any person connected with such an individual,

(c) any close company whose participators include the trustees of the settlement,

(d) any non-UK resident company which, if it were UK resident, would be a close company whose participators include the trustees of the settlement,

(e) any body corporate controlled (within the meaning of section 995) by a company within paragraph (c) or (d),

(f) if the settlement is the principal settlement in relation to one or more sub-fund settlements, a person in the capacity as trustee of such a sub-fund settlement, and

(g) if the settlement is a sub-fund settlement in relation to a principal settlement, a person in the capacity as trustee of any other sub-fund settlements in relation to the principal settlement.

(4) A person who is a partner in a partnership is connected with--

(a) any partner in the partnership,

(b) the spouse or civil partner of any individual who is a partner in the partnership, and

(c) a relative of any individual who is a partner in the partnership.

But this subsection does not apply in relation to acquisitions or disposals of assets of the partnership pursuant to genuine commercial arrangements.

(5) A company is connected with another company if--

(a) the same person has control of both companies,

(b) a person ("A") has control of one company and persons connected with A have control of the other company,

(c) A has control of one company and A together with persons connected with A have control of the other company, or

(d) a group of two or more persons has control of both companies and the groups either consist of the same persons or could be so regarded if (in one or more cases) a member of either group were replaced by a person with whom the member is connected.

(6) A company is connected with another person ("A") if--

(a) A has control of the company, or

(b) A together with persons connected with A have control of the company.

(7) In relation to a company, any two or more persons acting together to secure or exercise control of the company are connected with--

(a) one another, and

(b) any person acting on the directions of any of them to secure or exercise control of the company.

994 Meaning of "connected" persons: supplementary

(1) In section 993 and this section--

  • "company" includes any body corporate or unincorporated association, but does not include a partnership (and see also subsection (2)),

  • "control" is to be read in accordance with section 416 of ICTA (except where otherwise indicated),

  • "principal settlement" has the meaning given by paragraph 1 of Schedule 4ZA to TCGA 1992,

  • "relative" means brother, sister, ancestor or lineal descendant,

  • "settlement" has the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act), and

  • "sub-fund settlement" has the meaning given by paragraph 1 of Schedule 4ZA to TCGA 1992.

(2) For the purposes of section 993--

(a) a unit trust scheme is treated as if it were a company, and

(b) the rights of the unit holders are treated as if they were shares in the company.

(3) For the purposes of section 993 "trustee", in the case of a settlement in relation to which there would be no trustees apart from this subsection, means any person--

(a) in whom the property comprised in the settlement is for the time being vested, or

(b) in whom the management of that property is for the time being vested.

Section 466(4) does not apply for the purposes of this subsection.

(4) If any provision of section 993 provides that a person ("A") is connected with another person ("B"), it also follows that B is connected with A.

995 Meaning of "control"

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

(2) In relation to a body corporate ("company A"), "control" means the power of a person ("P") to secure--

(a) by means of the holding of shares or the possession of voting power in relation to that or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,

that the affairs of company A are conducted in accordance with P's wishes.

(3) In relation to a partnership, "control" means the right to a share of more than half the assets, or of more than half the income, of the partnership.

996 Meaning of "farming" and related expressions

(1) In the Income Tax Acts "farming" means the occupation of land wholly or mainly for the purposes of husbandry, but does not include market gardening (see subsection (5)).

(2) In subsection (1) "husbandry" includes--

(a) hop growing, and

(b) the breeding and rearing of horses and the grazing of horses in connection with those activities.

(3) For the purposes of the Income Tax Acts the cultivation of short rotation coppice is regarded as husbandry and not as forestry.

(4) In the Income Tax Acts "woodlands" does not include land on which short rotation coppice is cultivated.

(5) In the Income Tax Acts "market gardening" means the occupation of land as a garden or nursery for the purpose of growing produce for sale.

(6) For the purposes of this section "short rotation coppice" means a perennial crop of tree species planted at high density, the stems of which are harvested above ground level at intervals of less than 10 years.

(7) In the application of this section for the purposes of section 192(1) or 303(1) of this Act or paragraph 16 of Schedule 5 to ITEPA 2003--

(a) both references to the occupation of land, and the reference to land on which short rotation coppice is cultivated, refer to land in the United Kingdom, and

(b) the reference to the cultivation of such coppice refers to its cultivation in the United Kingdom.

997 Meaning of "generally accepted accounting practice" and related expressions

(1) In the Income Tax Acts "generally accepted accounting practice" means UK generally accepted accounting practice.

This is subject to subsection (3).

(2) In the Income Tax Acts "UK generally accepted accounting practice"--

(a) means generally accepted accounting practice in relation to accounts of UK companies (other than IAS accounts) that are intended to give a true and fair view, and

(b) has the same meaning in relation to--

(i) individuals,

(ii) entities other than companies, and

(iii) companies that are not UK companies,

as it has in relation to UK companies.

(3) In relation to the affairs of a company or other entity that prepares IAS accounts, in the Income Tax Acts "generally accepted accounting practice" means generally accepted accounting practice in relation to IAS accounts.

(4) In the Income Tax Acts "for accounting purposes" means for the purposes of accounts drawn up in accordance with generally accepted accounting practice.

(5) In the Income Tax Acts "international accounting standards" has the same meaning as in the Corporation Tax Acts (see section 50(2) and (3) of FA 2004).

(6) In this section--

  • "IAS accounts" means accounts prepared in accordance with international accounting standards, and

  • "UK companies" means companies incorporated or formed under the law of a part of the United Kingdom.

998 Meaning of "grossing up"

(1) In the Income Tax Acts references to grossing up by reference to a rate of tax are to calculating the amount ("the grossed up amount") which after deduction of income tax at that rate would equal the amount to be grossed up ("the net amount").

(2) The grossed up amount is the sum of the net amount and the tax deducted.

(3) The grossed up amount may also be expressed as--

GA = NA + NA × R100 - R

where--

  • GA is the grossed up amount,

  • NA is the net amount, and

  • R is the percentage rate of tax by reference to which the net amount is to be grossed up.

999 Meaning of "local authority"

(1) In the Income Tax Acts "local authority", in relation to England and Wales, means--

(a) a billing authority as defined in section 69 of the Local Government Finance Act 1992 (c. 14),

(b) a precepting authority as defined in that section,

(c) a body with power to issue a levy (by virtue of regulations under section 74 of the Local Government Finance Act 1988 (c. 41)),

(d) a body with power to issue a special levy (by virtue of regulations under section 75 of that Act),

(e) a fire and rescue authority in Wales constituted by a scheme under section 2 of the Fire and Rescue Services Act 2004 (c. 21) or a scheme to which section 4 of that Act applies,

(f) an authority with power to make or determine a rate, or

(g) a residuary body established by order under section 22(1) of the Local Government Act 1992 (c. 19).

(2) In the Income Tax Acts "local authority", in relation to Scotland, means--

(a) a council constituted under section 2 of the Local Government etc (Scotland) Act 1994 (c. 39),

(b) a joint board or committee within the meaning of the Local Government (Scotland) Act 1973 (c. 65), or

(c) an authority with power to requisition any sum from a council such as is mentioned in paragraph (a).

(3) In the Income Tax Acts "local authority", in relation to Northern Ireland, means--

(a) an authority with power to make or determine a rate, or

(b) an authority with power to issue a precept, requisition or other demand for the payment of money to be raised out of a rate.

(4) In this section "rate" means a rate--

(a) whose proceeds are applicable for public local purposes, and

(b) which is leviable by reference to the value of land or property.

1000 Meaning of "local authority association"

(1) In the Income Tax Acts "local authority association" means any incorporated or unincorporated association which meets conditions A and B.

(2) Condition A is that all of its members are local authorities, groups of local authorities or local authority associations.

(3) Condition B is that its purpose, or primary purpose, is to protect and further the general interests of local authorities or any description of local authorities.

(4) For the purposes of condition A, a local authority, group of local authorities or local authority association is treated as a member if it has appointed a person to be a member or is represented by a member.

(5) And, in that case, the appointee or representative is treated as not being a member for the purpose of the condition.

1001 Meaning of "offshore installation"

(1) In the Income Tax Acts "offshore installation" means a structure which is, is to be, or has been, put to a relevant use while in water (see subsections (3) and (4)).

(2) But a structure is not an offshore installation if--

(a) it has permanently ceased to be put to a relevant use,

(b) it is not, and is not to be, put to any other relevant use, and

(c) since permanently ceasing to be put to a relevant use, it has been put to a use which is not relevant.

(3) A use is a relevant use if it is--

(a) for the purposes of exploiting mineral resources by means of a well,

(b) for the purposes of exploration with a view to exploiting mineral resources by means of a well,

(c) for the storage of gas in or under the shore or the bed of any waters,

(d) for the recovery of gas so stored,

(e) for the conveyance of things by means of a pipe, or

(f) mainly for the provision of accommodation for individuals who work on or from a structure which is, is to be, or has been, put to any of the above uses while in water.

(4) For the purposes of this section references to a structure being put to a use while in water are to the structure being put to a use while--

(a) standing in any waters,

(b) stationed (by whatever means) in any waters, or

(c) standing on the foreshore or other land intermittently covered with water.

(5) In this section "structure" includes a ship or other vessel.

1002 Regulations about the meaning of "offshore installation"

(1) The Treasury may by regulations make provision as to the meaning of "offshore installation" in the Income Tax Acts.

(2) The regulations may--

(a) add to, amend or repeal any provision of section 1001,

(b) make different provision for different purposes, and

(c) contain incidental, supplemental, consequential and transitional provision and savings.

1003 Meaning of "oil and gas exploration and appraisal"

(1) In the Income Tax Acts "oil and gas exploration and appraisal" means activities carried out for the purpose of--

(a) searching for petroleum anywhere in an area,

(b) ascertaining a petroleum-bearing area's extent or characteristics, or

(c) ascertaining its reserves of petroleum,

so that it may be determined whether the petroleum is suitable for commercial exploitation.

(2) In this section "petroleum" has the meaning given by section 1 of the Petroleum Act 1998 (c. 17).

1004 Meaning of "property investment LLP"

(1) In the Income Tax Acts "property investment LLP" means a limited liability partnership--

(a) whose business consists wholly or mainly in the making of investments in land, and

(b) the principal part of whose income is derived from investments in land.

(2) Whether a limited liability partnership is a property investment LLP is determined for each period of account of the partnership.

1005 Meaning of "recognised stock exchange"

(1) In the Income Tax Acts "recognised stock exchange" means--

(a) the Stock Exchange, and

(b) any stock exchange outside the United Kingdom which is for the time being designated as a recognised stock exchange for the purposes of this section by an order made by the Commissioners for Her Majesty's Revenue and Customs.

(2) An order under this section may designate a stock exchange--

(a) by name, or

(b) by reference to any class or description of stock exchanges (including one framed by reference to any authority or approval given in a country outside the United Kingdom).

(3) An order under this section may--

(a) contain incidental, supplemental, consequential and transitional provision and savings, and

(b) vary or revoke a previous order under this section.

1006 Meaning of "research and development"

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

(2) "Research and development" means activities that fall to be treated as research and development in accordance with generally accepted accounting practice.

This is subject to subsection (3).

(3) The Treasury may by regulations specify activities which--

(a) are to be treated as being "research and development" for the purposes of this section, or

(b) are to be treated as not being "research and development" for the purposes of this section.

(4) The regulations may--

(a) make provision by reference to guidelines issued by the Secretary of State, and

(b) contain incidental, supplemental, consequential and transitional provision and savings.

(5) Unless otherwise expressly provided, "research and development" does not include oil and gas exploration and appraisal.

1007 Meaning of "unit trust scheme"

(1) In the Income Tax Acts "unit trust scheme" has the meaning given by section 237 of FISMA 2000.

This is subject to subsection (2).

(2) The Treasury may by regulations provide that a unit trust scheme within the meaning given by section 237 of FISMA 2000 is not to be a unit trust scheme for the purposes of this section if the scheme is within a specified description.

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

(4) This section does not apply for the purposes of section 558 (approved charitable investments).



Chapter 2 Other Income Tax Acts provisions

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1008 Scotland

(1) In the application of the Income Tax Acts to Scotland--

  • "assignment" means an assignation,

  • "estate in land" includes the land, and

  • "surrender" includes renunciation.

(2) In the application of the Income Tax Acts to Scotland, any reference to property or rights being held on trust or on trusts is a reference to the property or rights being held in trust.

1009 Sources of income within the charge to income tax or corporation tax

In the Income Tax Acts a source of income is within the charge to income tax or corporation tax if that tax--

(a) is chargeable on the income arising from it, or

(b) would be so chargeable if there were any income arising from it,

and references to a person, or income, being within the charge to income tax or corporation tax are to be read in the same way.

1010 Application of Income Tax Acts to recognised investment exchanges

The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision securing that provisions in the Income Tax Acts which contain references to the Stock Exchange apply--

(a) in relation to all other recognised investment exchanges (within the meaning of FISMA 2000), or

(b) in relation to such of those exchanges as may be prescribed,

for such purposes and subject to such modifications as may be prescribed.

1011 References to married persons, or civil partners, living together

Individuals who are married to, or are civil partners of, each other are treated for the purposes of the Income Tax Acts as living together unless--

(a) they are separated under an order of a court of competent jurisdiction,

(b) they are separated by deed of separation, or

(c) they are in fact separated in circumstances in which the separation is likely to be permanent.

1012 Relationship between rules on highest part of total income

(1) This section makes provision about the relationship between rules requiring particular income to be treated as the highest part of a person's total income.

(2) It has effect for the purposes of the Income Tax Acts except sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief).

(3) If more than one of the provisions listed in subsection (4) applies in relation to a person, a provision mentioned earlier in the list has priority over a provision mentioned later in the list.

(4) The provisions are--

  • section 465A of ITTOIA 2005 (gains from contracts for life insurance etc to be treated as highest part of total income),

  • section 404A of ITEPA 2003 (payments and other benefits on termination of employment to be treated as highest part of total income), and

  • section 16 (savings and dividend income to be treated as highest part of total income).

(5) The provisions listed in subsection (4) have priority over--

  • section 619A(2) of ITTOIA 2005 (income treated as highest part of settlor's total income),

  • section 768(6) and (7) (income treated as arising under Chapter 3 of Part 13 to be treated as highest part of total income),

  • section 786(6) and (7) (income treated as arising under Chapter 4 of Part 13 to be treated as highest part of total income), and

  • any other provisions of the Income Tax Acts requiring income of any description to be treated as the highest part of a person's total income.

(6) The effect of one provision having priority over another is that the second provision has effect subject to the first.

1013 Territorial sea of the United Kingdom

The territorial sea of the United Kingdom is treated for the purposes of the Income Tax Acts as part of the United Kingdom.

1014 Orders and regulations

(1) This section applies to all powers under the Income Tax Acts of the Treasury or the Commissioners for Her Majesty's Revenue and Customs to make orders or regulations, other than excluded powers.

(2) All powers under the following are excluded--

(a) ICTA (see instead section 828 of that Act),

(b) section 178(5) of FA 1989 (setting of rates of interest),

(c) CAA 2001 (see instead section 570B of that Act),

(d) ITEPA 2003 (see instead section 717 of that Act),

(e) Part 4 of FA 2004 (see instead section 282 of that Act),

(f) ITTOIA 2005 (see instead section 873 of that Act), and

(g) the following provisions of this Act--

(i) section 184(3)(b) and (c) (EIS: the unquoted status requirement (designated exchanges etc)),

(ii) section 295(3)(b) and (c) (venture capital trusts: the unquoted status requirement (designated exchanges etc)), and

(iii) section 1005(1)(b) (meaning of "recognised stock exchange").

(3) Any orders or regulations made under a power to which this section applies must be made by statutory instrument.

(4) Any orders or regulations made under a power to which this section applies are subject to annulment in pursuance of a resolution of the House of Commons.

(5) Subsection (4) does not apply if the order or regulations are made under--

(a) section 73A of FA 2004 (exemption for designated international organisations), or

(b) any of the following provisions of this Act--

(i) section 21(5) (indexation of starting rate limit and basic rate limit),

(ii) section 57 (indexation of allowances),

(iii) section 114 or 802 (exclusion of amounts in calculating individual's contribution to the firm),

(iv) section 400(4)(e) (amounts treated as contributed by an individual to investment partnership capital),

(v) section 897 (UK public revenue dividends: regulations about collection of income tax),

(vi) section 962 (regulations modifying Chapter 15 of Part 15),

(vii) section 979 (designated international organisations: exceptions from duties to deduct),

(viii) section 991(2)(e) (meaning of "bank"), or

(ix) section 1030(2) (power to make transitional or saving provision in connection with coming into force of this Act).

(6) Further, subsection (4) does not apply--

(a) if any other Parliamentary procedure is expressly provided to apply in relation to the order or regulations, or

(b) if the order in question appoints a day for the purposes of any provision of the Income Tax Acts from which the provision will have effect (with or without amendments) or will cease to have effect,

and is also subject to any other provision to the contrary.

1015 Territorial scope of charges under certain provisions to which section 1016 applies

(1) This section applies in relation to any amount chargeable to income tax under or by virtue of any provision--

(a) to which section 1016 applies, and

(b) which is listed in Part 2 or 3 of the table in that section (provisions not in ITTOIA 2005).

(2) An amount arising to a UK resident is chargeable to tax whether or not it is from a source in the United Kingdom.

(3) An amount arising to a non-UK resident 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.

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