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Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

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(5) This section is subject to any express or implied provision to the contrary in any provision of the Income Tax Acts.

1016 Table of provisions to which this section applies

(1) In the Income 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) and (4)).

(2) This is the table--

PART 1
Provisions of ITTOIA 2005Description
Chapter 18 of Part 2Post-cessation receipts: trades, professions and vocations
Chapter 8 of Part 3Rent receivable in connection with a UK section 12(4) concern
Chapter 9 of Part 3Rent receivable for UK electric-line wayleaves
Chapter 10 of Part 3Post-cessation receipts: UK property businesses
Chapter 2 of Part 4Interest
Chapter 9 of Part 4Gains from contracts for life insurance etc
Chapter 11 of Part 4Transactions in deposits
Chapter 12 of Part 4Disposals of futures and options involving guaranteed returns
Section 579Royalties and other income from intellectual property
Section 583Income from disposals of know-how
Section 587Income from sales of patent rights
Chapter 3 of Part 5Films and sound recordings: non-trade businesses
Chapter 4 of Part 5Certain telecommunication rights: non-trading income
Chapter 5 of Part 5Settlements: amounts treated as income of settlor
Section 682(4)Adjustments after the administration period
Chapter 8 of Part 5Income not otherwise charged
Section 844(4)Withdrawal of relief for unremittable foreign income after source ceases

PART 2
Provisions of this ActDescription
Chapter 2 of Part 12Accrued income profits
Section 720, 727 or 731Transfer of assets abroad
Chapter 3 of Part 13Transactions in land
Section 776Sales of occupation income
Section 796Individuals benefited by film relief
Section 804Losses derived from exploiting licence: individuals in partnership

PART 3
Other provisionsDescription
Section 214(1)(ab) of ICTAChargeable payments connected with exempt distributions
Section 571(1) of ICTACancellation of certificates: schemes for rationalising industry
Section 730(4) of ICTATransfers of income arising from securities
Section 761(1)(b)(i) of ICTAOffshore income gains
Section 774(1) of ICTATransactions between dealing company and associated company
Section 780(3A)(a) of ICTASale and lease-back (taxation of consideration received)
Section 781(1) of ICTAAssets leased to traders and others
Section 786(5)(a) of ICTATransactions associated with loans or credit
Section 68(2) of FA 1989Employee share ownership trust (chargeable event)
Section 71(4) of FA 1989Employee share ownership trust (borrowing)
Section 258(4) of CAA 2001Special leasing
Section 479(4) of CAA 2001Persons having qualifying non-trade expenditure
Section 394(2) of ITEPA 2003Charge on administrator of non-approved pension scheme
Section 476(5) of ITEPA 2003Charge on occurrence of chargeable event

(3) For the purposes of this section--

(a) any reference to any provision of ITTOIA 2005 does not include that provision so far as relating to relevant foreign income,

(b) the reference to Chapter 2 of Part 4 of ITTOIA 2005 is a reference to that Chapter only so far as relating to an issue of funding bonds where--

(i) the issue is treated under section 380 of that Act as a payment of interest, and

(ii) the person by or through whom they are issued is required to retain bonds under section 939(2) of this Act but it is impracticable for the person to do so,

(c) the reference to Chapter 9 of Part 4 of ITTOIA 2005 is a reference to that Chapter only so far as relating to gains--

(i) which are from a policy or contract specified in section 531(3) of that Act, and

(ii) which do not fall within section 532 or 534 of that Act,

(d) the reference to section 579 of ITTOIA 2005 does not include that section so far as relating to any annual payment,

(e) the reference to Chapter 4 of Part 5 of ITTOIA 2005 does not include that Chapter so far as relating to any annual payment, and

(f) the reference to Chapter 5 of Part 5 of ITTOIA 2005 does not include that Chapter so far as relating to income which falls within section 619(3) of that Act.

(4) For the purposes of this section the reference to section 720 or 727 of this Act does not include those sections so far as relating to income falling within subsection (3) of section 745.



Part 17 Definitions for purposes of Act and final provisions

Definitions for the purposes of Act

1017 Abbreviated references to Acts

In this Act--

  • "CAA 2001" means the Capital Allowances Act 2001 (c. 2),

  • "FA", followed by a year, means the Finance Act of that year,

  • "F(No.2)A", followed by a year, means the Finance (No.2) Act of that year,

  • "FISMA 2000" means the Financial Services and Markets Act 2000 (c. 8),

  • "ICTA" means the Income and Corporation Taxes Act 1988 (c. 1),

  • "IHTA 1984" means the Inheritance Tax Act 1984 (c. 51),

  • "ITEPA 2003" means the Income Tax (Earnings and Pensions) Act 2003 (c. 1),

  • "ITTOIA 2005" means the Income Tax (Trading and Other Income) Act 2005 (c. 5),

  • "TCGA 1992" means the Taxation of Chargeable Gains Act 1992 (c. 12), and

  • "TMA 1970" means the Taxes Management Act 1970 (c. 9).

1018 "Act" to include Scottish and Northern Ireland legislation in some cases

(1) In the following provisions of this Act, "Act" includes an Act of the Scottish Parliament--

  • section 66 (restriction on relief unless trade is commercial),

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

  • section 536 (exemption for miscellaneous income),

  • section 558 (approved charitable investments),

  • section 1028 (power to make consequential provision), and

  • section 1029 (power to undo changes).

(2) In the following provisions of this Act, "Act" includes Northern Ireland legislation--

  • section 66 (restriction on relief unless trade is commercial),

  • section 114 (exclusion of amounts in calculating contribution to the firm),

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

  • section 536 (exemption for miscellaneous income),

  • section 558 (approved charitable investments),

  • section 802 (exclusion of amounts in calculating partner's capital contribution),

  • section 1028 (power to make consequential provision), and

  • section 1029 (power to undo changes).

1019 Meaning of "certificate of deposit"

In this Act "certificate of deposit" means a document--

(a) relating to the deposit of money in any currency,

(b) recognising an obligation to pay a stated principal amount to bearer or to order, with or without interest, and

(c) by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable.

1020 Claims and elections

(1) In this Act any reference to a claim or election is to a claim or election in writing or in any form authorised (in relation to the case in question) by directions under section 118 of FA 1998.

(2) For further information about claims and elections, see TMA 1970 (in particular, section 42(2), (10) and (11) and Schedule 1A).

1021 Application of definitions of "connected" persons and "control"

(1) Section 993 (meaning of "connected" persons) applies for the purposes of this Act unless otherwise indicated.

(2) Section 995 (meaning of "control") applies for the purposes of this Act unless otherwise indicated.

1022 Meaning of "debenture"

(1) In this Act "debenture" has the meaning given by section 744 of the Companies Act 1985 (c. 6).

(2) This section does not apply for the purposes of sections 559, 560 and 691.

1023 Meaning of "double taxation arrangements"

In this Act "double taxation arrangements" means arrangements which have effect under section 788 of ICTA.

1024 Meaning of "gilt-edged securities"

In this Act "gilt-edged securities" means any securities which--

(a) are gilt-edged securities for the purposes of TCGA 1992 (see Schedule 9 to that Act), or

(b) will be such securities on the making of an order under paragraph 1 of that Schedule, if the making of the order is anticipated in the prospectus under which the securities were issued.

1025 Meaning of "modified net income"

(1) For the purposes of this Act a person's modified net income for a tax year ("year X") is the person's net income for year X calculated in accordance with Steps 1 and 2 of section 23 (calculation of income tax liability) as modified by subsection (2).

(2) In applying Steps 1 and 2 of section 23, ignore--

(a) any non-qualifying income included in the person's total income (see section 1026),

(b) any relief under Chapter 2 of Part 4 for a loss incurred or treated as incurred, or a payment made, in a tax year later than year X,

(c) any reliefs to which the person may be entitled under Chapter 4 of Part 8,

(d) any adjustment of profits resulting from a claim under Chapter 16 of Part 2 of ITTOIA 2005 (averaging profits of farmers and creative artists), if year X is the earlier of the tax years in relation to which the claim is made,

(e) any adjustment resulting from an election under section 257 of ITTOIA 2005 (election to carry back post-cessation receipts), and

(f) any relief or adjustment resulting from the making, amendment or revocation of a claim for relief, if the claim, amendment or revocation would have been out of time but for section 224(4) of ITTOIA 2005 (averaging profits of farmers and creative artists: extension of deadline for claiming other reliefs).

(3) This section applies for the purposes of section 427 as if subsection (2)(c) were omitted.

(4) This section applies for the purposes of Chapter 9 of Part 9 and Chapter 13 of Part 15 as if for subsection (2)(c) there were substituted--

" (c) any reliefs to which the person may be entitled under section 505, " .

(5) In this section "claim" includes an election or notice.

1026 Meaning of "non-qualifying income" for the purposes of section 1025

For the purposes of section 1025 an amount included in a person's total income is non-qualifying income if it is--

(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 ITTOIA 2005 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 ITTOIA 2005 (release of loan to participator in a close company),

(d) income on which an individual is liable to income tax as a result of section 465 of ITTOIA 2005 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),

(e) income which is included in the aggregate income of an estate as a result of section 664(2)(c), (d) or (e) of ITTOIA 2005 (income arising to personal representatives and corresponding to income within paragraph (b), (c) or (d)),

(f) income on which income tax is treated as paid under section 685A(3) of ITTOIA 2005 (settlor-interested settlements), or

(g) an amount that a person is treated as having received under section 804(5B) of ICTA (double taxation relief: special rules about overlap profit).



Final provisions

1027 Minor and consequential amendments

Schedule 1 (minor and consequential amendments) has effect.

1028 Power to make consequential provision

(1) The Treasury may by order make such provision as the Treasury consider appropriate in consequence of this Act.

(2) The power conferred by subsection (1) may not be exercised after 5 April 2010.

(3) An order under this section may amend, repeal or revoke any provision made by or under an Act.

(4) An order under this section may contain provision having retrospective effect.

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

1029 Power to undo changes

(1) The Treasury may by order make such provision as the Treasury consider appropriate, in relation to a case in which the Treasury consider that a provision of this Act changes the effect of the law, for the purpose of returning the effect of the law to what it was immediately before 6 April 2007.

(2) The power conferred by subsection (1) may not be exercised after 5 April 2010.

(3) An order under this section may amend, repeal or revoke any provision made by or under this Act or by or under any other Act.

(4) An order under this section may contain provision having retrospective effect.

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

1030 Transitional provisions and savings

(1) Schedule 2 (transitional provisions and savings) has effect.

(2) The Treasury may by order make such transitional or saving provision as the Treasury consider appropriate in connection with the coming into force of this Act.

(3) An order under subsection (2) may contain provision having retrospective effect.

(4) At any time before section 1014 of this Act (orders and regulations) comes into force, section 828(4) of ICTA (order-making powers excluded from negative resolution procedure) has effect as if it included a reference to an order made under subsection (2) of this section.

1031 Repeals and revocations

Schedule 3 (repeals and revocations, including of spent enactments) has effect.

1032 Index of defined expressions

(1) Schedule 4 (index of defined expressions that apply for the purposes of this Act) has effect.

(2) That Schedule lists the places where some of the expressions used in this Act are defined or otherwise explained.

1033 Extent

(1) This Act extends to England and Wales, Scotland and Northern Ireland (but see subsection (2)).

(2) An amendment, repeal or revocation contained in Schedule 1 or 3 has the same extent as the provision amended, repealed or revoked.

1034 Commencement

(1) This Act comes into force on 6 April 2007 and has effect--

(a) for income tax purposes, for the tax year 2007-08 and subsequent tax years, and

(b) for corporation tax purposes, for accounting periods ending after 5 April 2007.

(2) Subsection (1) is subject to subsections (3) and (4).

(3) The following--

(a) Part 5 (enterprise investment scheme),

(b) Part 3 of Schedule 1 (consequential amendment associated with Part 5), and

(c) Part 2 of Schedule 3 (repeals so associated),

do not have effect in relation to shares issued before 6 April 2007.

This is subject to Schedule 2 (transitional provisions and savings).

(4) Subsection (1) does not apply to the following provisions of this Act (which therefore come into force on the day on which this Act is passed)--

(a) in Part 15, section 852, and

(b) in this Part, sections 1017, 1018, 1028, 1029, 1030(2) to (4) and 1033, this section and section 1035.

1035 Short title

This Act may be cited as the Income Tax Act 2007.

SCHEDULES

Section 1027

SCHEDULE 1 Minor and consequential amendments



Part 1 Income and Corporation Taxes Act 1988

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

2 Omit sections 1 to 2 (the charge to income tax, application of lower rate to income from savings and distributions, rates of tax applicable to distribution income etc, and fractions of a pound and yearly assessments).

3 Omit section 3 (certain income charged at basic rate).

4 Omit section 4 (construction of references in Income Tax Acts to deduction of tax).

5 Omit section 7(1) (deduction of income tax from payments to companies).

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

(2) In subsection (2)--

(a) after "except that it does not include" insert "-- (a)", and

(b) after "subsection (1) above" insert " , or

(b) ITA 2007 " .

(3) In subsection (4) after "ITTOIA 2005" insert "and ITA 2007".

(4) In subsection (6) omit the words from the beginning to "this Act; and".

7 Omit section 42A (non-resident landlords and their representatives).

8 Omit sections 50, 51 and 51AA (United Kingdom securities: Treasury directions for payment without deduction of tax etc).

9 In section 56(3)(c) (transactions in deposits with and without certificates or in debts) for "charity" substitute "charitable company".

10 In section 105(2) (allowable deductions) omit "or by virtue of section 90(4) of the Finance Act 1995".

11 Omit section 109A (relief for post-cessation expenditure).

12 In section 110(1) (interpretation of sections 103 to 109A) for "sections 103 to 109A" substitute "sections 103 to 106".

13 Omit section 117 (restriction on relief for limited partners: individuals).

14 (1) Amend section 118 (restriction on relief for limited partners: companies) as follows.

(2) In subsection (2) before the definition of "relevant accounting period" insert--

" "limited partner" means--

(a) a company which is carrying on a trade as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907;

(b) a company which--

(i)

is carrying on a trade as a general partner in a partnership;

(ii)

is not entitled to take part in the management of the trade; and

(iii)

is entitled to have its liabilities, or its liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade discharged or reimbursed by some other person; or

(c) a company which carries on a trade jointly with others and which, under the law of any territory outside the United Kingdom--

(i)

is not entitled to take part in the management of the trade; and

(ii)

is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade; " .

(3) In subsection (2) in the definition of "relevant accounting period" omit "(within the meaning of section 117(2))".

(4) In subsection (2) in the definition of "the relevant sum" omit "(within the meaning of section 117(3))".

(5) After that subsection insert--

" (3) A partner company's contribution to a trade at any time is the aggregate of--

(a) the amount which the partner company has contributed to the trade as capital and has not, directly or indirectly, drawn out or received back (other than anything which it is or may be entitled so to draw out or receive back at any time when it carries on the trade as a limited partner or which it is or may be entitled to require another person to reimburse to it), and

(b) the amount of any profits of the trade to which the partner company is entitled but which it has not received in money or money's worth. "

15 For section 118ZB substitute--

" 118ZB Restriction on relief: companies

Section 118 has effect in relation to a member of a limited liability partnership as in relation to a limited partner, but subject to sections 118ZC and 118ZD. "

16 (1) Amend section 118ZC (member's contribution to trade) as follows.

(2) In subsection (1) for "section 117" substitute "section 118".

(3) In subsection (2)--

(a) omit "that section and",

(b) for "him" substitute "it", and

(c) for "his" substitute "its".

(4) In subsection (3)--

(a) for "he", in each place where it occurs, substitute "it", and

(b) for "him" substitute "it".

(5) In subsection (4)--

(a) for "he", in both places where it occurs, substitute "it",

(b) for "its" substitute "the partnership's", and

(c) for "it" substitute "the partnership".

(6) Omit subsection (5).

17 (1) Amend section 118ZD (carry forward of unrelieved losses) as follows.

(2) In subsection (1)--

(a) for "chargeable periods" substitute "accounting periods",

(b) omit "117 or",

(c) for "his", in both places where it occurs, substitute "the member's",

(d) for "chargeable period" substitute "accounting period", and

(e) for "he" substitute "the member".

(3) In subsection (2)--

(a) for the words from the beginning to "as they apply" substitute "Sections 393A(1) and 403 (and section 118 as it applies",

(b) for "chargeable period", in both places where it occurs, substitute "accounting period", and

(c) for "his" substitute "the member's".

(4) In subsection (3)--

(a) for "chargeable period", in each place where it occurs, substitute "accounting period",

(b) for "his", in each place where it occurs, substitute "the member's", and

(c) for "the Tax Acts" substitute "the Corporation Tax Acts".

18 Omit sections 118ZE to 118ZK (restriction on reliefs for non-active general partners and non-active members of LLPs).

19 Omit sections 118ZL and 118ZM (restriction on reliefs for partnerships exploiting films).

20 Omit sections 118ZN and 118ZO (partners: meaning of "contribution to the trade").

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

(2) In subsection (1)--

(a) omit "shall be made without deduction of income tax and", and

(b) for "or total income of the person by whom" substitute "of the company by which".

(3) In subsection (2)(b) omit "income tax or".

(4) In subsection (3)--

(a) insert "or" at the end of paragraph (b), and

(b) omit paragraph (d) and the "or" immediately before it.

22 In section 209A(4) (section 209(3AA): link to shares of company or associated company) for "section 349(5) and (6)" substitute "section 984 of ITA 2007".

23 Omit section 214(1)(b) (chargeable payments connected with exempt distributions: deduction of tax at source).

24 (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) omit "above or section 397(1) of ITTOIA 2005".

(3) Omit subsection (1A).

25 (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) omit "above or section 397(1) of ITTOIA 2005".

(3) Omit subsection (1A).

26 In section 231B(12) (consequences of certain arrangements to pass on the value of a tax credit) for the definition of "tax advantage" substitute--

" "tax advantage" has the meaning given by section 840ZA " .

27 (1) Amend section 256 (personal reliefs: general) as follows.

(2) In subsection (1) for "sections 275 to 278" substitute "section 278".

(3) In subsection (2)--

(a) for "an income tax reduction" substitute "a tax reduction", and

(b) for the words from "the effect of that relief" to the end of the subsection substitute "the amount of the tax reduction is equal to 10 per cent. of the specified amount".

(4) Omit subsection (3).

28 After section 256 insert--

" 256A Meaning of "adjusted net income"

(1) For the purposes of this Chapter an individual's adjusted net income for a year of assessment is calculated as follows.

Step 1

Take the amount of the individual's net income for the year of assessment.

Step 2

If in the year of assessment the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid) deduct the grossed up amount of the gift.

Step 3

If the individual is given relief in accordance with section 192 of FA 2004 (relief at source) in respect of any contribution paid in the year of assessment under a pension scheme, deduct the gross amount of the contribution.

Step 4

Add back any relief under section 266 of this Act given by virtue of subsection (7) of that section (payments for life insurance etc) that was deducted in calculating the individual's net income for the year of assessment.

The result is the individual's adjusted net income for the year of assessment.

(2) The grossed up amount of a gift is the amount of the gift grossed up by reference to the basic rate for the year of assessment.

(3) The gross amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004.

256B Meaning of "the minimum amount"

In this Chapter "the minimum amount" means £2,350. "

29 (1) Amend section 257 (personal allowance) as follows.

(2) In subsection (1) for "deduction from his total income" substitute "personal allowance".

(3) In subsection (2)--

(a) for "deduction from his total income" substitute "personal allowance", and

(b) for "the deduction" substitute "the allowance".

(4) In subsection (3)--

(a) for "deduction from his total income" substitute "personal allowance", and

(b) for "the deduction" substitute "the allowance".

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