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					                                   Bill 4




                                CONTENTS


                                    PART 1

                               BASIC PROVISIONS

                                  CHAPTER 1

                      CALCULATION OF INCOME TAX LIABILITY

 1   Introduction
 2   The calculation of income tax liability
 3   Reliefs deductible at Step 2
 4   Reliefs and allowances deductible at Steps 2 and 3: supplemental
 5   Tax reductions
 6   Order of deducting tax reductions: individuals
 7   Order of deducting tax reductions: other persons
 8   Tax reductions: supplemental
 9   Additional tax
10   Total income: supplemental
11   Liability not dealt with in the calculation




     Schedule 1   —   Consequential amendments
         Part 1   —   Income and Corporation Taxes Act 1988
         Part 2   —   Other enactments
     Schedule 2   —   Repeals and revocations
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Part 1 — Basic provisions
Chapter 1 — Calculation of income tax liability




                                                     A



                                          BILL
                                                     TO


Make provision



B                 by the Queen’s most Excellent Majesty, by and with the advice and
          E IT ENACTED
     consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—


                                                   PART 1

                                             BASIC PROVISIONS

                                                  CHAPTER 1

                              CALCULATION OF INCOME TAX LIABILITY

1          Introduction
    (1)     This Chapter deals with the calculation of a person’s income tax liability for a
            tax year.
            Origin: Drafting.
    (2)     But it does not deal with any income tax liability mentioned in section 11.
            Origin: Drafting.
    (3)     This Chapter needs to be read with Chapter [] of Part [] (limits on liability to
            income tax of non-UK residents).
            Origin: Drafting.

2          The calculation of income tax liability
            The liability of a person (“the taxpayer”) to income tax for a tax year is the
            amount found by taking the following steps.
            Step 1
            Identify the amounts of income on which the taxpayer is charged to income tax
            for the tax year.
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                                                                        Part 1 — Basic provisions
                                                     Chapter 1 — Calculation of income tax liability


    Each of those amounts is a “component” of income.
    The sum of the components is “total income”.
    Step 2
    Deduct from each component the amount of any relief under a provision listed
    in relation to the taxpayer in section 3 to which the taxpayer is entitled for the
    tax year.
    See section 4 for further provision about the deduction of those reliefs.
    The sum of the amounts of the components left after this step is “unrelieved
    total income”.
    Step 3
    Deduct from the amounts of the components left after Step 2 any allowances to
    which the taxpayer is entitled for the tax year under [Chapter 1 of Part 7 of
    ICTA] (individuals: personal allowance and blind person’s allowance).
    See section 4 for further provision about the deduction of those allowances.
    Step 4
    Calculate tax at each applicable rate on the amounts of the components left
    after Step 3.
    See Chapter 2 of this Part for the rates at which income tax is charged and the
    income charged at particular rates.
    If the taxpayer is a trustee, see also Chapters [2] to [5] and [8] of Part [] (special
    rules about trusts) for further provision about the income charged at particular
    rates.
    Step 5
    Add together the amounts of tax calculated at Step 4.
    The result is “Step 5 tax”.
    Step 6
    Deduct from Step 5 tax any tax reductions to which the taxpayer is entitled for
    the tax year under a provision listed in relation to the taxpayer in section 5.
    See sections 6 to 8 for further provision about the deduction of those tax
    reductions.
    The amount of tax left after this step is “Step 6 tax”.
    Step 7
    Add to Step 6 tax any amounts of tax for which the taxpayer is liable for the tax
    year under any provision listed in relation to the taxpayer in section 9.
    The result is the taxpayer’s liability to income tax for the tax year.
    Origin: ICTA s.1(2) (part), s.1A(1) (part), (1A) (part), (1B) (part), s.1B(1) (part),
    (2) (part), s.6(2) (part), s.11(1) (part), s.109A(1) (part), (6A) (part), s.256(1) (part),
    (2) (part), s.257(1) (part), (2) (part), (3) (part), s.257A(2) (part), (3) (part), s.265(1)
    (part), (2) (part), s.266(4) (part), (7) (part), s.273(1) (part), s.289A(1) (part), (2)
    (part), s.347B(2) (part), s.353(1) (part), (1A) (part), (1B) (part), s.379A(1) (part),
    (3) (part), s.380(1) (part), s.381(1) (part), s.385(1) (part), s.388(1) (part), s.392(1)
    (part), (2) (part), s.574(1) (part), s.587B(2) (part), s.687(2) (part), s.788(3) (part),
    (4) (part), s.790(1) (part), s.793(1) (part), s.835(1) (part, (3) (part), (4) (part), (5)
    (part), Schedule 15B para.1(1) (part), (5) (part); FA 1990 s.25(8) (part), (9) (part);
    FA 2002 Sch.16 para.19(2) (part); ITEPA 2003 s.555(1) (part), (2) (part); FA 2004
    s.193(6) (part), s.194(1) (part), s.205(1) (part), s.206(1) (part), s.208(1) (part), (2)
    (part), (8) (part), s.209(1) (part), (3) (part), s.214(1) (part), s.215(1) (part), (2)
    (part), (11) (part), s.227(1) (part), (4) (part), (5) (part), Sch.34 para. 1(1) (part), 5
    (part), 8(1) (part), 13(1) (part); ITTOIA 2005 s.401(1) (part), s.446(1) (part), (2)
    (part), s.454(1) (part), (4) (part), s.535(1) (part), (2) (part), s.600(1) (part), s.601(1)
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Chapter 1 — Calculation of income tax liability


           (part), (2) (part), s.677(2) (part), s.678(2) (part); F(No.2)A 2005 s.7(1) (part), (3)
           (part); drafting.

3         Reliefs deductible at Step 2
    (1)    If the taxpayer is an individual, the provisions referred to at Step 2 of the
           calculation in section 2 are—
              (a) the following—
                        section [381(1) of ICTA] (early trade losses relief),
                        section [574(1) of ICTA] (share loss relief),
                        section [587B(2) of ICTA] (gifts of shares, securities and real
                           property to charities etc),
                        section [266(7) of ICTA] (payments for life insurance etc),
                        section 193(4) of FA 2004 (pension schemes: relief under net pay
                           arrangement: excess relief), and
                        section 194(1) of FA 2004 (pension schemes: relief on making of
                           claim), and
              (b) the provisions listed in subsection (3).
           Origin: ICTA s.266(7) (part), s.381(1) (part), s.574(1) (part), s.587B(2) (part; FA
           2004 s.193(6) (part), s.194(1) (part).
    (2)    In any other case, the provisions referred to at Step 2 of the calculation in
           section 2 are—
             (a) the provisions listed in subsection (3), and
             (b) section [] (relief for trustees of unauthorised unit trust).
           Origin: ICTA s.348(1) (part).
    (3)    The provisions are—
               section [380(1) of ICTA] (trade loss relief against general income),
               section [385(1) of ICTA] (carry-forward trade loss relief),
               section [388(1) of ICTA] (terminal trade loss relief),
               section [109A(1) of ICTA] (post-cessation trade relief),
               section [379A(1) of ICTA] (carry-forward property loss relief),
               section [379A(3) of ICTA] (property loss relief against general income),
               section [109A(6A) of ICTA] (post-cessation property relief),
               section [380(1) of ICTA] (employment loss relief against general income),
               section [392(1) of ICTA] (loss relief against miscellaneous income),
               section [353(1) of ICTA] (interest payments),
               Chapter [] of Part [] (annual payments and patent royalties),
               [paragraph 2A(1) of Schedule 23A to ICTA] (manufactured dividends on
                  UK shares: payments by non-companies),
               [paragraph 3(2) of Schedule 23A to ICTA] (manufactured interest on UK
                  securities: payments not otherwise deductible),
               section 555 of ITEPA 2003 (deduction for liabilities related to former
                  employment),
               section 446 of ITTOIA 2005 (strips of government securities: relief for
                  losses),
               section 454(4) of ITTOIA 2005 (listed securities held since 26th March
                  2003: relief for losses: persons other than trustees), and
               section 600 of ITTOIA 2005 (relief for patent expenses).
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                                                                             Part 1 — Basic provisions
                                                          Chapter 1 — Calculation of income tax liability


           Origin: ICTA s.109A(1) (part), (6A) (part), s.353(1) (part), s.379A(1) (part), (3)
           (part), s.380(1) (part), s.385(1) (part), s.388(1) (part), s.392(1) (part), (2) (part),
           Sch.23A para. 2A(1) (part), 3(2) (part); ITEPA 2003 s.555(1) (part), (2) (part);
           ITTOIA 2005 s.446(1) (part), (2) (part), s.454(1) (part), (4) (part), s.600(1) (part);
           Annex 1, Change [jc414].

4         Reliefs and allowances deductible at Steps 2 and 3: supplemental
    (1)    This section supplements the provisions about reliefs and allowances in Steps
           2 and 3 of the calculation in section 2.
           Origin: Drafting.
    (2)    At Step 2, deduct the reliefs—
             (a) in the order, and
             (b) from the components,
           which will result in the greatest reduction in the taxpayer’s liability to income
           tax for the tax year.
           Origin: ICTA s.835(3) (part), (4) (part); drafting.
    (3)    At Step 3, deduct the allowances—
             (a) in the order, and
             (b) from the components,
           which will result in the greatest reduction in the taxpayer’s liability to income
           tax for the tax year.
           Origin: ICTA s.835(3) (part), (4) (part), (5) (part); drafting.
    (4)    Subsections (2) and (3) are subject to—
               section [385(1) of ICTA] (carry-forward trade loss relief against trade
                  profits),
               section [388(1) of ICTA] (terminal trade loss relief against charged trade
                  profits),
               section [391 of ICTA] (foreign trades etc reliefs only against qualifying
                  foreign income),
               section [379A(1) of ICTA] (carry-forward property loss relief against
                  property business profits),
               section [574(2) of ICTA] (share loss relief against general income),
               section [392(2) of ICTA] (loss relief against miscellaneous income),
               [paragraph 2A(1ZA), (1A) and (1B) of Schedule 23A to ICTA]
                  (manufactured dividends on UK shares: restrictions on deductions),
               [paragraph 3(2A) and (2B) of Schedule 23A to ICTA] (manufactured
                  interest on UK securities: restrictions on deductions),
               section 601 of ITTOIA 2005 (how relief for patent expenses is given), and
               any other provision of the Income Tax Acts under which reliefs or
                  allowances deductible at Step 2 or 3 are required to be deducted in a
                  different order or from particular components of income.
           Origin: ICTA s.835(4) (part); drafting.
    (5)    A relief or allowance may be deducted at Step 2 or 3 only so far as there is
           sufficient income from which to deduct it.
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Part 1 — Basic provisions
Chapter 1 — Calculation of income tax liability


           Origin: ICTA s.379A(1) (part), s.380(1) (part), s.381(2) (part), s.385(1) (part), (4)
           (part), s.388(1) (part), (4) (part), s.392(2) (part), s.574(1) (part); ITTOIA 2005
           s.601(3) (part); drafting.
    (6)    In deciding whether there is sufficient income from which to deduct a relief or
           allowance, reliefs and allowances already deducted at Step 2 or 3 must be taken
           into account.
           Origin: Drafting.
    (7)    Nothing in Step 2 or 3 is to be read as permitting a relief or allowance to be
           deducted more than once.
           Origin: Drafting.

5         Tax reductions
    (1)    If the taxpayer is an individual, the provisions referred to at Step 6 of the
           calculation in section 2 are—
              (a) the following—
                        section [257A of ICTA] (tax reductions for married couples),
                        section [289A(1) of ICTA] (EIS relief),
                        [paragraph 1(1) of Schedule 15B to ICTA] (VCT relief),
                        [paragraph 1(1) of Schedule 16 to FA 2002] (community
                           investment tax relief),
                        section [273(1) of ICTA] (payments for benefit of family members),
                        section [347B(2) of ICTA] (qualifying maintenance payments),
                        section 353(1A) of ICTA (relief for interest on loan to buy life
                           annuity), and
                        section 535 of ITTOIA 2005 (top slicing relief), and
              (b) the provisions listed in subsection (3).
           Origin: ICTA s.257A(2) (part), (3) (part), s.273(1) (part), s.289A(1) (part), (2)
           (part), s.347B(2) (part), s.353(1A) (part), Schedule 15B para.1(1) (part); FA 2002
           Sch.16 para.1(1) (part); ITTOIA 2005 s.535(1) (part), (2) (part).
    (2)    In any other case, the provisions referred to at Step 6 of the calculation in
           section 2 are—
             (a) the provisions listed in subsection (3), and
             (b) section 26 of FA 2005 (trusts with vulnerable beneficiary: income tax
                   relief).
           Origin: FA 2005 s.26 (part).
    (3)    The provisions are—
               section 788 of ICTA (double taxation arrangements: relief by agreement),
               section 790(1) of ICTA (relief for foreign tax where no double taxation
                  arrangements),
               section 401 of ITTOIA 2005 (relief: qualifying distribution after linked
                  non-qualifying distribution), and
               sections 677 and 678 of ITTOIA 2005 (relief where foreign estates have
                  borne UK income tax).
           Origin: ICTA s.788(4) (part), s.790(1) (part), s.793(1) (part); ITTOIA 2005
           s.401(1) (part), s.677(2) (part), s.678(2) (part).
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                                                                            Part 1 — Basic provisions
                                                         Chapter 1 — Calculation of income tax liability


6         Order of deducting tax reductions: individuals
    (1)    This section makes provision about the order in which tax reductions are to be
           deducted at Step 6 of the calculation in section 2, if the taxpayer is an
           individual.
           Origin: Drafting.
    (2)    Deduct the tax reductions in the order which will result in the greatest
           reduction in the taxpayer’s liability to income tax for the tax year.
           Origin: Annex 1, Change [jc521].
    (3)    Subsection (2) is subject to subsections (4) to (6).
           Origin: Drafting.
    (4)    If the taxpayer is entitled to tax reductions for the tax year under more than one
           of the provisions listed in subsection (5), a tax reduction under a provision
           mentioned earlier in the list must be deducted before a tax reduction under a
           provision mentioned later in the list.
           Origin: ICTA s.256(3) (part), s.257A(2) (part), (3) (part), s.273(1) (part),
           s.289A(5) (part), s.347B(5B) (part), s.353(1H) (part), Schedule 15B para.1(6)
           (part); FA 2002 Sch.16 para.19(6) (part).
    (5)    The provisions are—
               [paragraph 1(1) of Schedule 15B to ICTA] (VCT relief),
               section [289A(1) of ICTA] (EIS relief),
               [paragraph 1(1) of Schedule 16 to FA 2002] (community investment tax
                  relief),
               section 353(1A) of ICTA (relief for interest on loan to buy life annuity),
               section [347B(2) of ICTA] (qualifying maintenance payments),
               section [273(1) of ICTA] (payments for benefit of family members), and
               section [257A of ICTA] (tax reductions for married couples).
           Origin: ICTA s.256(3) (part), s.257A(2) (part), (3) (part), s.273(1) (part),
           s.289A(5) (part), s.347B(5B) (part), s.353(1H) (part), Schedule 15B para.1(6)
           (part); FA 2002 Sch.16 para.19(6) (part); Annex 1, Change [jc521].
    (6)    If the taxpayer is entitled to a tax reduction under—
              (a) section 788 of ICTA (double taxation arrangements: relief by
                    agreement), or
              (b) section 790(1) of ICTA (relief for foreign tax where no double taxation
                    arrangements),
           that tax reduction must be deducted after any other tax reduction to which the
           taxpayer is entitled for the tax year.
           Origin: ICTA s.790(3) (part), s.796(1) (part); FA 1994 Sch.8 para.12.

7         Order of deducting tax reductions: other persons
    (1)    This section makes provision about the order in which tax reductions are to be
           deducted at Step 6 of the calculation in section 2, if the taxpayer is a person
           other than an individual.
           Origin: Drafting.
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Part 1 — Basic provisions
Chapter 1 — Calculation of income tax liability


    (2)    Deduct the tax reductions in the order which will result in the greatest
           reduction in the taxpayer’s liability to income tax for the tax year.
           Origin: Annex 1, Change [jc521].
    (3)    Subsection (2) is subject to subsections (4) and (5).
           Origin: Drafting.
    (4)    If the taxpayer is entitled to a tax reduction under—
              (a) section 788 of ICTA (double taxation arrangements: relief by
                    agreement), or
              (b) section 790(1) of ICTA (relief for foreign tax where no double taxation
                    arrangements),
           that tax reduction must be deducted after any other tax reduction to which the
           taxpayer is entitled for the tax year, subject to subsection (5).
           Origin: ICTA s.790(3) (part), s.796(1) (part); FA 1994 Sch.8 para.12.
    (5)    If the taxpayer is a trustee and is entitled to a tax reduction under section 26 of
           FA 2005 (trusts with vulnerable beneficiary: income tax relief) that tax
           reduction must be deducted after any other tax reduction to which the
           taxpayer is entitled for the tax year.
           Origin: FA 2005 s.26 (part), s.27(1) (part).

8         Tax reductions: supplemental
    (1)    This section supplements the provisions about tax reductions in Step 6 of the
           calculation in section 2.
           Origin: Drafting.
    (2)    A tax reduction may be deducted at Step 6 only so far as there is sufficient Step
           5 tax from which to deduct it.
           Origin: ICTA s.256(2) (part), s.289A(2) (part), s.347B(5A) (part), s.353(1F) (part),
           s.796(3) (part), Sch.15B para.1(5) (part); FA 2002 Sch.16 para.19(2) (part);
           drafting.
    (3)    In deciding whether there is sufficient Step 5 tax from which to deduct a tax
           reduction, tax reductions already deducted at Step 6 must be taken into
           account.
           Origin: Drafting.
    (4)    Subsections (2) and (3) apply in addition to—
             (a) section 796(1) and (2) of ICTA (limits on credit for foreign tax), or
             (b) any other provision of the Income Tax Acts that limits the amount of a
                  tax reduction.
           Origin: Drafting.
    (5)    For the purposes of this Chapter, a person is treated as being entitled to a tax
           reduction under section 788 of ICTA if the person is entitled to credit against
           income tax under arrangements which have effect under that section.
           Origin: Drafting.
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                                                                               Part 1 — Basic provisions
                                                            Chapter 1 — Calculation of income tax liability


9          Additional tax
     (1)    If the taxpayer is an individual, the provisions referred to at Step 7 of the
            calculation in section 2 are—
                 section [] (gift aid: charge to tax),
                 section 205 of FA 2004 (pension schemes: the short service refund lump
                    sum charge),
                 section 206 of FA 2004 (pension schemes: the special lump sum death
                    benefits charge),
                 section 208(2)(a) of FA 2004 (pension schemes: the unauthorised
                    payments charge),
                 section 209(3)(a) of FA 2004 (pension schemes: the unauthorised
                    payments surcharge),
                 section 214 of FA 2004 (pension schemes: the lifetime allowance charge),
                 section 227 of FA 2004 (pension schemes: the annual allowance charge),
                 section [7 of F(No.2)A 2005] (social security pension lump sum).
            Origin: FA 1990 s.25(8) (part), (9) (part); FA 2004 s.205(1) (part), s.206(1) (part),
            s.208(1) (part), (2) (part), (8) (part), s.209(1) (part), (3) (part), s.214(1) (part),
            s.215(1) (part), (2) (part), (11) (part), s.227(1) (part), (4) (part), (5) (part), Sch.34
            para. 1(1) (part), 5 (part), 8(1) (part), 13(1) (part); F(No.2)A 2005 s.7(1) (part), (3)
            (part).
     (2)    If the taxpayer is a trustee, the provision referred to at Step 7 of the calculation
            in section 2 is section [] (discretionary payments by trustees: tax pool
            adjustment).
            Origin: ICTA s.687(2) (part).

10         Total income: supplemental
     (1)    This section applies for the purposes of calculating total income.
            Origin: s.835(6) (part).
     (2)    Income from which a deduction in respect of income tax is to be made (or
            treated as made) at the basic or savings rate in force for a tax year is treated as
            income of that tax year.
            Origin: ICTA s.835(6) (part); FA 1996 Sch.6 para.24.
     (3)    If—
              (a) a dividend is paid, or another distribution is made, in a tax year,
              (b) a person is entitled to a tax credit in respect of the dividend or other
                  distribution, and
              (c) the amount or value of the dividend or other distribution is treated
                  under section 398 of ITTOIA 2005 as increased by the amount of the tax
                  credit,
            the amount or value as increased is treated as income of that tax year.
            Origin: ICTA s.835(6)(a) (part); FA 1998 Sch.3 para.40.
     (4)    Subsections (2) and (3) apply even if all or part of the income, or the dividend
            or other distribution, accrued or will accrue in a different tax year.
            Origin: ICTA s.835(6) (part).
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Part 1 — Basic provisions
Chapter 1 — Calculation of income tax liability


     (5)    An assessment that has become final and conclusive for income tax purposes
            for a tax year is also final and conclusive for the purposes of calculating total
            income.
            Origin: ICTA s.835(7) (part).

11         Liability not dealt with in the calculation
            The liabilities referred to in section 1(2) are income tax liability—
                 under section [307(1) of ICTA] (withdrawal or reduction of EIS relief),
                 under [paragraph 4 of Schedule 15B to ICTA] (withdrawal or reduction of
                   VCT relief),
                 under [paragraph 27 of Schedule 16 to FA 2002] (withdrawal or reduction
                   of CITR),
                 under section [694(1) of ICTA] (heritage maintenance settlements:
                   application of property for non-heritage purposes),
                 under Chapter [11], [12] or [13] of Part [] (deduction of tax at source:
                   collection mechanisms),
                 under [paragraph 3(5) or 4(3) of Schedule 23A to ICTA] (foreign payers of
                   manufactured interest or manufactured overseas dividends: the
                   reverse charge),
                 under section [703 of ICTA] (transactions in securities),
                 of the person who is (or persons who are) the responsible person in
                   relation to an employer-financed retirement benefits scheme under
                   section 394(2) of ITEPA 2003, and
                 under Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax
                   charges), except any liability under a provision mentioned in section
                   9(1).
            Origin: Drafting.
10                                                                                       Bill 4
                                                         Schedule 1 — Consequential amendments




                                 SCHEDULES


                                     SCHEDULE 1

                             CONSEQUENTIAL AMENDMENTS

                                         PART 1

                      INCOME AND CORPORATION TAXES ACT 1988

 1        The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
 2    (1) Amend section 353 (relief for payments of interest: general) as follows.
      (2) For subsection (1A) substitute—
          “(1A)   Where a person is entitled for a year of assessment to relief under this
                  section in respect of an amount of interest which is eligible for relief
                  by virtue of section 365, the relief is given as an income tax reduction
                  for that tax year.
         (1AA)    The amount of the income tax reduction is 23% of the amount of the
                  interest.”
      (3) Omit subsections (1F) to (1H).
 3    (1) Amend section 796 (limits on credit for foreign tax: income tax) as follows.
      (2) In subsection (1) after “Income Tax Acts” insert “, except a reduction under
          section 26 of FA 2005”.
      (3) For subsection (3) substitute—
           “(3)   See section 8(2) and (3) of [Bill 4] (tax reductions limited by reference
                  to tax liability) for further limits on the total amount of credit for
                  foreign tax to be allowed to a person against income tax.”
 4        Omit section 823 (adjustments of reliefs where given at different times).
 5        Omit section 835 (“total income” in the Income Tax Acts).
 6        Omit section 836 (returns of total income).

                                         PART 2

                                  OTHER ENACTMENTS

Taxation of Chargeable Gains Act 1992 (c. 12)

 7        The Taxation of Chargeable Gains Act 1992 is amended as follows.
 8    (1) Amend section 4 (rates of capital gains tax) as follows.
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Schedule 1 — Consequential amendments
Part 2 — Other enactments

       (2) In subsection (1) for “lower rate” substitute “savings rate”.
       (3) In subsection (1AA) for “rate applicable to trusts under section 686 of the
           Taxes Act” substitute “trust rate”.
       (4) In subsection (1AB) for the words from “(after” to “total income” substitute
           “an individual has no Step 3 income for a year of assessment or the
           individual’s Step 3 income”.
       (5) In subsection (1AC) for the words from “his total income” to the end
           substitute “the individual’s Step 3 income”.
       (6) In subsection (4) for the words from “his total income” to the end substitute
           “the individual’s Step 3 income”.
       (7) At the end insert—
             “(5)   For the purposes of this section the “Step 3 income” of an individual
                    means the individual’s unrelieved total income less allowances
                    deducted at Step 3 of the calculation in section 2 of [Bill 4] for the
                    purpose of calculating the individual’s income tax liability.
              (6)   Section [] of [Bill 4] (interpretation: rates of income tax and rate
                    limits) applies for the purposes of this section as it applies for income
                    tax purposes.”
 9     (1) Amend section 263ZA (former employees: employment-related liabilities)
           as follows.
       (2) In subsection (1)(a) for “former employee’s total income” substitute “former
           employee’s unrelieved total income”.
 10        In section 288(1) (interpretation) after the definition of “trading stock”
           insert—
                       ““unrelieved total income” has the same meaning as in the
                         Income Tax Acts;”.

Income Tax (Earnings and Pensions) Act 2003 (c. 1)

 11        The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
 12        In section 555(2) (deduction for liabilities related to former employment) for
           “total income” substitute “unrelieved total income”.

Finance Act 2004 (c. 12)

 13        The Finance Act 2004 is amended as follows.
 14        In section 193(6) (relief under net pay arrangements) for “from the total
           income” substitute “in calculating the unrelieved total income”.
 15        In section 194(1) (relief on making of claim) for “from the total income”
           substitute “in calculating the unrelieved total income”.

Income Tax (Trading and Other Income) Act 2005 (c. 5)

 16        The Income Tax (Trading and Other Income) Act 2005 is amended as
           follows.
12                                                                                      Bill 4
                                                        Schedule 1 — Consequential amendments
                                                                    Part 2 — Other enactments

 17      In section 414(4) (stock dividends from UK resident companies: income tax
         treated as paid) after “fall to be made” insert “at Step 2 or 3 of the calculation
         in section 2 of [Bill 4] (calculation of income tax liability)”.
 18      In section 421(4) (loans to participator in close company: income tax treated
         as paid) after “fall to be made” insert “at Step 2 or 3 of the calculation in
         section 2 of [Bill 4] (calculation of income tax liability)”.
 19      In section 446 (strips of government securities: relief for losses) for
         subsection (2) substitute—
           “(2)   If a person makes a claim under this section, the relief is given by
                  deducting the loss in calculating the person’s unrelieved total
                  income for the tax year in which the disposal occurs.”
 20      In section 454 (listed securities held since 26th March 2003: relief for losses)
         for subsection (4) substitute—
           “(4)   If a claim under this section is made by a person other than a trustee,
                  the relief is given by deducting the loss in calculating the person’s
                  unrelieved total income for the tax year in which the disposal
                  occurs.”
 21      In section 530(4) (gains from contracts for life insurance etc: income tax
         treated as paid) after “fall to be made” insert “at Step 2 or 3 of the calculation
         in section 2 of [Bill 4] (calculation of income tax liability)”.



                                     SCHEDULE 2

                              REPEALS AND REVOCATIONS

             Reference                          Extent of repeal or revocation
 Income and Corporation Taxes        Section 353(1F) to (1H).
   Act 1988 (c. 1)                   Section 823.
                                     Section 835.
                                     Section 836.
 Finance Act 1988 (c. 39)            In Schedule 3, paragraph 22.
 Finance Act 1996 (c. 8)             In Schedule 6, paragraph 24.
 Finance Act 1998 (c. 36)            In Schedule 3, paragraph 40.
 Finance Act 1999 (c. 16)            In Schedule 4, paragraph 1(4).
 Finance Act 2000 (c. 17)            Section 83(2).
 Capital Allowances Act 2001         In Schedule 2, paragraph 62.
   (c. 2)
 Income Tax (Trading and Other       In Schedule 1, paragraph 339.
   Income) Act 2005 (c. 5)

				
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Description: Tax Liability on Uk Patent Royalties document sample