Sneaky change

Sneaky change

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Have the Revenue got away with a sneaky little change in the law when they brought in ITTOIA without telling us?

Section 20(2) of ICTA said quite clearly that (with a couple of exceptions that relate to Lloyds underwriters) 'no distribution which is chargeable under schedule F shall be chargeable under any other provision of the Income Tax Acts'.

This was repealed with the introduction of ITTOIA, which also introduced a new section 716A into ITEPA. This is far more limited in its scope, simply giving ITTOIA precedence over parts 2, 9 and 10 of ITEPA. It does not give ITTOIA precedence over part 7, for example, which is about 'income relating to securities'.

This could affect composite companies in the IT sector, for example, which pay dividends based on the amount of work done to contractors who are not affected by IR35. Their shares could (I suggest probably would) be 'employment-related securities' and thus dividends from them taxed under section 447 of ITEPA, with a consequent national insurance charge. Previously, that would have been barred by section 20 of ICTA.

I have looked through the explanatory notes to ITTOIA which are full of details of very minor technical changes, but I can find no reference to this one. Has it been sneaked in without warning?

David Kirk, MA FCA ATII
[email protected]
David Kirk

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