ANNEX 1:: MINOR CHANGES IN THE LAW Change 5: Requiring an apportionment, or a reduction, to be just and reasonable: sections 37 and 44 and Schedule 4 (sections 681DE and 681DJ of ITA)
This change requires any apportionment or reduction that is not required by the source legislation to be made on a just and reasonable basis to be made on such a basis.
In some cases where there is an apportionment under legislation rewritten in this Act, the apportionment is required by the source legislation to be made on a just and reasonable basis. In other cases, it is required to be made only on a just basis or only on a reasonable basis. In new tax legislation it is now the practice to require an apportionment to be just and reasonable. For example, before it was replaced by ITEPA, section 140B(4) of ICTA (inserted by FA 1998) required a just and reasonable apportionment to be made of any consideration given partly in respect of one thing and partly in respect of another. There is no reason why an apportionment should not be on a just and reasonable basis. And it is desirable that all apportionments should be made on the same basis.
Similarly, section 784(4) of ICTA provides that “the amount to be deducted … shall be such proportion of the capital expenditure which is still unallowed as is reasonable” (rather than such proportion as is just and reasonable).
Accordingly, where an apportionment under legislation rewritten in this Act is not required to be made on a just and reasonable basis, the rewritten provision requires the apportionment to be made on a just and reasonable basis. The changes are as follows.
	Section 783(8) of ICTA (leased assets: capital sums) requires apportionments to be just. As rewritten in new section 681DJ of ITA (inserted by Schedule 4), it requires apportionments to be not only just but also reasonable.
	Sections 798(3) and 798A(3)(b) of ICTA (double taxation relief: limitations on credit against income tax and corporation tax) require apportionments to be reasonable. As rewritten in sections 37 and 44 respectively, they require apportionments to be not only reasonable but also just.
Similarly, new section 681DE(5)(a) of ITA (inserted by Schedule 4), which is based on section 784(4) of ICTA, requires the unallowed amount to be reduced to a proportion which is not only reasonable but also just.
The same change has been made in previous rewrite Acts to provide a uniform expression of the basis on which apportionments are to be made.
This change makes minor amendments to a number of existing rules, but is expected to have no practical effect as it is in line with generally accepted practice.