Commentary on Sections Part 2: Charge to corporation tax: basic provisions Overview
29.The process of separating income tax and corporation tax began with ITTOIA and continued with ITA, which substantially completed the rewrite of income tax legislation for income tax purposes. Following that there were two parallel sets of income tax principles. Those in rewrite style apply only for income tax purposes and, for example, no longer include Schedules such as Schedule D and its Cases.
30.Prior to this Act corporation tax has been dependent on the continuing existence of the income tax rules in unrewritten style so that, for example, those Schedules and Cases continue to be applied for the purposes of corporation tax.
31.This Act continues and finalises the separation process so that the relevant principles apply separately for corporation tax. The adoption of this approach means that section 9 of ICTA (computation of income: application of income tax principles) is repealed by this Act (apart from section 9(5) which theoretically could have a continuing effect). Some of the provisions of section 9 of ICTA are rewritten in section 969 and there is a transitional provision in Schedule 2.
32.This Chapter deals with the charge to corporation tax on profits. The approach retains the principle of a single charge, currently under section 6 of ICTA. The charge under section 2 is on amounts of income and on chargeable gains that together form the “profits pot”.
33.This contrasts with the multiple charges to income tax in the Income Tax Acts, primarily ITTOIA, and reflects the different history of the two taxes.
34.The way the charge on profits operates is explained in the commentary on section 2. This section rewrites both section 6(1) and (4) of ICTA and section 9(1) and (4) of that Act. In the light of the separation of corporation tax from income tax it is necessary to find a different way of expressing the relationship between the general charge to corporation tax on income and the provisions that deal with its application.
35.There are also other charges to corporation tax. These are charges to an amount of corporation tax and they do not feature in the “profits pot”. There is an example of this kind of charge in this Act – in section 75{j032704}(2) (retraining courses: recovery of tax).
36.These are provisions of an administrative nature mainly recovering excessive relief. In some of the charges of this kind there are references to the assessment being made under Schedule D Case VI. The Case VI label will disappear along with Schedule D and the other Cases with the repeal of section 18 of ICTA. The references are removed by consequential amendments in Schedule 1. An example is the amendment to paragraph 27(4) of Schedule 16 to FA 2002.