Annex 1: Minor changes in the law Change 65: Corporation Tax Acts definitions: amendment of section 991 of ITA: Schedule 1
This change corrects an error in section 991 of ITA and brings the definition of “bank” in the Income Tax Acts and Corporation Tax Acts into line.
Section 840A of ICTA defines “bank” for the purposes of any provision of the Corporation Tax Acts that applies this definition. Prior to the amendment of this section by paragraph 226 of Schedule 1 to ITA, the section applied for both the Income Tax Acts and the Corporation Tax Acts.
Among the categories of body which make up the defined term in section 840A of ICTA is “a relevant international organisation which is designated as a bank for the purposes of that provision by an order made by the Treasury”. The “provision” referred to is the provision that applies the definition of “bank” in this section. An order made under this power may therefore affect some but not all of the provisions that apply the definition. While the only order made to date using this power (the European Investment Bank (Designated International Organisation) Order 1996 (SI 1996/1179), repealed by Schedule 3 to ITA) applied for the purposes of all such provisions, there may be circumstances in which it would be desirable to restrict the scope of the designation under such an order.
Section 991 of ITA expresses the power to designate an international organisation as a bank “for the purposes of this section”, that is, for the purposes of section 991 of ITA, rather than for the purposes of the provisions that apply the definition. It therefore omits the option to designate an international organisation as a bank for the purposes of some but not all provisions.
Section 1120 rewrites section 840A of ICTA but includes that option in its expression of the power as it applies to the Corporation Tax Acts (see subsection (5)). Schedule 1 to the Act therefore amends section 991 of ITA to restore the option in the income tax definition and to keep the income tax and corporation tax codes in line.
This change has the potential to limit when an international organisation is treated as a bank for the purposes of some provisions of the Income Tax Acts. Whether that leads to an increase or decrease of tax (or whether there is any effect) depends on the affected provision and the circumstances of the affected taxpayer.
This change is in principle adverse to some taxpayers and favourable to others. But it is expected to have no practical effect as it is in line with generally accepted practice.