Annex 1: Minor changes in the law Change 60: Corporation Tax Acts definitions: meaning of “local authority” in relation to Northern Ireland: claims: section 1130 and Schedule 1
This change defines “local authority”, in relation to Northern Ireland, explicitly in terms of relevant district councils rather than by reference to authorities with power to raise a rate.
Section 842A of ICTA defines “local authority” in the Corporation Tax Acts in relation to each of England and Wales, Scotland and Northern Ireland as “an authority of a description specified” in a list of institutions relevant to each of those parts of the United Kingdom.
In relation to Northern Ireland, section 842A(4) of ICTA specifies:
Section 842A(5) of ICTA defines “rate” for the purposes of that section as “a rate the proceeds of which are applicable for public local purposes and which is leviable by reference to the value of land or other property”.
The Office of the Legislative Counsel in Northern Irelandhas advised that this definition of “local authority” in relation to Northern Ireland is now inappropriate. Section 842A of ICTA refers to an authority with power to make or determine “a rate”. But there are two different kinds of “rate” in Northern Ireland: adistrict rate which is set by district councils and a regional rate which is set by the Departmentof Finance and Personnel, which are levied as one rate by the Department of Financeand Personnel. Section 842A of ICTA could therefore be construed as defining as a “localauthority” an entity which is part of central government in Northern Ireland. This is not the intended effect of this provision and would produce a result out of step with the equivalent provisions for the meaning of “local authority” in England and Wales and Scotland.
In addition, the Office of the Legislative Counsel in Northern Ireland has advised that the wording ofsection 842A(4)(b) of ICTA is inapt for the local rating system in Northern Ireland as there is no analogue in that jurisdiction for the term “precept” and the term “requisition” is not used.
The definition in section 842A(4) of ICTA has therefore been rewritten so that it captures only district councils constituted under section 1 of the Local Government Act (Northern Ireland) 1972 and does not extend to theDepartment of Finance and Personnel.On this basis there is no need to replicate section 842A(4)(b) of ICTA as no other relevant authorities fall within that limb.
An amendment in Schedule 1 to the Act makes a corresponding change to section 999(3) of ITA.
This change affects the scope of provisions referring to local authorities in relation to Northern Ireland. It makes explicit the bodies to which the term refers but does not in practice change the scope of the definition. The change affects in principle the taxation of such bodies (for example, see section 984 (exemption for local authorities etc in the United Kingdom)) and of companies holding securities issued by such bodies (for example, see section 806 (meaning of “UK securities” in Part 17 (manufactured payments and repos))). While in principle it cuts down the potential scope of the definition, it has no such effect in practice.
This change is adverse to some taxpayers in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.