ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small. Change 156: Deduction of tax: visiting performers: Schedule 1 (section 556 of ICTA and section 13 of ITTOIA)
This change makes it explicit that, when a payment or transfer of the type referred to in section 555 of ICTA is made, section 556 of ICTA and section 13 of ITTOIA will apply regardless of whether there is a duty to deduct tax at source under section 555. This gives statutory effect to the majority decision of the House of Lords in Agassi v Robinson [2006 UKHL 23] (21).
In that case, the House of Lords held that a visiting performer is liable to income tax on payments made in respect of a UK performance regardless of whether the payment is made directly to the performer or to a person connected with the performer. They held that the liability to income tax on a visiting performer under section 18(1)(a)(iii) of ICTA is not determined by whether there is a duty to deduct income tax from the payment. So the operation of section 556 of ICTA does not depend on the payer having an obligation to deduct tax at source under section 555 of ICTA.
As Lord Scott said at paragraph 17(2) of the judgment:
“In order to know whether for section 556(5) purposes the payment is one to which section 555(2) applies, two, and in my opinion only two, questions need to be asked. First, has a payment been made (to whatever person), not being a payment “of such a kind as [has been] prescribed” (section 555(6))? If the answer is “yes”, then, second, has the payment “a connection of a prescribed kind with the relevant activity”? If the answer to this question, too, is “yes” then, in my opinion, for section 556(5) purposes, the payment is one to which section 555(2) applies. The identity of the payer is, in my opinion, as a matter of construction of section 555(2), irrelevant to the question.”
The amendments to section 556 of ICTA make it explicit that, when a payment or transfer of the type referred to in section 555 of ICTA is made, no liability to corporation tax will arise. This is regardless of whether there is a duty to deduct under section 966 of this Act.
The amendments to section 13 of ITTOIA make it explicit that when a payment or transfer of the type referred to in section 555 of ICTA is made, it is not necessary for there to be a duty to deduct under section 966 of this Act in order for the performer to be liable to income tax on the payment or transfer under Chapter 2 of Part 2 of ITTOIA (income taxed as trade profits).
As part of this amendment, section 555(5) of ICTA has been incorporated into section 13 of ITTOIA to make clear that there is no link between the primary liability to income tax under Chapter 2 of Part 2 of ITTOIA (income taxed as trade profits) and the duty to deduct tax under section 966 of this Act.