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Modifications etc. (not altering text)
C1Pt. 9 modified (with effect as mentioned in Sch. 6 para. 6(2)-(7) to the amending Act) by Income and Corporation Taxes Act 1988 (c. 1) , s. 774D(4) as inserted by Finance Act 2006 (c. 25), s. 76, Sch. 6 para. 6(1)
(1)The rule in section 9(2) (farming trades) operates in relation to firms so that—
(a)all farming in the United Kingdom which a firm carries on, other than farming carried on as part of another trade, is treated as one trade, but
(b)the farming carried on by a firm which is treated as one trade is not included in any farming trade of any partner in the firm.
(2)Section 264 (UK property business) operates in relation to firms so that—
(a)every business and transaction mentioned in that section carried on, or entered into, by a firm constitutes the firm's UK property business, but
(b)each business or transaction included in the firm's UK property business is not included in any UK property business of any partner in the firm.
(3)Section 265 (overseas property business) operates in relation to firms so that—
(a)every business and transaction mentioned in that section carried on, or entered into, by a firm constitutes the firm's overseas property business, but
(b)each business or transaction included in the firm's overseas property business is not included in any overseas property business of any partner in the firm.
(1)A change in the persons carrying on a trade from one period of account to the next does not prevent Chapter 17 of Part 2 (adjustment income) applying in relation to the trade so long as a person carrying on the trade immediately before the change continues to carry on the trade immediately after the change.
[F1(1A)A change in the persons carrying on a property business from one period of account to the next does not prevent Chapter 7 of Part 3 (adjustment income) applying in relation to the property business so long as a person carrying on the property business immediately before the change continues to carry on the property business immediately after the change.]
(2)A change in the persons carrying on a trade does not constitute the permanent cessation of the trade for the purposes of Chapter 17 of Part 2 so long as a person carrying on the trade immediately before the change continues to carry on the trade immediately after the change.
(3)In the case of a trade [F2or property business] carried on by a firm the amount of any adjustment under Chapter 17 of Part 2[F3, or Chapter 7 of Part 3,] is calculated as if the firm were a UK resident individual.
(4)Each partner's share of any amount of adjustment income is determined according to the firm's profit-sharing arrangements for the 12 months ending immediately before the date on which the new basis was adopted.
(5)Any election under Chapter 17 of Part 2 must be made jointly by all the persons who have been members of the firm in that 12 month period.
(6)For the purposes of this section—
(a)“adjustment income” and “change of basis” have the same meaning as in Chapter 17 of Part 2, [F4or Chapter 7 of Part 3 (as the case requires)]
(b)“profit-sharing arrangements” means the rights of the partners to share in the profits of the trade [F5or property business (as the case requires)] , and
(c)references to the date on which a new basis was adopted are to the first day of the first period of account for which the new basis was adopted.
(7)Sections 849 to 856 do not apply so far as this section applies.
Textual Amendments
F1S. 860(1A) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 641(2) (with Sch. 2 Pts. 1, 2)
F2Words in s. 860(3) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 641(3)(a) (with Sch. 2 Pts. 1, 2)
F3Words in s. 860(3) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 641(3)(b) (with Sch. 2 Pts. 1, 2)
F4Words in s. 860(6)(a) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 641(4)(a) (with Sch. 2 Pts. 1, 2)
F5Words in s. 860(6)(b) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 641(4)(b) (with Sch. 2 Pts. 1, 2)
(1)This section applies if each of the following conditions is met—
(a)a person (“the trader”) sells the whole or part of any patent rights in carrying on a trade,
(b)tax is chargeable under section 587 of this Act or section 912 of CTA 2009 on the proceeds of the sale or on any instalment of those proceeds,
(c)the tax is chargeable in one or more tax years or accounting periods (referred to in this section as “the tax charge periods”),
(d)there is a change in the persons carrying on the trade at any time between the beginning of the first of those tax charge periods and the end of the last of them, and
(e)the partnership condition and the continuity condition are met.
(2)The partnership condition is that—
(a)the trader is a firm at the time of the sale, or
(b)the trade is carried on in partnership at any time between the beginning of the first of the tax charge periods and the end of the last of them.
(3)The continuity condition is—
(a)in the case of an amount chargeable under section 587, that a person who carried on the trade immediately before the change continues to carry it on after the change, or
(b)in the case of an amount chargeable under section 912 of CTA 2009, that a company which carried on the trade in partnership immediately before the change continues to carry it on in partnership after the change.
(4)Any amounts chargeable in respect of the proceeds or instalment that would (apart from this section) be treated in accordance with Chapter 2 of Part 5 of this Act or Chapter 3 of Part 9 of CTA 2009 as profits of the seller of the patent rights chargeable in tax charge periods falling wholly after the change are treated for income tax purposes—
(a)as proceeds, arising at a constant daily rate during the remainder of the relevant period, of a sale of patent rights by the person or persons carrying on the trade after the change, and
(b)if the trade is carried on in partnership after the change, as arising to the partners in shares calculated in accordance with the firm's profit-sharing arrangements.
(5)If the change occurs during the course of a tax charge period—
(a)any person who would, but for this section, have been charged to income tax in that period on a sum (“S”) in respect of the proceeds or instalment is so charged on a fraction of S proportionate to the length of the part of the period before the change, and
(b)the balance of S not dealt with under paragraph (a) is treated for the purposes of this section and section 1271 of CTA 2009 (sale of patent rights: effect of partnership changes) as if it were an amount such as is described in subsection (4).
(6)In this section “the remainder of the relevant period” means—
(a)if one or more tax charge periods begins after the tax charge period in which the change occurs, the period beginning immediately after the change and ending 6 years after the beginning of the first of the tax charge periods, or
(b)otherwise, the period beginning immediately after the change and ending at the end of the tax charge period in which the change occurs.
(7)In this section “profit-sharing arrangements” means the rights of the partners to share in the profits of the trade.]
Textual Amendments
F6S. 861 substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 642 (with Sch. 2 Pts. 1, 2)
Modifications etc. (not altering text)
C2S. 861 modified (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 1271(5)(b), 1329(1) (with Sch. 2 Pts. 1, 2)
[F7(1)This section applies if—
(a)a person (“the trader”) sells the whole or part of any patent rights in carrying on a trade,
(b)by virtue of section 861 amounts are chargeable to income tax under section 587 as profits of one or more persons for the time being carrying on the trade in partnership,
(c)a partner permanently ceases to carry on the trade after that, and
(d)no person who carried on the trade immediately before the cessation continues to carry on the trade immediately after the cessation.
(2)Any amounts mentioned in subsection (1)(b) which would have been chargeable in any tax year later than that in which the cessation occurred are charged in the tax year in which the cessation occurred.]
F8(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)If an additional amount is chargeable under subsection (2), the person liable may elect that the amount of income tax payable should be reduced to the amount that would have been payable on the assumptions mentioned in subsection (5).
(5)The assumptions are—
(a)that subsection (2) does not apply, and
(b)that the total of the amounts that would have been charged in later tax years is charged in equal instalments in each of the tax years—
(i)beginning with the year in which the trader received the proceeds of the sale or instalment of those proceeds, and
(ii)ending with the year in which the cessation occurs.
(6)The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.
F9(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F7S. 862(1)(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 643(2) (with Sch. 2 Pts. 1, 2)
F8S. 862(3) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 643(3), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)
F9S. 862(7) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 643(3), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)
(1)For income tax purposes, if a limited liability partnership carries on a trade, profession or business with a view to profit—
(a)all the activities of the limited liability partnership are treated as carried on in partnership by its members (and not by the limited liability partnership as such),
(b)anything done by, to or in relation to the limited liability partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and
(c)the property of the limited liability partnership is treated as held by the members as partnership property.
References in this subsection to the activities of the limited liability partnership are to anything that it does, whether or not in the course of carrying on a trade, profession or business with a view to profit.
(2)For all purposes, except as otherwise provided, in the Income Tax Acts—
(a)references to a firm [F10or partnership] include a limited liability partnership in relation to which subsection (1) applies,
(b)references to members [F11or partners] of a firm [F12or partnership] include members of such a limited liability partnership,
(c)references to a company do not include such a limited liability partnership, and
(d)references to members of a company do not include members of such a limited liability partnership.
(3)Subsection (1) continues to apply in relation to a limited liability partnership which no longer carries on any trade, profession or business with a view to profit—
(a)if the cessation is only temporary, or
(b)during a period of winding up following a permanent cessation, provided—
(i)the winding up is not for reasons connected in whole or in part with the avoidance of tax, and
(ii)the period of winding up is not unreasonably prolonged.
This is subject to subsection (4).
(4)Subsection (1) ceases to apply in relation to a limited liability partnership—
(a)on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or
(b)on the occurrence of any event under the law of a territory outside the United Kingdom corresponding to an event specified in paragraph (a).
Textual Amendments
F10Words in s. 863(2)(a) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 580(a) (with transitional provisions and savings in Sch. 2)
F11Words in s. 863(2)(b) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 580(b)(i) (with transitional provisions and savings in Sch. 2)
F12Words in s. 863(2)(b) inserted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 580(b)(ii) (with transitional provisions and savings in Sch. 2)