Income Tax Act 2007

1025 Meaning of “modified net income”

(1) For the purposes of this Act a person’s modified net income for a tax year (“year X”) is the person’s net income for year X calculated in accordance with Steps 1 and 2 of section 23 (calculation of income tax liability) as modified by subsection (2).

(2) In applying Steps 1 and 2 of section 23, ignore—

(a) any non-qualifying income included in the person’s total income (see section 1026),

(b) any relief under Chapter 2 of Part 4 for a loss incurred or treated as incurred, or a payment made, in a tax year later than year X,

(c) any reliefs to which the person may be entitled under Chapter 4 of Part 8,

(d) any adjustment of profits resulting from a claim under Chapter 16 of Part 2 of ITTOIA 2005 (averaging profits of farmers and creative artists), if year X is the earlier of the tax years in relation to which the claim is made,

(e) any adjustment resulting from an election under section 257 of ITTOIA 2005 (election to carry back post-cessation receipts), and

(f) any relief or adjustment resulting from the making, amendment or revocation of a claim for relief, if the claim, amendment or revocation would have been out of time but for section 224(4) of ITTOIA 2005 (averaging profits of farmers and creative artists: extension of deadline for claiming other reliefs).

(3) This section applies for the purposes of section 427 as if subsection (2)(c) were omitted.

(4) This section applies for the purposes of Chapter 9 of Part 9 and Chapter 13 of Part 15 as if for subsection (2)(c) there were substituted—

“(c) any reliefs to which the person may be entitled under section 505,”.

(5) In this section “claim” includes an election or notice.