Finance Act 2013

Rules allowing deductions U.K.

12 U.K. Chapter 5 (trade profits: rules allowing deductions) is amended as follows.

13 U.K. After section 56 insert—

“Cash basis accounting U.K.

56A Application of Chapter to the cash basis

(1) The following sections do not apply in calculating the profits of a trade on the cash basis—

• sections 60 to 67 (tenants under taxed leases),

• section 68 (replacement and alteration of trade tools).

(2) For rules allowing deductions that apply only where profits are calculated on the cash basis, see the following—

section 57B (cash basis: interest payments on loans).

(3) In calculating the profits of a trade on the cash basis, any reference in this Chapter to the incurring of expenses is to be read as a reference to the paying of expenses.”

14 U.K. After section 57A insert—

“Cash basis: interest payments U.K.

57B Cash basis: interest payments on loans

(1) This section applies if a person carrying on a trade in a period pays any interest on a loan during the period and—

(a) a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because of section 51A, or

(b) in the absence of section 51A, a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because (and only because) it was not an expense incurred wholly and exclusively for the purposes of the trade.

(2) In calculating the profits of the trade on the cash basis, a deduction is allowed for the interest.

(3) But the maximum amount that may be deducted by virtue of this section or section 58 (incidental costs of obtaining finance) in calculating the profits of a trade for any period is £500.

(4) The Treasury may by order amend the figure for the time being specified in subsection (3).

(5) A statutory instrument containing an order under this section that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

15 U.K. In section 58 (incidental costs of obtaining finance), in subsection (5), after “with” insert “—

(a) section 57B(3) (which imposes a limit on the total amount that may be deducted by virtue of this section or section 57B), and

(b)”.

16 U.K. In section 72 (payroll deduction schemes: contributions to agents' expenses), after subsection (2) insert—

“(2A) In calculating the profits of the employer's trade on the cash basis, subsection (2) has effect as if paragraph (b) were omitted.”

17 U.K. In section 94A (costs of setting up SAYE option scheme or CSOP scheme), after subsection (4) insert—

“(5) But subsection (4) does not apply in calculating the profits of a trade on the cash basis.”