Finance Act 2022

Calculation of income tax liability on amount of transition profits U.K.

75 (1) This paragraph applies for determining the trader’s liability to income tax for a tax year in which an amount of the transition profits for the tax year 2023-24 is chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005 (see Step 5 of the calculation in paragraph 70(2) and paragraphs 72 and 73).

(2) To find the trader’s liability to income tax for the tax year, section 23 of ITA 2007 applies as if—

(a) the amount of the transition profits chargeable to income tax were a separate component of total income (“the transition component”),

(b) the transition component were relieved in accordance with Step 2,

(c) the amount of the transition component left after Step 2 were left out of the calculation of net income (and subsequent Steps), and

(d) for the purposes of Steps 5 to 7, the amount (if any) given by sub-paragraph (3) were treated as an amount of tax calculated at Step 4.

(3) The amount given by this sub-paragraph is the difference between—

(a) the total amount of tax that would be calculated at Step 5 if Steps 1 to 4 were applied in accordance with sub-paragraph (2)(a) to (c) (ignoring sub-paragraph (2)(d)), and

(b) the total amount of tax that would be calculated at Step 5 if Steps 1 to 4 were applied in accordance with sub-paragraph (2)(a) and (b) (ignoring sub-paragraph (2)(c) and (d)).

(4) The Steps mentioned in sub-paragraphs (2) and (3) are Steps of the calculation in section 23 of ITA 2007.