Finance Act 1975

18 Relief for increase in stock values in financial year 1973

(1) Subject to the following provisions of this section, if—

(a) a company carries on a trade in respect of which it is, for its 1973 accounting period, within the charge to corporation tax under Case I of Schedule D, and

(b) the value of the company's trading stock at the end of its 1973 accounting period (in this section referred to as its " closing stock value") exceeds the value of its trading stock at the beginning of that accounting period (in this section referred to as its " opening stock value "),

the company shall be entitled to relief under this section by reference to the amount of that excess; and in the following provisions of this section the amount of that excess is referred to as the company's " 1973 increase in stock value ".

(2) In this section " 1973 accounting period " means—

(a) in the case of a company which has not more than one accounting period ending in the financial year 1973, that accounting period ; and

(b) in the case of any other company, a notional accounting period beginning on the first day of the first of the company's accounting periods which ends in the financial year 1973 and ending on the last day of the last of the company's accounting periods which ends in that year;

and for the purposes of this section an accounting period which ends on the last day of a financial year shall be treated as ending in that year.

(3) Schedule 3 to this Act shall have effect—

(a) in any case where a company's 1973 accounting period does not coincide with a period of account or with two or more consecutive periods of account or is longer than twelve months ; and

(b) in certain cases where trading stock is transferred between companies which are members of the same group of companies ; and

(c) in certain cases of companies beginning or ceasing to carry on a trade or ceasing to be within the charge to corporation tax or to be resident in the United Kingdom.

(4) For the purposes of the Corporation Tax Acts, other than this section and Schedule 3 to this Act, in any case where a company is entitled to relief under this section—

(a) the company's closing stock value shall be treated as reduced by an amount equal to its 1973 increase in stock value, less 10 per cent, of its trading income for its 1973 accounting period, and

(b) the value of the company's trading stock at the beginning of the period of account which begins on the day following that as at which the closing stock value is determined shall be treated as reduced by the like amount,

and all such adjustments shall be made in any assessment to corporation tax for any relevant accounting period as are necessary to give effect to any relief under this section.

(5) A company shall not be entitled to relief under this section unless—

(a) its closing stock value is not less than £25,000 ; and

(b) its 1973 increase in stock value is greater than 10 per cent, of its trading income for its 1973 accounting period; and

(c) a claim for the relief is made within the time allowed under subsection (6) below ;

and, notwithstanding anything in section 155 of the Taxes Act (partnership profits and losses computed in certain cases as if the partnership were a company), nothing in this section shall affect the computation of the profits of, or any loss incurred in, a partnership unless each of the partners is a company.

(6) A claim for relief under this section in respect of an accounting period may be made at any time before—

(a) the date on which the assessment to corporation tax for that period becomes final, that is to say, when the assessment can no longer be varied by any Commissioners on appeal or by the order of any court, or

(b) the expiry of the period of six months beginning with the date on which this Act is passed,

whichever is the later.

(7) In any case where—

(a) by virtue of subsection (2)(b) above, a company's 1973 accounting period consists of two or more accounting periods and the last of those periods (in this subsection referred to as " the relevant accounting period") coincides with a period of account, and

(b) the company makes a claim for relief under this section, and

(c) in the relevant accounting period the company incurs a loss in the trade referred to in subsection (1)(a) above,

then, notwithstanding that the relevant accounting period is less than 12 months, in relation to so much of the loss referred to in paragraph (a) above as would not have been incurred if the claim for relief under this section had not been made, subsections (2) and (3) of section 177 of the Taxes Act (carry back of losses against profits of preceding accounting periods ending within a specified time) shall have effect as if the time specified in the said subsection (3) comprised—

(i) so much of the 1973 accounting period as does not consist of the relevant accounting period ; and

(ii) the period which ends immediately before the 1973 accounting period and is either equal in length to that period or 12 months, whichever is the shorter.

(8) Where any adjustment is made in the computation of the profits arising or losses incurred in an accounting period in giving effect to a claim for relief under this section, a claim for relief or (as the case may be) for additional relief under any other provision of the Tax Acts which is made in consequence of that adjustment (whether by the company to which the relief under this section is granted or by any other company) shall not be out of time if it is made before the end of the period of six months beginning with the date on which this Act is passed, notwithstanding that the time limit otherwise applicable to a claim under that provision has expired.

(9) In this section " trading stock" has the same meaning as in section 137 of the Taxes Act except that it does not include—

(a) securities, which for this purpose includes shares and stock, or

(b) any services, article or material which, if the trade concerned were a profession, would be treated as work in progress for the purposes of section 138 of that Act, or

(c) in the case of a company which carries on a trade in partnership with other persons at least one of whom is an individual, any interest in the trading stock of the partnership,

and in determining the value of a company's trading stock at any time for the purposes of this section, to the extent that, at or before that time, any payments on account have been received by the company in respect of any trading stock, the value of that stock shall be reduced accordingly.

(10) In this section " trading income " means, in relation to any trade, the income from the trade computed, in accordance with the rules applicable to Case I of Schedule D, except that—

(a) no deduction or addition shall be made by virtue of section 73, section 74 or section 91 of the [1968 c. 3.] Capital Allowances Act 1968 (corporation tax allowances and charges and allowances for capital expenditure on scientific research); and

(b) no account shall be taken of any set-off or reduction of income to which the company is entitled by virtue of section 177 or section 178 of the Taxes Act (trade etc. losses); and

(c) in a case falling within subsection (9)(c) above, any income in relation to the trade carried on by the partnership shall be excluded.

(11) For the purposes of this section, in any case where, by virtue of subsection (2)(b) above, a company's 1973 accounting period consists of more than one accounting period, its trading income for its 1973 accounting period shall be the aggregate of its trading income for each of the accounting periods of which that period consists.