PART IIF41PROVISIONS RELATING TO THE SCHEDULE A CHARGE
General
21F1 Persons chargeable and basis of assessment.
F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F5C1C221A Computation of amount chargeable.
1
Except as otherwise expressly provided, the profits of a Schedule A business are computed in the same way as the profits of a trade are computed for the purposes of Case I of Schedule D.
2
The following provisions apply in accordance with subsection (1)—
section 72 (apportionment);
the provisions of Chapter V of Part IV (computational provisions relating to the Schedule D charge), except as mentioned in subsection (4) below;
section 577 (business entertainment expenses);
section 577A (expenditure involving crime);
sections 579 and 580 (redundancy payments);
F46section 588 (training courses for employees);
F47section 589A (counselling services for employees);
section 73(2) of the M6Finance Act 1988 (consideration for restrictive undertakings);
section 43 of the M7Finance Act F481989 (Schedule D: computation);
F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
sections 42 and 46(1) and (2) of the Finance Act 1998 (provisions as to computation of profits and losses);
F51sections 196 to 200 of the Finance Act 2004 (registered pension schemes);
section 246 of that Act (employer-financed retirement benefits schemes).
3
Section 74(1)(d) of this Act (disallowance of provisions for future repairs) applies in relation to a Schedule A business as if the reference to premises occupied for the purposes of the trade were to premises held for the purposes of the Schedule A business.
4
The following provisions in Chapter V of Part IV of this Act do not apply, or are excepted from applying, in accordance with subsection (1)—
F455
Part 1 of Schedule 22 to the Finance Act 2001 (deduction for capital expenditure on remediation of contaminated land) applies in accordance with subsection (1), and the other Parts of that Schedule (further provision as to relief for remediation of contaminated land) have effect in relation to a Schedule A business in accordance with their provisions.
F521B Application of other rules applicable to Case I of Schedule D.
The following provisions apply for the purposes of Schedule A in relation to a Schedule A business as they apply for the purposes of Case I of Schedule D in relation to a trade—
sections 103 to 106 F54. . . and 110 (post-cessation receipts and expenses, etc.) F55, with any reference to a trade within the charge to income tax being read as a reference to a UK property business;
F54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
section 337(1) (effect of company beginning or ceasing to carry on trade);
section 401(1) (pre-trading expenditure);
F56section 64 of and Schedule 22 to the Finance Act 2002 (change of accounting basis).
F621C The Schedule A charge and mutual business.
1
The following provisions have effect for the purpose of applying the charge to F57corporation tax under Schedule A in relation to mutual business.
2
The transactions or relationships involved in mutual business are treated as if they were transactions or relationships between persons between whom no relationship of mutuality existed.
3
Any surplus arising from the business is regarded as a profit (and any deficit as a loss) if it would be so regarded if the business were not mutual.
4
F58The company to which the profit arises is the company which would satisfy that description if the business were not mutual business.
5
Nothing in this section affects the operation of section 488 (co-operative housing associations).
22 Assessments.
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23 Collection from lessees and agents.
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24 Construction of Part II.
1
M1In this Part, except where the context otherwise requires—
“lease” includes an agreement for a lease, and any tenancy, but does not include a mortgage or heritable security, and “lessee”, “lessor” and “letting” shall be construed accordingly;
“lessee” and “lessor” include respectively the successors in title of a lessee or a lessor;
“premises” includes any land; and
“premium” includes any like sum, whether payable to the immediate or a superior landlord or to a person connected (within the meaning of section 839) with the immediate or a superior landlord.
2
3
M3Where paragraph (c) of section 38(1) applies, the premium, or an appropriate part of the premium, payable for or in connection with either lease mentioned in that paragraph may be treated as having been required under the other.
4
References in this section to a sum shall be construed as including the value of any consideration, and references to a sum paid or payable or to the payment of a sum shall be construed accordingly.
5
M4In the application of this Part to Scotland—
“assignment” means an assignation;
“intermediate landlord” means, where an occupying lessee is a sub-lessee, any person for the time being holding the interest of landlord under a sub-lease which comprises the property of which the occupying lessee is sub-lessee, but does not include the immediate landlord;
“premium” includes in particular a grassum payable to any landlord or intermediate landlord on the creation of a sub-lease; and
“reversion” means the interest of the landlord in the property subject to the lease.
6
M5In Schedule A and in sections 25 to 31—
a
references to a lease extend only to a lease conferring a right, as against the person whose interest is subject to the lease, to the possession of the premises;
b
“rent” includes a payment by the tenant to defray the cost of work of maintenance of, or repairs to, the demised premises, not being work required by the lease to be carried out by the tenant; F44. . .
c
F44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions and other allowances
25 Deductions from rent: general rules.
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26 Deductions from rent: land managed as one estate.
F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27 Deductions from rent: maintenance funds for historic buildings.
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28 Deductions from receipts other than rent.
F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29 Sporting rights.
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 Expenditure on making sea walls.
C31
M8Where in any year of assessment the owner or tenant of any premises incurs any expenditure in the making of any sea wall or other embankment necessary for the preservation or protection of the premises against the encroachment or overflowing of the sea or any tidal river, F60that person shall be treated F59for the purpose of computing the profits of any Schedule A business carried on in relation to those premises as making in that year of assessment and in each of the succeeding 20 years of assessment a payment in relation to the premises preserved or protected by the embankment of an amount equal to a twenty-first part of the expenditure and incurred in respect of dilapidation attributable to the year.
2
Where the whole of that person’s interest in the premises or any part thereof is transferred (whether by operation of law or otherwise) to some other person—
a
the amount of the payment which F61that person would be so treated as making for the year of assessment in which the transfer takes place shall be treated as being made partly by the transferor and partly by the transferee, as may be just; and
b
the transferee shall, to the exclusion of the transferor, be treated in any subsequent year—
i
where the interest transferred is in the whole of the premises, as having made the whole of the payment for that year, and
ii
where the interest transferred is in part only of the premises, as having made so much of the payment as is properly referable to that part of the premises.
F622A
If—
a
the transferor is a company within the charge to corporation tax and the transferee is a person within the charge to income tax, or
b
the transferor is a person within the charge to income tax and the transferee is a company within the charge to corporation tax,
subsection (2) above shall apply only for the purpose of determining the amount of the payment which the company is treated as making in any year of assessment.
For any entitlement of the person within the charge to income tax to a deduction for any of the expenditure, see sections 316 and 318 of ITTOIA 2005 (corresponding income tax provision).
3
For the purposes of subsection (2) above, where an interest in any premises is a lease and that lease comes to an end, that interest shall be deemed to have been transferred—
a
if an incoming lessee makes any payment to the outgoing lessee in respect of the embankment in question, to the incoming lessee, and
b
in any other case, to the owner of the interest in immediate reversion on the lease and, in relation to Scotland, the expression “the owner of the interest in immediate reversion on the lease” shall be construed as a reference to the landlord.
4
In relation to a company, section 9(1) shall not have effect so as to require references in this section to a year of assessment to be read as references to an accounting period, but any deduction authorised by this section shall be apportioned between the accounting periods (if more than one) comprising the year of assessment, other than any such period ended before the expenditure is incurred, or transfer takes place, by virtue of which the company is entitled to the deduction.
C45
This section shall not apply in relation to any expenditure in respect of which a capital allowance has been made.
31 Provisions supplementary to sections 25 to 30.
F12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1731ZADeduction for expenditure on energy-saving items
1
This section applies if—
a
a company carries on a Schedule A business in relation to land which consists of or includes a dwelling-house,
b
the company incurs expenditure in acquiring and installing an energy-saving item in the dwelling-house or in a building containing the dwelling-house (see subsections (5) to (7)),
c
the expenditure is incurred before 1st April 2015,
d
a deduction for the expenditure is not prohibited by the wholly and exclusively rule but would otherwise be prohibited by the capital prohibition rule (see subsection (8)), and
e
no allowance under the Capital Allowances Act may be claimed in respect of the expenditure.
2
In calculating the profits of the Schedule A business, a deduction for the expenditure is allowed.
3
But any deduction is subject to—
a
section 31ZB (restrictions on the relief), and
b
any provision made by regulations under section 31ZC.
4
If, on a just and reasonable apportionment of any expenditure, part of the expenditure would qualify for the relief (but the remainder would not), a deduction is allowed for that part.
5
“Energy-saving item” means an item of an energy-saving nature of such description as is for the time being specified in regulations made by the Treasury.
6
The Treasury may by regulations provide for an item to be an energy-saving item only if it satisfies such conditions as may be—
a
specified in, or
b
determined in accordance with,
the regulations.
7
The conditions may include conditions imposed by reference to information or documents issued by any body, person or organisation.
8
In this section—
“the capital prohibition rule” means the rule in section 74(1)(f) or (g) (capital expenditure), as applied by section 21A, and
“the wholly and exclusively rule” means the rule in section 74(1)(a) or (e) (expenses not wholly and exclusively for trade and unconnected losses), as applied by section 21A.
F1731ZBRestrictions on relief
1
This section restricts deductions that would otherwise be allowable under section 31ZA.
2
No deduction is allowed if, when the energy-saving item is installed, the dwelling-house—
a
is in the course of construction, or
b
is comprised in land in which the company does not have an interest or is in the course of acquiring an interest or further interest.
3
No deduction is allowed in respect of expenditure in an accounting period if—
a
the Schedule A business consists of or includes the commercial letting of furnished holiday accommodation for the purposes of section 503, and
b
the dwelling-house constitutes some or all of that accommodation for the accounting period.
4
No deduction is allowed in respect of expenditure treated by section 401 (as applied by section 21B) as incurred on the date on which the company starts to carry on the Schedule A business unless the expenditure was incurred not more than 6 months before that date.
5
No deduction is allowed in respect of expenditure incurred in acquiring and installing the energy-saving item in a building containing the dwelling-house in so far as the expenditure is not for the benefit of the dwelling-house.
F1731ZCRegulations
1
In relation to any deduction under section 31ZA, the Treasury may make regulations for—
a
restricting or reducing the amount of expenditure for which the deduction is allowable,
b
excluding entitlement to the deduction in such cases as may be specified in, or determined in accordance with, the regulations,
c
determining who is (and is not) entitled to the deduction if different persons have different interests in land that consists of or includes the whole or part of a building containing one or more dwelling-houses,
d
making apportionments if the Schedule A business is carried on by persons in partnership or an interest in land is beneficially owned by persons jointly or in common.
2
The apportionments that may be made include apportionments to persons within the charge to income tax.
3
Regulations under this section may—
a
make different provision for different cases, and
b
contain incidental, supplemental, consequential and transitional provision and savings (including provision as to appeals in relation to apportionments mentioned in subsection (1)(d)).
31AF18Deductions for expenditure by landlords on energy-saving items
F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31BProvisions supplementary to section 31A
F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32 Capital allowances for machinery and plant used in estate management.
F15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33 Agricultural land: allowance for excess expenditure on maintenance.
F16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23 Connected persons
Ss. 33A, 33B inserted (16.7.1992 with effect in relation to rents or receipts accruing on or after 10.3.1992) by Finance (No. 2) Act 1992 (c. 48), s. 57(1)(2).
F1933A Rents or receipts payable by a connected person.
F20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F2133B Rents or receipts relating to land in respect of which a connected person makes payments to a third party.
F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F32 Supplementary provisions
Cross-heading before s. 40 substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 19, (with Sch. 5 para. 73)
40 Tax treatment of receipts and outgoings on sale of land.
1
M31Where—
a
by virtue of a contract for the sale of an estate or interest in land there falls to be apportioned between the parties a receipt or outgoing in respect of the estate or interest which becomes due after the making of the contract but before the time to which the apportionment falls to be made, and
b
a part of the receipt is therefore receivable by the vendor in trust for the purchaser or, as the case may be, a part of the outgoing is paid by the vendor as trustee for the purchaser,
2
Where by virtue of such a contract there falls to be apportioned between the parties a receipt or outgoing in respect of the estate or interest which became due before the making of the contract, the parties shall be treated for the purposes of F127corporation tax under Schedule A as if the contract had been entered into before the receipt or outgoing became due, and subsection (1) above shall apply accordingly.
3
Where on the sale of an estate or interest in land there is apportioned to the vendor a part of a receipt or outgoing in respect of the estate or interest which is to become receivable or be paid by the purchaser after the making of the apportionment, then for the purposes of F128corporation tax under Schedule A—
a
when the receipt becomes due or, as the case may be, the outgoing is paid, the amount of it shall be treated as reduced by so much thereof as was apportioned to the vendor, and
4
Any reference in subsection (1) or (2) above to a party to a contract shall include a person to whom the rights and obligations of that party under the contract have passed by assignment or otherwise.
F1234A
An amount deemed under this section to have been received or paid shall be taken into account in computing the profits of the Schedule A business in question for the period in which it is treated as received or paid.
5
F124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41 Relief for rent etc. not paid.
F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C22C2342 Appeals against determinations under sections 34 to 36 F29or Chapter 4 of Part 3 of ITTOIA 2005.
1
a
b
any amount that under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc.) is brought into account as a receipt in calculating the profits of a property business (within the meaning of that Act),
may affect the liability to income tax, corporation tax or capital gains tax of other persons he may give notice to those persons as well as to the first-mentioned person of the determination he proposes to make and of the rights conferred on them by this section.
2
Any person to whom such a notice is given may, within 30 days after the date on which it is given, object to the proposed determination by notice given to the inspector.
3
Where notices have been given under subsection (1) above and no notice of objection is duly given under subsection (2) above the inspector shall make the determination as proposed in his notices and the determination shall not be called in question in any proceedings.
4
Where a notice of objection is duly given the amount mentioned in subsection (1) above shall be determined in like manner as an appeal and shall be so determined by the Special Commissioners or such body of General Commissioners as may be agreed on by the person to be charged and all persons who have given notice of objection.
5
All persons to whom notices have been given under subsection (1) above may take part in any proceedings under subsection (4) above and in any appeal arising out of those proceedings and shall be bound by the determination made in the proceedings or on appeal, whether or not they have taken part in the proceedings; and their successors in title shall also be so bound.
6
A notice under subsection (1) above may, notwithstanding any obligation as to secrecy or other restriction on the disclosure of information, include a statement of the grounds on which the inspector proposes to make the determination.
7
An inspector may by notice require any person to give within the time specified in the notice such information as appears to the inspector to be required for deciding whether to give a notice under subsection (1) above to any person.
42AF33 Non-residents and their representatives.
F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43 Non-residents.
F31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F42 Rent factoring
Ss. 43A-43G and cross-heading inserted (with effect in accordance with s. 110(2) of the amending Act) by Finance Act 2000 (c. 17), s.110(1)
43A Finance agreement: interpretation.
F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43B Transfer of rent.
F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43C Transfer of rent: exceptions, &c.
F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43D Interposed lease.
F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43E Interposed lease: exceptions, &c.
F38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43F Insurance business.
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43G Interpretation.
F40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pt. 2 heading substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 3 (with Sch. 5 para. 73)