PART IV PROVISIONS RELATING TO THE SCHEDULE D CHARGE

CHAPTER I SUPPLEMENTARY CHARGING PROVISIONS

53 Farming and other commercial occupation of land (except woodlands).

(1)

M1All farming and market gardening in the United Kingdom shall be treated as the carrying on of a trade or, as the case may be, of a part of a trade, and the F1profits thereof shall be charged to F2corporation tax under Case I of Schedule D accordingly.

(2)

All the farming carried on by any particular F3company or partnership shall be treated as one trade F4for corporation tax purposes.

(3)

M2Subject to subsection (4) below, the occupation of land in the United Kingdom for any purpose other than farming or market gardening shall, if the land is managed on a commercial basis and with a view to the realisation of profits, be treated as the carrying on of a trade or, as the case may be, of a part of a trade, and the F5profits thereof shall be charged to F6corporation tax under Case I of Schedule D accordingly.

F7(4)

Subsection (3) above shall not apply in relation to the occupation of land which comprises woodlands or is being prepared for use for forestry purposes.

F854 Woodlands managed on a commercial basis.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55 Mines, quarries and other concerns.

(1)

F9profits arising out of land in the case of any concern specified in subsection (2) below shall be charged to F10corporation tax under Case I of Schedule D.

(2)

The concerns are—

(a)

mines and quarries (including gravel pits, sand pits and brickfields);

(b)

ironworks, gasworks, salt springs or works, alum mines or works (not being mines falling within the preceding paragraph) and waterworks and streams of water;

(c)

canals, inland navigation, docks and drains or levels;

(d)

fishings;

(e)

rights of markets and fairs, tolls, bridges and ferries;

(f)

railways and other ways;

(g)

other concerns of the like nature as any of the concerns specified in paragraphs (b) to (e) above.

56 Transactions in deposits with and without certificates or in debts.

(1)

M3M4Subsection (2) below applies to the following rights—

(a)

the right to receive the amount, with or without interest, stated in a certificate of deposit;

(b)

the right to receive an amount payable with interest—

(i)

in a transaction in which no certificate of deposit or security is issued, and

(ii)

which is payable by a bank or similar institution or a person regularly engaging in similar transactions;

and the right to receive that interest.

(2)

M5Profits or gains arising to a F11company from the disposal of a right to which this subsection applies or, except so far as it is a right to receive interest, from the exercise of any such right (whether by the person to whom the certificate was issued or by some other person, or, as the case may be, by the person who acquired the right in the transaction referred to in subsection (1) above or by some person acquiring it directly or indirectly from that person), shall, if not falling to be taken into account as a trading receipt, be treated as annual profits or gains chargeable to F12corporation tax under Case VI of Schedule D.

(3)

M6Subsection (2) above F13and section 551 of ITTOIA 2005 (charge to income tax on profits from disposal of deposit rights) do not apply in the case of the disposal or exercise of a right to receive an amount stated in a certificate of deposit or interest on such an amount—

(a)

if the F14company disposing of the right acquired it before 7th March 1973;

(b)

to any profits or gains arising to a fund or scheme in the case of which provision is made by section F15613(4) or 614(2) or (3) or section 186 of the Finance Act 2004 for exempting the whole or part of its income from income tax;

(c)

in so far as they are applied to charitable purposes only, to any profits or gains arising to a charity within the meaning of section 506.

F16(3A)

F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3B)

F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3C)

F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3D)

F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

M7For the purposes of this section, profits or gains shall not be treated as falling to be taken into account as a trading receipt by reason only that they are included in the computation required F18for the purposes of section 76(2).

F19(4A)

This section and section 56A shall not apply for the purposes of corporation tax except in relation to rights in existence before 1st April 1996.

(4B)

For the purposes of corporation tax, where any profits or gains arising from the disposal or exercise of a right in existence before 1st April 1996 are, or (if there were any) would be, chargeable under this section, nothing in Chapter II of Part IV of the Finance Act 1996 (loan relationships) shall require any amount relating to that disposal, or to the exercise of that right, to be brought into account for the purposes of that Chapter.

(5)

M8 In this section—

“certificate of deposit” means a document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable; and

“security” has the same meaning as in section F20132 of the 1992 Act.

F2156A Disposal or exercise of rights in pursuance of deposits.

(1)

This section applies where there is an arrangement under which—

(a)

there is a right to receive an amount (with or without interest)

in pursuance of a deposit of money,

(b)

when the right comes into existence there is no certificate of deposit in respect of the right, and

(c)

the person for the time being entitled to the right is entitled to call for the issue of a certificate of deposit in respect of the right.

(2)

In such a case—

(a)

the right shall be treated as not falling within section 56(1)(b), and

(b)

if there is a disposal or exercise of the right before such time (if any) as a certificate of deposit is issued in respect of it, section 56(2) shall apply to it by virtue of this paragraph.

(3)

In the application of section 56 by virtue of this section—

(a)

subsection (2) shall have effect as if the words from “(whether” to “person)” read “(whether by the person originally entitled to the right or by some other person)”, and

(b)

subsection (3) shall have effect as if the words “stated in a certificate of deposit” read “under an arrangement”.

(4)

In this section “certificate of deposit” has the meaning given by section 56(5).

57 Deep discount securities.

F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58 Foreign pensions.

F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59 Persons chargeable.

(1)

F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)

F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

Where, in accordance with F25section 12 of ITTOIA 2005, income tax is charged F26. . . on the profits of markets or fairs, or on tolls, fisheries or any other annual or casual profits not distrainable, the owner or occupier or receiver of the profits thereof shall be answerable for the tax so charged, and may retain and deduct the same out of any such profits.

(4)

F27Subsection (3) above shall not apply for the purposes of corporation tax.

CHAPTER II INCOME TAX: BASIS OF ASSESSMENT ETC.

Cases I and II

60 Assessment on current year basis.

F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61 Basis of assessment at commencement.

F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62 Change of basis period.

F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3162A Conditions for such a change.

F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63 Basis of assessment on discontinuance.

F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3463A Overlap profits and overlap losses.

F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cases III, IV and V

64 Case III assessments.

F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65 Cases IV and V assessments: general.

F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3865A Case V income from land outside UK: income tax.

F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66 Special rules for fresh income.

F40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 Special rules where source of income disposed of or yield ceases.

F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68 Special rules where property etc. situated in Republic of Ireland.

F42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4368AShare incentive plans: application of section 68B

F44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68BShare incentive plans: cash dividends and dividend shares

F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68CShare incentive plans: interpretation

F46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case VI

69 Case VI assessments.

F47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER III CORPORATION TAX: BASIS OF ASSESSMENT ETC

70 Basis of assessment etc.

(1)

M9In accordance with sections 6 to 12 and 337 to 344, for the purposes of corporation tax for any accounting period income shall be computed under Cases I to VI of Schedule D on the full amount of the profits or gains or income arising in the period (whether or not received in or transmitted to the United Kingdom), without any other deduction than is authorised by the Corporation Tax Acts.

(2)

M10Where a company is chargeable to corporation tax in respect of a trade or vocation under Case V of Schedule D, the income from the trade or vocation shall be computed in accordance with the rules applicable to Case I of Schedule D.

(3)

F48M11Cases III and V of Schedule D shall for the purposes of corporation tax extend to companies not resident in the United Kingdom, so far as those companies are chargeable to tax on income of descriptions which, in the case of companies resident in the United Kingdom, fall within those Cases (but without prejudice to any provision of the Tax Acts specially exempting non-residents from tax on any particular description of income).

F4970A Case V income from land outside UK: corporation tax.

(1)

This section applies where a company is chargeable to corporation tax under Case V of Schedule D in respect of income which—

(a)

arises from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land outside the United Kingdom, and

(b)

is not income to which section 70(2) applies (income from a trade or vocation).

(2)

The provisions of Schedule A apply to determine whether income falls within subsection (1)(a) above as they would apply to determine whether the income fell within paragraph 1(1) of that Schedule if—

(a)

the land in question were in the United Kingdom, or

(b)

a caravan or houseboat which is to be used at a location outside the United Kingdom were to be used at a location in the United Kingdom.

(3)

Any provision of the Taxes Acts which deems there to be a Schedule A business in the case of land in the United Kingdom applies where the corresponding circumstances arise with respect to land outside the United Kingdom so as to deem there to be a business within subsection (1)(a) above.

(4)

All businesses and transactions carried on or entered into by a particular company or partnership, so far as they are businesses or transactions the income from which is chargeable to tax under Case V of Schedule D in accordance with this section, are treated for the purposes of the charge to tax under Case V as, or as entered into in the course of carrying on, a single business (an “overseas property business").

(5)

The income from an overseas property business shall be computed for the purposes of Case V of Schedule D in accordance with the rules applicable to the computation of the profits of a Schedule A business.

Those rules apply separately in relation to—

(a)

an overseas property business, and

(b)

any actual Schedule A business of the company chargeable,

as if each were the only Schedule A business carried on by that company.

(6)

Sections 503 and 504 of this Act F50. . . do not apply to the profits or losses of an overseas property business.

(7)

Where under this section rules expressed by reference to domestic concepts of law apply in relation to land outside the United Kingdom, they shall be interpreted so as to produce the result that most closely corresponds with the result produced for Schedule A purposes in relation to land in the United Kingdom.

CHAPTER IV PROVISIONS SUPPLEMENTARY TO CHAPTERS II AND III

71 Computation of income tax where no profits in year of assessment.

F51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72 Apportionments etc. for purposes of Cases I, II and VI.

(1)

M12Where in the case of any profits or gains chargeable F52to corporation tax under Case I, II or VI of Schedule D it is necessary in order to arrive for the purposes of F53. . . corporation tax at the profits or gains or losses of any F53. . . accounting period or other period, to divide and apportion to specific periods the profits or gains or losses for any period for which the accounts have been made up, or to aggregate any such profits, gains or losses or any apportioned parts thereof, it shall be lawful to make such a division and apportionment or aggregation.

(2)

M13Any apportionment under this section shall be made in proportion to the number of F54days in the respective periods.

73 Single assessments for purposes of Cases III, IV and V.

F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER V COMPUTATIONAL PROVISIONS

Annotations:
Modifications etc. (not altering text)

C5 See—1979(C) s.122—election to take capital gain or loss into account when asset appropriated to stock in trade.1989 ss.67-74—employee share ownership trusts.Banking Act 1987 (c.22) s.66—contributions to the Deposit Protection Fund.

Deductions

74 General rules as to deductions not allowable.

F56(1)

M14Subject to the provisions of F57the Corporation Tax Acts, in computing the amount of the F58profits to be charged F59to corporation tax under Case I or Case II of Schedule D, no sum shall be deducted in respect of—

(a)

any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade F60or profession;

(b)

F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)

the rent of the whole or any part of any dwelling-house or domestic offices, except any such part as is used for the purposes of the trade F60or profession, and where any such part is so used, the sum so deducted shall not, unless in any particular case it appears that having regard to all the circumstances some greater sum ought to be deducted, exceed two-thirds of the rent bona fide paid for that dwelling-house or those offices;

(d)

any sum expended for repairs of premises occupied, or for the supply, repairs or alterations of any implements, utensils or articles employed, for the purposes of the trade F60or profession, beyond the sum actually expended for those purposes;

(e)

any loss not connected with or arising out of the trade F60or profession;

(f)

any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade F60or profession, but so that this paragraph shall not be treated as disallowing the deduction of any interest;

(g)

any capital employed in improvements of premises occupied for the purposes of the trade F60or profession;

(h)

any interest which might have been made if any such sums as aforesaid had been laid out at interest;

F62(j)

F63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(k)

any average loss beyond the actual amount of loss after adjustment;

(l)

any sum recoverable under an insurance or contract of indemnity;

(m)

any annuity or other annual payment (other than interest) payable out of the F64profits;

(n)

F65. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F66(o)

F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(p)

M15any royalty or other sum paid in respect of the user of a patent;

(q)

F67. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F68(2)

F69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7075Expenses of management: companies with investment business

(1)

In computing for the purposes of corporation tax the total profits for an accounting period of a company with investment business (see section 130) a deduction is to be allowed for any expenses of management of the company’s investment business (see subsection (4) below) which are referable to that accounting period in accordance with section 75A.

That is subject to the following provisions of this section.

(2)

A deduction is not to be allowed under subsection (1) above for any expenses to the extent that those expenses are deductible in computing profits apart from this section.

(3)

Expenses of a capital nature are not expenses of management for the purposes of this section except to the extent that they fall to be treated as expenses of management for those purposes by virtue of—

(a)

subsection (7) below (capital allowances), or

(b)

any provision of the Tax Acts, other than this section.

(4)

For the purposes of this section, expenses of management are “expenses of management of the company’s investment business” to the extent that—

(a)

the expenses are in respect of so much of the company’s business as consists in the making of investments, and

(b)

the investments concerned are not held by the company for an unallowable purpose during the accounting period (see subsection (5) below),

and references in this section to the company’s investment business shall be construed accordingly.

(5)

For the purposes of subsection (4)(b) above, investments are held by a company for an unallowable purpose during an accounting period to the extent that they are held during the period—

(a)

for a purpose that is not a business or other commercial purpose of the company, or

(b)

for the purpose of activities in respect of which the company is not within the charge to corporation tax.

(6)

For the purposes of subsection (1) above, there shall be deducted from the amount that would, apart from this subsection, be deductible under that subsection the amount of any income derived from a source not charged to tax—

(a)

which the company has in the course of carrying on its investment business, and

(b)

which, in a case where the company is not resident in the United Kingdom,—

(i)

the company has in the course of carrying on that business through a permanent establishment in the United Kingdom, and

(ii)

is such property or rights as are mentioned in section 11(2A)(b),

but which is not franked investment income.

(7)

For the purposes of this section, there shall be added to a company’s expenses of management referable to any accounting period the amount of any allowances falling to be made to the company for that period by virtue of section 15(1)(g) of the Capital Allowances Act (plant and machinery allowances) so far as effect cannot be given to them under section 253(2) of that Act.

(8)

Subsection (9) below applies in any case where, in an accounting period of a company with investment business, the sum of—

(a)

the expenses of management deductible under subsection (1) above, and

(b)

any charges on income paid in the accounting period, to the extent that they are paid for the purposes of so much of the company’s business as consists in the making of investments,

exceeds the amount of the profits from which those expenses and charges are deductible.

(9)

In any such case—

(a)

the excess shall be carried forward to the succeeding accounting period; and

(b)

the amount so carried forward to the succeeding accounting period shall be treated for the purposes of this section (including any further application of this subsection) as if it were expenses of management deductible for that accounting period.

(10)

Any apportionment falling to be made for the purposes of this section shall be made on a just and reasonable basis.

F7175AAccounting period to which expenses of management are referable

(1)

This section has effect for the purpose of determining the accounting period to which expenses of management are referable for the purposes of section 75(1).

(2)

Where—

(a)

expenses of management are debited in accounts drawn up by a company for a period of account,

(b)

the treatment of those expenses in those accounts is in accordance with generally accepted accounting practice, and

(c)

the period of account coincides with an accounting period,

the expenses of management are referable to that accounting period.

(3)

Where—

(a)

expenses of management are debited in accounts drawn up by a company for a period of account, and

(b)

the treatment of those expenses in those accounts is in accordance with generally accepted accounting practice, but

(c)

the period of account does not coincide with an accounting period,

subsection (4) below applies.

(4)

Where this subsection applies, the expenses of management—

(a)

shall be apportioned between any accounting periods that fall within the period of account, and

(b)

are referable to an accounting period to the extent that they are so apportioned to it.

(5)

An apportionment under subsection (4) above shall be in accordance with section 834(4) (time basis) unless it appears that that method would work unreasonably or unjustly, in which case such other method shall be used as appears just and reasonable.

(6)

Where—

(a)

expenses of management are not referable to an accounting period by virtue of subsections (2) to (5) above, but

(b)

accounts are drawn up by the company for a period of account, and

(c)

if the expenses of management had been treated in those accounts in accordance with generally accepted accounting practice, they would fall to be debited in those accounts,

the expenses of management are referable to the accounting period to which they would have been referable in accordance with subsections (2) to (5) above if they had been so debited in those accounts.

(7)

Where expenses of management are not referable to an accounting period by virtue of subsections (2) to (6) above, they are referable to the accounting period to which they would be referable in accordance with subsections (2) to (5) above on the assumptions in subsection (8) below.

(8)

Those assumptions are—

(a)

that for each accounting period that does not coincide with, or fall within, any period of account, there is a period of account that coincides with that accounting period, and

(b)

that so much of the expenses of management as would fall to be debited in accordance with generally accepted accounting practice in accounts drawn up by the company for any such deemed period of account are so debited.

(9)

This section is without prejudice to any other provision of the Corporation Tax Acts which provides for amounts to be treated for the purposes of section 75 as expenses of management referable to an accounting period.

(10)

Any reference in this section to expenses of management being debited in accounts is a reference to those expenses being brought into account, in accordance with generally accepted accounting practice, as a debit—

(a)

in the company’s profit and loss account F72or income statement, or

(b)

in a statement of total recognised gains and losses F73, statement of changes in equity or other statement of items brought into account in computing the company’s profits and losses for accounting purposes.

For this purpose “debit” means an amount which for accounting purposes reduces a profit, or increases a loss, for a period of account.

F7475BAmounts reversing expenses of management deducted: charge to tax

(1)

This section applies in any case where the following conditions are satisfied—

(a)

a credit is brought into account by a company in a period of account (the “reversal period”) which ends on or after the commencement date,

(b)

the credit reverses (in whole or in part) a debit brought into account in a previous period of account of the company (whenever ending),

(c)

the debit (in whole or in part) represents expenses of management deductible under section 75(1) for an accounting period of the company (“the period of deductibility”),

(d)

the expenses of management were so deductible for that period otherwise than by virtue of section 75(9) (carry forward of unrelieved excess),

(e)

the period of deductibility ends before, or at the same time as, the reversal period,

(f)

the reversal period does not coincide with an accounting period beginning before the commencement date.

(2)

In any such case, subsection (4) or (5) below (as the case may be) shall apply in relation to the reversal amount.

(3)

In this section “the reversal amount” means so much of the credit as—

(a)

reverses so much of the debit as represents the expenses of management, and

(b)

does not represent sums otherwise taken into account in determining for the purposes of corporation tax the profits and losses of the company for the relevant accounting period or any earlier accounting period.

For this purpose the relevant accounting period is the latest accounting period of the company that falls wholly or partly within the reversal period.

(4)

If the reversal period coincides with an accounting period of the company beginning on or after the commencement date, the reversal amount shall be dealt with for that period in accordance with subsection (7) below.

(5)

If the reversal period does not coincide with an accounting period of the company—

(a)

the reversal amount shall be apportioned between any accounting periods that fall within the reversal period, and

(b)

any amount so apportioned to an accounting period beginning on or after the commencement date shall be dealt with for that period in accordance with subsection (7) below.

(6)

An apportionment under subsection (5) above shall be in accordance with section 834(4) (time basis) unless it appears that that method would work unreasonably or unjustly, in which case such other method shall be used as appears just and reasonable.

(7)

Where an amount falls to be dealt with in accordance with this subsection for an accounting period—

(a)

it shall, so far as possible, be applied in reducing or further reducing (but not below nil) the company’s expenses of management deductible for that period otherwise than by virtue of section 75(9) (carry forward of unrelieved excess), and

(b)

so much of the amount as cannot be so applied shall be regarded as income of the company chargeable under Case VI of Schedule D for that accounting period.

(8)

In subsection (1) above “brought into account”, in relation to a period of account of a company, means brought into account in accordance with generally accepted accounting practice in determining, for accounting purposes, profit and loss for that period of account.

(9)

If (apart from this subsection) an accounting period does not coincide with, or fall within, any period of account, it shall be assumed for the purposes of this section that there is a period of account of the company that coincides with that accounting period.

(10)

It shall be assumed for the purposes of this section that, in determining for accounting purposes profit and loss for any period of account of any company, amounts fall to be brought into account in accordance with generally accepted accounting practice.

(11)

For the purposes of this section a credit reverses a debit in whole or in part in any case where the sum represented in whole or in part by the debit is paid and then in whole or in part repaid (as well as in a case where the sum represented by the debit is never paid).

(12)

In this section—

“the commencement date” means 1st April 2004;

“credit” means an amount which for accounting purposes increases or creates a profit, or reduces a loss, for a period of account;

“debit” means an amount which for accounting purposes reduces a profit, or increases or creates a loss, for a period of account.

F7576Expenses of insurance companies

(1)

In computing for the purposes of corporation tax the profits for any accounting period of a company—

(a)

which carries on life assurance business, and

(b)

which is not charged to tax in respect of that business under Case I of Schedule D,

section 75 is not to apply in computing the profits of that business, but a deduction for expenses payable (the “expenses deduction”) is to be allowed in accordance with the following provisions of this section.

See also subsection (14) below for the application of this section in relation to a company which carries on capital redemption business.

(2)

The expenses deduction is to be made from so much of the income and gains of the accounting period referable to basic life assurance and general annuity business as remains after any deduction falling to be made by virtue of paragraph 4(2) of Schedule 11 to the Finance Act 1996 (non-trading deficits on loan relationships).

(3)

For the purposes of this section “expenses payable” means expenses brought into account in line 12, 22 or 25 of Form 40 (the revenue account) in the periodical return of the company for a period of account, but does not include any of the amounts falling within subsection (4), (5) or (6) below.

(4)

The amounts falling within this subsection are the following—

(a)

reinsurance premiums,

(b)

refunds of premiums,

(c)

profit commissions and profit participations (however described),

(d)

expenses or other amounts payable, to the extent that the company’s purpose in incurring the liability to make the payment is not a business or other commercial purpose of the company.

For the purposes of paragraph (d) above, it is not one of the business or commercial purposes of a company to incur a liability to pay an amount of commission or other expenses which exceeds the amount which it could reasonably be expected to pay if the company were charged to tax under Case I of Schedule D in respect of its life assurance business.

(5)

The amounts falling within this subsection are any amounts payable in connection with a policy or contract to—

(a)

a policy holder or annuitant under the policy or contract (except where the policy holder is an insurance company),

(b)

any other person who is entitled to receive benefits under the policy or contract,

(c)

any person acting on behalf of a person falling within paragraph (a) or (b) above,

(d)

the personal representatives of a deceased person who fell within paragraphs (a) to (c) above.

(6)

The amounts falling within this subsection are expenses of a capital nature.

But this subsection does not apply in the case of an amount which, by virtue of any provision of the Tax Acts other than this section, falls to be treated for the purposes of this section as expenses payable which fall to be brought into account at Step 1 in subsection (7) below (the reference to Step 1 being express in the provision).

(7)

The amount of the expenses deduction for an accounting period is found by taking the following steps—

  • Step 1

  • Find so much of the expenses payable as are—

    1. (a)

      attributable to basic life assurance and general annuity business (see subsection (8) below), and

    2. (b)

      referable to the accounting period (see subsection (9) below).

  • Step 2

  • Reduce each of the amounts found at Step 1 by excluding so much of the amount as is—

    1. (a)

      deductible in computing income for the purposes of Schedule A,

    2. (b)

      deductible by virtue of section 85(2B) of the Finance Act 1989, or

    3. (c)

      deductible by virtue of section 121(3) in computing income from the letting of rights to work minerals in the United Kingdom.

  • Step 3

  • Find the amounts (so far as not included at Step 1) which fall to be treated for the purposes of this section as expenses payable for the accounting period by virtue of any of the following provisions—

  • section 432AB(3) (Schedule A loss or an overseas property business loss referable to basic life assurance and general annuity business);

  • section 437(1A) (relief for income element of new annuities);

  • section 587B(8)(b)(i) (relief for company carrying on life assurance business in relation to gifts of shares and securities);

  • paragraph 16(1) of Schedule 7 to the Finance Act 1991 (transitional relief for old annuities);

  • paragraph 4(4)(b) of Schedule 11 to the Finance Act 1996 (carried forward non-trading deficit on loan relationships produced by separate computation for basic life assurance and general annuity business);

  • section 256(2)(a) of the Capital Allowances Act (capital allowances on plant and machinery used in the management of life assurance business);

  • paragraph 23 of Schedule 22 to the Finance Act 2001 (150% relief in respect of the remediation expenditure on contaminated land owned by a company carrying on life assurance business and acquired to be a management asset);

  • paragraph 13(2) of Schedule 12 to the Finance Act 2002 (125% of relevant expenditure on R&D in the case of a life assurance company);

  • paragraph 23(2) of Schedule 13 to the Finance Act 2002 (150% of relevant expenditure on research into vaccines in the case of a life assurance company);

  • paragraph 36(3) of Schedule 29 to the Finance Act 2002 (relief for non-trading loss on intangible fixed assets).

  • Step 4

  • Give effect to the provisions specified in Step 3 by adding together—

    1. (a)

      so much of the amounts found at Step 1 as remains after making any reductions at Step 2, and

    2. (b)

      the amounts found at Step 3,

  • and then deduct the amount of any reversal (wherever brought into account) of an expense included at Step 1 in a previous period,

  • to give Subtotal 1.

  • Step 5

  • If the whole or any part of a loss arising to the company in respect of its life assurance business in the accounting period is set off under section 393A or 403(1)—

    1. (a)

      find the amount (“amount L”) that is equal to so much of the loss as, in the aggregate, is so set off,

    2. (b)

      find the sum (“amount S”) of the amounts by which any losses for that period under section 436 or 439B fall to be reduced under section 434A(2)(b),

    3. (c)

      from amount L deduct amount S, to give the adjusted loss deduction,

  • then reduce Subtotal 1 by deducting from it the adjusted loss deduction,

  • to give Subtotal 2.

  • Step 6

  • Give effect to subsection (6) of section 86 of the Finance Act 1989 (spreading of acquisition expenses) by—

    1. (a)

      finding the amount that is equal to six-sevenths of the adjusted amount of the acquisition expenses (within the meaning of that section) for the accounting period, and

    2. (b)

      deducting that amount from Subtotal 2,

  • to give Subtotal 3.

  • Step 7

  • Add together the following amounts—

    1. (a)

      Subtotal 3, and

    2. (b)

      any amounts carried forward to the accounting period under subsection (12) or (13) below (unrelieved excesses from earlier accounting periods),

  • to give Subtotal 4.

  • Step 8

  • Give effect to subsections (8) and (9) of section 86 of the Finance Act 1989 (fraction of adjusted amount of acquisition expenses for earlier accounting periods) by adding together—

    1. (a)

      Subtotal 4, and

    2. (b)

      any amounts which are to be relieved under this section by virtue of those subsections,

  • to give the basic deduction.

  • Step 9

  • If—

    1. (a)

      amount D1 (see subsection (10) below), exceeds

    2. (b)

      amount R (see subsection (11) below),

  • deduct an amount equal to the excess from the basic deduction.

  • Step 10: the amount of the expenses deduction

  • The amount of the expenses deduction is so much of the basic deduction (see Step 8) as remains after making any deduction required at Step 9.

(8)

For the purposes of Step 1, the expenses that are attributable to basic life assurance and general annuity business are the expenses which are attributable to that business in accordance with proper internal accounting practice.

In this subsection “proper internal accounting practice” means the practice of insurance companies in allocating all the expenses of the company to particular categories of business in accordance with any applicable requirements of—

(a)

generally accepted accounting practice, F76. . .

(b)

the Prudential Sourcebook (Insurers)F77, or

(c)

the F78Insurance Prudential Sourcebook.

(9)

The following rules have effect for determining for the purposes of Step 1 the expenses that are referable to an accounting period.

Rule A

Where a period of account coincides with an accounting period, the expenses brought into account for the period of account are the expenses referable to the accounting period.

Rule B

Where—

(a)

two or more accounting periods fall within the same period of account, and

(b)

that period of account is longer than 12 months,

section 834(4) (apportionment on time basis) is to apply.

Rule C

In any other case where two or more accounting periods fall within the same period of account, the expenses referable to any of those accounting periods are the expenses that would have been referable to that accounting period if—

(a)

the accounting period had coincided with a period of account, and

(b)

a separate periodical return had been made for that period of account,

and section 834(4) (apportionment on time basis) is not to apply.

Rule D

Rules A to C are subject to any provision of the Corporation Tax Acts which provides for an amount to be treated as expenses payable for, or referable to, a particular period.

(10)

The amount D1 in Step 9 is the amount that would be the profits of the company’s life assurance business for the accounting period if—

(a)

computed in accordance with the provisions applicable to Case I of Schedule D, and

(b)

adjusted in respect of losses.

The adjustment in respect of losses is a deduction of the amount which, disregarding sections 434A(2) and 440B, would fall to be set off under section 393 against the company’s income for that period if the company had always been charged to tax under Case I of Schedule D in respect of its life assurance business.

(11)

The amount R in Step 9 (which may be a negative amount) is found for the accounting period by—

(a)

taking the company’s relevant income, and

(b)

deducting from it the relevant aggregate.

The “relevant income”is the sum of—

(a)

the income and gains referable by virtue of section 432A to the company’s basic life assurance and general annuity business;

(b)

distributions received by the company from companies resident in the United Kingdom which are referable by virtue of section 432A to its basic life assurance and general annuity business;

(c)

profits chargeable under Case VI of Schedule D under section 436, 439B or 441.

The “relevant aggregate”is the sum of—

(a)

the basic deduction (see Step 8);

(b)

any non-trading deficit on the company’s loan relationships which is produced for the period in relation to the company’s basic life assurance and general annuity business by a separate computation under paragraph 2 of Schedule 11 to the Finance Act 1996;

(c)

any amount which in pursuance of a claim under paragraph 4(3) of that Schedule is carried back to the period and (in accordance with paragraph 4(5) of that Schedule) applied in reducing profits of the company for that period.

(12)

Where for any accounting period—

(a)

the amount of the expenses deduction (see Step 10), exceeds

(b)

the amount from which that deduction is to be made (see subsection (2) above),

the excess is to be carried forward to the next accounting period and brought into account for that period in accordance with Step 7.

(13)

Subject to paragraph 4(11) to (13) of Schedule 11 to the Finance Act 1996, where for any accounting period—

(a)

the basic deduction (see Step 8), exceeds

(b)

the expenses deduction (see Step 10),

the excess is to be carried forward to the next accounting period and brought into account for that period in accordance with Step 7.

(14)

In this section any reference to—

(a)

life assurance business, or

(b)

basic life assurance and general annuity business,

includes a reference to capital redemption business.

(15)

In this section—

“capital redemption business” means any capital redemption business, within the meaning of section 458, which is business to which that section applies;

“expenses payable” has the meaning given by subsection (3) above;

and other expressions have the same meaning as in Chapter 1 of Part 12.

76A Levies and repayments under the Financial Services and Markets Act 2000.

(1)

In computing the amount of the profits to be charged F79to corporation tax under Case I of Schedule D arising from a trade carried on by an authorised person (other than an investment company)—

(a)

to the extent that it would not be deductible apart from this section, any sum expended by the authorised person in paying a levy may be deducted as an allowable expense;

(b)

any payment which is made to the authorised person as a result of a repayment provision is to be treated as a trading receipt.

F80(2)

“Levy” means—

(a)

a payment required under rules made under section 136(2) of the Financial Services and Markets Act 2000 (“the Act of 2000”);

(b)

a levy imposed under the Financial Services Compensation Scheme;

(c)

a payment required under rules made under section 234 of the Act of 2000;

(d)

a payment required under scheme rules in accordance with paragraph 15(1) of Schedule 17 to the Act of 2000;

(e)

a payment required in accordance with the standard terms fixed under paragraph 18 of Schedule 17 to the Act of 2000 other than an award which is not an award of costs under cost rules.

F81(3)

“Repayment provision” means—

(a)

any provision made by virtue of section 136(7) or 214(1)(e) of the Act of 2000;

(b)

any provision by scheme rules for fees to be refunded in specified circumstances.

(4)

“Authorised person” has the same meaning as in the Act of 2000.

F82(5)

“Scheme rules” means the rules referred to in paragraph 14(1) of Schedule 17 to the Act of 2000.

(6)

“Costs rules” means—

(a)

rules made under section 230 of the Act of 2000;

(b)

provision relating to costs contained in the standard terms fixed under paragraph 18 of Schedule 17 to the Act of 2000.

76B Levies and repayments under the Financial Services and Markets Act 2000: investment companies.

(1)

For the purposes of section 75 any sums paid by F83a company with investment business—

(a)

by way of a levy, or

(b)

as a result of an award of costs under costs rules,

shall be treated as part of its expenses of management.

(2)

F84For the purposes of corporation tax, if a payment is made to F85a company with investment business as a result of a repayment provision, the company shall be charged to tax under Case VI of Schedule D on the amount of that payment.

(3)

“Levy” has the meaning given in section F8676A(2).

F87(4)

“Costs rules” has the meaning given in section 76A(6).

(5)

“Repayment provision” has the meaning given in section 76A(3).

77 Incidental costs of obtaining loan finance.

F88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78 Discounted bills of exchange.

F89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79 Contributions to local enterprise agencies.

(1)

M16Notwithstanding anything in section 74, but subject to the provisions of this section, where a F90company carrying on a F91trade or profession makes any contribution (whether in cash or in kind) to an approved local enterprise agency, any expenditure incurred by F92the company in making the contribution may be deducted as an expense in computing the F93profits of the F91trade or profession for the purposes of F94corporation tax if it would not otherwise be so deductible.

(2)

Where any such contribution is made by F95a company with investment business any expenditure allowable as a deduction under subsection (1) above shall for the purposes of section 75 be treated as expenses of management.

F96(2A)

Where any such contribution is made by a company in relation to which section 76 applies (expenses of insurance companies) any expenditure allowable as a deduction under subsection (1) above shall for the purposes of that section be treated as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section.

(3)

Subsection (1) above does not apply in relation to a contribution made by F97any company if either the company or any person connected with the company receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution, whether from the agency concerned or from any other person.

(4)

In this section “approved local enterprise agency” means a body approved by the Secretary of State for the purposes of this section; but he shall not so approve a body unless he is satisfied that—

(a)

its sole objective is the promotion or encouragement of industrial and commercial activity or enterprise in a particular area in the United Kingdom with particular reference to encouraging the formation and development of small businesses; or

(b)

one of its principal objectives is that set out in paragraph (a) above and it maintains or is about to maintain a fund separate from its other funds which is or is to be applied solely in pursuance of that objective;

and where the Secretary of State approves a body by virtue of paragraph (b) above, the approval shall specify the fund concerned and, in relation to a body so approved, any reference in this section to a contribution is a reference to a contribution which is made wholly to or for the purposes of that fund.

(5)

M17A body may be approved under subsection (4) above whether or not it is a body corporate or a body of trustees or any other association or organisation and whether or not it is described as a local enterprise agency.

(6)

A body may not be approved under subsection (4) above unless it is precluded, by virtue of any enactment, contractual obligation, memorandum or otherwise, from making any direct or indirect payment or transfer to any of its members, or to any person charged with the control and direction of its affairs, of any of its income or profit by way of dividend, gift, division, bonus or otherwise howsoever by way of profit.

(7)

For the purposes of subsection (6) above, the payment—

(a)

of reasonable remuneration for goods, labour or power supplied or for services rendered, or

(b)

of reasonable interest for money lent, or

(c)

of reasonable rent for any premises,

does not constitute a payment or transfer which is required to be so precluded.

(8)

M18Any approval given by the Secretary of State may be made conditional upon compliance with such requirements as to accounts, provision of information and other matters as he considers appropriate; and if it appears to the Secretary of State that—

(a)

an approved local enterprise agency is not complying with any such requirement, or

(b)

one or other of the conditions for his approval contained in subsection (4) above or the precondition for his approval in subsection (6) above has ceased to be fulfilled with respect to an approved local enterprise agency,

he shall by notice withdraw his approval from the body concerned with effect from such date as he may specify in the notice (which may be a date earlier than the date on which the notice is given).

(9)

In any case where—

(a)

a contribution has been made F98by a company to an approved local enterprise agency in respect of which relief has been given under subsection (1) above, and

(b)

any benefit received in any F99accounting period by F100the company or any person connected with the company is in any way attributable to that contribution,

F101the company shall in respect of that F99accounting period be charged to F102corporation tax under Case I or Case II of Schedule D or, if F103the company is not chargeable to F102corporation tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.

(10)

Section 839 applies for the purposes of subsections (3) and (9) above.

(11)

This section applies to contributions made on or after 1st April 1982 F104. . . .

F10579A Contributions to training and enterprise councils and local enterprise companies.

(1)

Notwithstanding anything in section 74, but subject to the provisions of this section, where a F106company carrying on a F107trade or profession makes any contribution (whether in cash or in kind) to a training and enterprise council, F108business link organisation or a local enterprise company, any expenditure incurred by F109the company in making the contribution may be deducted as an expense in computing the F110profits of the F107trade or profession for the purposes of F111corporation tax if it would not otherwise be so deductible.

(2)

Where any such contribution is made by F112a company with investment business any expenditure allowable as a deduction under subsection (1) above shall for the purposes of section 75 be treated as expenses of management.

F113(2A)

Where any such contribution is made by a company in relation to which section 76 applies (expenses of insurance companies) any expenditure allowable as a deduction under subsection (1) above shall for the purposes of that section be treated as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section.

(3)

Subsection (1) above does not apply in relation to a contribution made by F114any company if either the company or any person connected with the company receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution, whether from the council, F115organisation or company concerned or from any other person.

(4)

In any case where—

(a)

relief has been given under subsection (1) above in respect of a contribution F116made by a company, and

(b)

any benefit received in any F117accounting period by F118the company or any person connected with the company is in any way attributable to that contribution,

F119the company shall in respect of that F117accounting period be charged to F120corporation tax under Case I or Case II of Schedule D, or if F121the company is not chargeable to F120corporation tax under either of those Cases for that period under Case VI of Schedule D, on an amount equal to the value of that benefit.

(5)

In this section—

F122(aa)

“business link organisation” means any person authorised by or on behalf of the Secretary of State to use a service mark (within the meaning of the Trade Marks (Amendment) Act 1984) designated by the Secretary of State for the purposes of this paragraph

(a)

“training and enterprise council” means a body with which the Secretary of State has made an agreement (not being one which has terminated) under which it is agreed that the body shall carry out the functions of a training and enterprise council, and

(b)

“local enterprise company” means a company with which an agreement (not being one which has terminated) under which it is agreed that the company shall carry out the functions of a local enterprise company has been made by F123. . . Scottish Enterprise or Highlands and Islands Enterprise.

(6)

Section 839 applies for the purposes of subsections (3) and (4) above.

(7)

This section applies to contributions made on or after 1st April 1990 F124or, in the case of a contribution to a business link organisation, 30th November 1993F125. . . .

79BContributions to urban regeneration companies

(1)

Notwithstanding anything in section 74, but subject to the provisions of this section, where a F126company carrying on a F127trade or profession makes any contribution (whether in cash or in kind) to a designated urban regeneration company, any expenditure incurred by F128the company in making the contribution may be deducted as an expense in computing the profits of the F127trade or professionF129for the purposes of corporation tax if it would not otherwise be so deductible.

(2)

Where any such contribution is made by F130 a company with investment business, any expenditure allowable as a deduction under subsection (1) above shall for the purposes of section 75 be treated as expenses of management.

F131(2A)

Where any such contribution is made by a company in relation to which section 76 applies (expenses of insurance companies) any expenditure allowable as a deduction under subsection (1) above shall for the purposes of that section be treated as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section.

(3)

Subsection (1) above does not apply in relation to a contribution made by F132any company if either the company or any person connected with the company receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution, whether from the urban regeneration company concerned or from any other person.

(4)

In any case where—

(a)

relief has been given under subsection (1) above in respect of a contribution F133made by a company, and

(b)

any benefit received in any F134accounting period by F135the company or any person connected with the company is in any way attributable to that contribution,

F136the company shall in respect of that F134accounting period be charged to F137corporation tax under Case I or Case II of Schedule D or, if F138the company is not chargeable to F137corporation tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.

(5)

In this section “urban regeneration company” means any body of persons (whether corporate or unincorporate) which the Treasury by order designates as an urban regeneration company for the purposes of this section.

(6)

The Treasury may only make an order under subsection (5) above designating a body as an urban regeneration company for the purposes of this section if they consider that each of the criteria in subsection (7) below is satisfied in the case of the body.

(7)

The criteria are that—

(a)

the sole or main function of the body is to co-ordinate the regeneration of a specific urban area in the United Kingdom;

(b)

the body is expected to seek to perform that function by creating a plan for the development of that area and endeavouring to secure that the plan is carried into effect;

(c)

in co-ordinating the regeneration of that area, the body is expected to work together with some or all of the public or local authorities which exercise functions in relation to the whole or part of that area.

(8)

An order under subsection (5) above may be framed so as to take effect on a date earlier than the making of the order, but not earlier than—

(a)

1st April 2003, in the case of the first order under that subsection, or

(b)

three months before the date on which the order is made, in the case of any subsequent order.

(9)

Section 839 (connected persons) applies for the purposes of this section.

(10)

This section applies to contributions made on or after 1st April 2003.

80 Expenses connected with foreign trades etc.

F139. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81 Travel between trades etc.

F140. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82 Interest paid to non-residents.

F141. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82A Expenditure on research and development.

(1)

Notwithstanding anything in section 74, where a F142company carrying on a trade incurs expenditure not of a capital nature on research and development—

(a)

related to that trade, and

(b)

directly undertaken F143by the company or on the company's behalf,

the expenditure incurred may be deducted as an expense in computing the profits of the trade for the purposes of F144corporation tax.

(2)

For this purpose expenditure on research and development does not include expenditure incurred in the acquisition of rights in, or arising out of, research and development.

Subject to that, it includes all expenditure incurred in carrying out, or providing facilities for carrying out, research and development.

(3)

The reference in subsection (1) above to research and development related to a trade includes—

(a)

research and development which may lead to or facilitate an extension of that trade;

(b)

research and development of a medical nature which has a special relation to the welfare of workers employed in that trade.

(4)

The same expenditure may not be taken into account under this section in relation to more than one trade.

(5)

In this section “research and development” has the meaning given by section 837A and includes oil and gas exploration and appraisal.

82B Payments to research associations, universities etc.

(1)

Notwithstanding anything in section 74, where a F145company carrying on a trade—

F146(a)

pays any sum to an Association in the case of which exemption may be claimed under section 508 and which has as its object the undertaking of research and development which may lead to or facilitate an extension of the class of trade to which the trade carried on by the company belongs, or

(b)

pays any sum to be used for scientific research related to that class of trade to any such university, college research institute or other similar institution as is for the time being approved for the purposes of this section by the Secretary of State,

the sum paid may be deducted as an expense in computing the profits of the trade for the purposes of F147corporation tax.

(2)

In this section “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge.

(3)

The reference in F148subsection (1)(b) above to scientific research related to a class of trade includes—

(a)

scientific research which may lead to or facilitate an extension of trades of that class;

(b)

scientific research of a medical nature which has a special relation to the welfare of workers employed in trades of that class.

(4)

If a question arises under this section whether, or to what extent, any activities constitute or constituted scientific research, the Board shall refer the question for decision to the Secretary of State.

The decision of the Secretary of State is final.

(5)

The same expenditure may not be taken into account under this section in relation to more than one trade.

83 Patent fees etc. and expenses.

M19Notwithstanding anything in section 74, in computing the F149profits of a trade F150for the purposes of corporation tax there may be deducted as expenses any fees paid or expenses incurred—

(a)

in obtaining for the purposes of the trade the grant of a patent, an extension of the term of a patent, the registration of a design or trade mark, F151an extension of the period for which the right in a registered design subsists or the renewal of registration of a trade mark, or

(b)

in connection with a rejected or abandoned application for a patent made for the purposes of the trade.

F152. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83A Gifts in kind to charities etc.

(1)

This section applies where F153a company carrying on a trade or profession gives an article falling within subsection (2) below to—

(a)

a charity within the meaning of section 506, or

(b)

a body listed in section 507(1).

(2)

An article falls within this subsection if—

(a)

it is an article manufactured, or of a class or description sold, by F154the company in the course of its trade; F155. . .

(b)

F155. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

Subject to subsection (4) below, where this section applies in the case of the gift of an article—

(a)

no amount shall be required, in consequence of the F156the company's disposal of that article from trading stock, to be brought into account for F157corporation tax purposes as a trading receipt of F158the company; F155. . .

(b)

F155. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

In any case where—

(a)

relief is given under subsection (3) above F159or section 63(2) of the Capital Allowances Act in respect of the gift of an article F160made by a company, and

(b)

any benefit received in any F161accounting period by F162the company or any person connected with the company is in any way attributable to the making of that gift,

F163the company shall in respect of that F161accounting period be charged to F164corporation tax under Case I or Case II of Schedule D or, if F165the company is not chargeable to F164corporation tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.

(5)

Section 839 applies for the purposes of this section.

84F166Gifts to educational establishments.

(1)

This section applies where F167a company carrying on a trade or profession (“the donor”) makes a gift for the purposes of a designated educational establishment of—

(a)

an article manufactured, or of a class or description sold, by the donor in the course of F168its trade which qualifies as F169plant or machinery in the hands of the educational establishment; F170. . .

(b)

F170. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)

For the purposes of this section, an article “ F171qualifies as plant or machinery in the hands of an educational establishment” if, and only if, it is an article such that—

(a)

were the activities carried on by the educational establishment regarded as a trade carried on by a body of persons, and

(b)

had that body, at the time of the gift, incurred capital expenditure wholly and exclusively on the provision of an identical article for the purposes of those activities, and

(c)

had the identical article belonged to that body in consequence of the incurring of that expenditure,

the identical article would be regarded for the purposes of F172Part 2 of the Capital Allowances Act as plant or machinery provided by the body for the purposes of that trade.

(3)

Where this section applies—

(a)

if the gift is of an article falling within paragraph (a) of subsection (1) above, then, for F173corporation tax purposes, no amount shall be required to be brought into account as a trading receipt of the donor in consequence of F174its disposal of that article from trading stock; F170. . .

(b)

F170. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

but this subsection shall not apply unless, within F175the period specified in subsection (3A) below, the donor makes a claim for relief under this subsection, specifying the article given and the name of the educational establishment in question.

F176(3A)

The period mentioned in subsection (3) above is F177the period of two years beginning at the end of the accounting period in which the gift is made.

(3B)

F178. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

In any case where—

(a)

relief is given under subsection (3) above F179or section 63(2) of the Capital Allowances Act in respect of the gift of an article F180made by the donor, and

(b)

any benefit received in any F181accounting period by the donor or any person connected with F182the donor is in any way attributable to the making of that gift,

the donor shall in respect of that F181accounting period be charged to F183corporation tax under Case I or Case II of Schedule D or, if F184the donor is not chargeable to F183corporation tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.

(5)

In this section “designated educational establishment” means any educational establishment designated, or of a category designated,—

(a)

as respects Great Britain, in regulations made by the Secretary of State; or

(b)

as respects Northern Ireland, in regulations made by the Department of Education for Northern Ireland;

and any such regulations may make different provision for different areas.

(6)

If any question arises as to whether a particular establishment falls within a category designated in regulations under subsection (5) above, the Board shall refer the question for decision—

(a)

in the case of an establishment in Great Britain, to the Secretary of State, or

(b)

in the case of an establishment in Northern Ireland, to the Department of Education for Northern Ireland.

(7)

The power of the Secretary of State to make regulations under subsection (5) above shall be exercisable by statutory instrument; and a statutory instrument containing any such regulations shall be subject to annulment in pursuance of a resolution of the House of Commons.

(8)

Regulations made under subsection (5) above for Northern Ireland—

(a)

shall be a statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979; and

(b)

shall be subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954.

(9)

Section 839 applies for the purposes of subsection (4) above.

F18584A Costs of establishing share option or profit sharing schemes: relief.

(1)

Subsection (2) below applies where—

(a)

a company incurs expenditure on establishing a share option scheme which the Board approve and under which no employee or director obtains rights before such approval is given, or

(b)

a company incurs expenditure on establishing a profit sharing scheme which the Board approve and under which the trustees acquire no shares before such approval is given.

(2)

In such a case the expenditure—

(a)

shall be deducted in computing for the purposes of Schedule D F186or Part 2 of ITTOIA 2005 the F187profits of a trade carried on by the company, or

F188(b)

if the company is one with investment business, shall be treated as expenses of management deductible under section 75 to the extent that it otherwise would not be, or

(c)

if the company is one in relation to which section 76 applies, shall be treated for the purposes of that section as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section to the extent that it otherwise would not be.

(3)

In a case where—

(a)

subsection (2) above applies, and

(b)

the approval is given after the end of the period of nine months beginning with the day following the end of the period of account in which the expenditure is incurred,

F189for the purpose of applying subsection (2) above the expenditure shall be treated in accordance with subsection (3ZA) below.

F190(3ZA)

Where this subsection applies—

(a)

in applying subsection (2)(a) above, the expenditure shall be treated as incurred in the period of account in which the approval is given (and not the period of account mentioned in subsection (3)(b) above),

(b)

in applying subsection (2)(b) or (c) above, the expenditure shall be treated as referable to the accounting period in which the approval is given.

F191(3A)

In this section, “share option scheme” means—

(a)

an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of ITEPA 2003 (approved SAYE option schemes)), or

(b)

a CSOP scheme within the meaning of the CSOP code (see section 521(4) of that Act (approved CSOP schemes)).

(4)

References in this section to approving are to approving under Schedule 9 F192to this Act or under Schedule 3 or 4 to ITEPA 2003 (approved SAYE option schemes and approved CSOP schemes).

(5)

This section applies where the expenditure is incurred on or after 1st April 1991.

85 Payments to trustees of approved profit sharing schemes.

(1)

M20Any sum expended in making a payment to the trustees of an approved profit sharing scheme by a company which is in relation to that scheme the grantor or a participating company—

(a)

shall be deducted in computing for the purposes of Schedule D the F193profits of a trade carried on by that company; or

F194(b)

if that company is a company with investment business, shall be treated as expenses of management deductible under section 75, or

(c)

if that company is one in relation to which section 76 applies, shall be treated as expenses payable for the purposes of that section,

if, and only if, one of the conditions in subsection (2) below is fulfilled.

(2)

The conditions referred to in subsection (1) above are—

(a)

that before the expiry of the relevant period the sum in question is applied by the trustees in the acquisition of shares for appropriation to individuals who are eligible to participate in the scheme by virtue of their being or having been employees or directors of the company making the payment; and

(b)

that the sum is necessary to meet the reasonable expenses of the trustees in administering the scheme.

(3)

For the purposes of subsection (2)(a) above “the relevant period” means the period of nine months beginning on the day following the end of the period of account in which the sum in question is charged as an expense of the company incurring the expenditure or such longer period as the Board may allow by notice given to that company.

(4)

For the purposes of this section, the trustees of an approved profit sharing scheme shall be taken to apply sums paid to them in the order in which the sums are received by them.

(5)

In this section—

“approved profit sharing scheme” means a profit sharing scheme approved under Schedule 9; and

“the grantor” and “participating company” have the meaning given by paragraph 1(3) and (4) of that Schedule.

85AF195Costs of establishing employee share ownership trusts: relief.

(1)

Subsection (2) below applies where a company incurs expenditure on establishing a qualifying employee share ownership trust.

(2)

In such a case the expenditure—

(a)

shall be deducted in computing for the purposes of Schedule D the F196profits of a trade carried on by the company,F197. . .

F198(b)

if the company is a company with investment business, shall be treated as expenses of management deductible under section 75 to the extent that it otherwise would not be, or

(c)

if the company is one in relation to which section 76 applies, shall be treated for the purposes of that section as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section to the extent that it otherwise would not be.

(3)

In a case where—

(a)

subsection (2) above applies, and

(b)

the trust is established after the end of the period of nine months beginning with the day following the end of the period of account in which the expenditure is incurred,

F199for the purpose of applying subsection (2) above, the expenditure shall be treated in accordance with subsection(3A) below.

F200(3A)

Where this subsection applies—

(a)

in applying subsection (2)(a) above, the expenditure shall be treated as incurred in the period of account in which the trust is established (and not the period of account mentioned in subsection (3)(b) above),

(b)

in applying subsection (2)(b) or (c) above, the expenditure shall be treated as referable to the accounting period in which the trust is established.

(4)

In this section “qualifying employee share ownership trust” shall be construed in accordance with Schedule 5 to the Finance Act 1989.

(5)

For the purposes of this section the trust is established when the deed under which it is established is executed.

(6)

This section applies where the expenditure is incurred on or after 1st April 1991.

Annotations:
Amendments (Textual)

F195S. 85A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 43

F196Words in s. 85A(2)(a) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a)(b), Sch. 7 para. 10

F197Word in s. 85A(2)(a) omitted (28.9.2004 with effect in accordance with art. 1(2) of the repealing S.I.) by virtue of The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 6(2)(a)

F198S. 85A(2)(b)(c) substituted for s. 85A(2)(b) (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 6(2)(b)

F199Words in s. 85A(3) substituted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 6(3)

F200S. 85A(3A) inserted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 6(4)

85BApproved share incentive plans

Schedule 4AA (which provides for deductions relating to approved share incentive plans) shall have effect.

86 Employees seconded to charities and educational establishments.

(1)

F201M21 If a company (“the employer”) carrying on a trade, profession or business for the purposes of which it employs a person (“the employee”) makes available to a charity, on a basis which is expressed and intended to be of a temporary nature, the services of the employee then, F202notwithstanding anything in section 74, 75 or 76, any expenditure incurred by the employer which is attributable to the employment of that employee shall continue to be deductible in the manner and to the like extent as if, during the time that his services are so made available to the charity, they continued to be available for the purposes of the employer’s trade, business F203or profession.

(2)

In subsection (1) above—

“charity” has the same meaning as in section 506;

F204“deductible” means—

(a)

deductible as an expense in computing the profits of the employer to be charged F205to corporation tax under Case I or II of Schedule D,

(b)

deductible as expenses of management for the purposes of section 75, or

(c)

falling to be brought into account in accordance with section 76 as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section,

as the case may be.

(3)

With respect to expenditure attributable to the employment of a person on or after 26th November 1986 F206. . . , this section shall have effect as if the references to a charity included references to any of the following bodies, that is to say—

F207(a)

in England and Wales, any body falling within subsection (4) below;

(b)

in Scotland, any body falling within subsection (5) below;

(c)

in Northern Ireland, any body falling within subsection (6) below; and

(d)

any other educational body which is for the time being approved for the purposes of this section by the Secretary of State or, in Northern Ireland, the Department of Education for Northern Ireland.

F208(4)

A body falls within this subsection if it is—

(a)

a local education authority;

(b)

an educational institution maintained or otherwise supported by such an authority (including a grant-maintained school or a grant-maintained special school within the meaning of the Education Act 1996);

(c)

an independent school, within the meaning of the Education Act 1996, whose registration under section 465 of that Act is final; or

(d)

an institution within the further education sector, or the higher education sector, within the meaning of the Further and Higher Education Act 1992.

(5)

A body falls within this subsection if it is—

(a)

an education authority;

(b)

an educational establishment managed by such an authority within the meaning of the Education (Scotland) Act 1980 (“the 1980 Act”);

(c)

a public or grant-aided school within the meaning of the 1980 Act;

(d)

a self-governing school within the meaning of the Self-Governing Schools etc. (Scotland) Act 1989;

(e)

an independent school within the meaning of the 1980 Act;

(f)

a central institution within the meaning of the 1980 Act;

(g)

an institution within the higher education sector within the meaning of section 56(2) of the Further and Higher Education (Scotland) Act 1992; or

(h)

a college of further education within the meaning of section 36(1) of that Act.

(6)

A body falls within this subsection if it is—

(a)

an education or library board within the meaning of the Education and Libraries (Northern Ireland) Order 1986;

(b)

a college of education or a controlled, maintained, grant-maintained integrated, controlled integrated, voluntary or independent school within the meaning of that Order; or

(c)

an institution of further education within the meaning of the Further Education (Northern Ireland) Order 1997.

F20986A Charitable donations: contributions to agent’s expenses.

(1)

This section applies where—

(a)

F210a company (the employer) is liable to make to any individual payments from which income tax falls to be deducted F211under PAYE regulations, and

(b)

the employer withholds sums from those payments in accordance with F212an approved scheme and pays the sums to an approved agent.

F213(1A)

In subsection (1)(b) “approved scheme” and “approved agent” have the same meaning as in section 714 of ITEPA 2003.

(2)

Any relevant expenditure incurred by the employer on or after 16th March 1993—

(a)

shall be deducted in computing for the purposes of Schedule D the F214profits of a trade F215or profession carried on by the employer, or

F216(b)

if the employer is a company with investment business, shall be treated as expenses of management deductible under section 75.

(3)

Relevant expenditure is expenditure incurred in making to the agent any payment in respect of expenses which have been or are to be incurred by the agent in connection with his functions under the scheme.

87 Taxable premiums etc.

(1)

M22This section applies where in relation to any land used in connection with a F217trade or profession—

F218(a)

any amount falls to be treated as a receipt of a Schedule A business by virtue of section 34 or 35, F219. . .

(b)

any amount would fall to be so treated but for the operation of section 37(2) or (3);

F220(c)

any amount falls to be treated as a receipt of a UK property business by virtue of any of sections 277 to 282 of ITTOIA 2005 (receipts in respect of lease premiums, sums payable instead of rent, for surrender of lease and for variation or waiver of term of lease and assignments), or

(d)

any amount would fall to be so treated but for the operation of the rule in section 288 of that Act (the additional calculation rule),

and that amount is referred to below F221and in section 87A as “the amount chargeable”.

(2)

M23Subject to subsections (3) to (8) below, where—

(a)

during any part of the relevant period the land in relation to which the amount chargeable arose is occupied by F222a company which is for the time being entitled to the lease as respects which it arose, and

(b)

that occupation is for the purposes of a F223trade or profession carried on by F224the company,

F225the company shall be treated, in computing the F226profits of the F223trade or profession chargeable to F227corporation tax under Case I or II of Schedule D, as paying in respect of that land rent for the period (in addition to any actual rent), becoming due from day to day, of an amount which bears to the amount chargeable the same proportion as that part of the relevant period bears to the whole.

(3)

As respects any period during which a part only of the land in relation to which the amount chargeable arose is occupied as mentioned in subsection (2) above, that subsection shall apply as if the whole were so occupied, but the amount chargeable shall be treated as reduced by so much thereof as, on a just apportionment, is attributable to the remainder of the land.

(4)

M24Where a F228company, although not in occupation of the land or any part of the land, deals with F229the company's interest in the land or that part as property employed for the purposes of a F230trade or profession carried on by F231the company, subsections (2) and (3) above shall apply as if the land or part were occupied by F231the company for those purposes.

(5)

M25Where section 37(2) and (3) has effect in relation to a lease granted out of the interest referred to in subsection (4) above, subsections (5) and (6) of that section shall apply for modifying the operation of subsections (2) and (3) above as they apply for modifying the operation of subsection (4) of that section.

(6)

M26In computing F226profits chargeable under Case I or II of Schedule D for any F232accounting period, rent shall not by virtue of subsection (4) above be treated as paid by a F233company for any period in respect of land in so far as rent treated under section 37(4) as paid by F234the company for that period in respect of the land has in any previous F232accounting period been deducted, or falls in that F232accounting period to be deducted under Part II.

(7)

M27Where, in respect of expenditure on the acquisition of F235the company's interest in the land in relation to which the amount chargeable arose, a F236company has become entitled to an allowance under F237Part 5 of the Capital Allowances Act in respect of expenditure falling within section 403 (mineral asset expenditure) for any F238accounting period, then—

(a)

if the allowance is in respect of the whole of the expenditure, no deduction shall be allowed F239the company under this section for that or any subsequent F238accounting period; or

(b)

if the allowance is in respect of part only of the expenditure (“the allowable part”), a deduction allowed F239the company under this section for that or any subsequent F238accounting period shall be the fraction—

A-BAmath

of the amount which apart from this subsection would fall to be deducted, where—

A is the whole of the expenditure, and

B is the allowable part of the expenditure;

F240. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)

Where the amount chargeable arose under section 34(2) F241or under section 277 of ITTOIA 2005 by virtue of section 278 of that Act (amount treated as lease premium where work required) by reason of an obligation which included the carrying out of work in respect of which any capital allowance has fallen or will fall to be made, this section shall apply as if the obligation had not included the carrying out of that work and the amount chargeable had been calculated accordingly.

(9)

M28In this section “the relevant period” means—

(a)

where the amount chargeable arose under section 34, the period treated in computing that amount as the duration of the lease;

(b)

where the amount chargeable arose under section 35, the period treated in computing that amount as the duration of the lease remaining at the date of the assignment;

F242(c)

where the amount chargeable arose under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc.), its receipt period (within the meaning of that Chapter (see section 288(6)).

F243(9A)

In the application of this section and section 87A to Scotland—

(a)

the reference to a lease being granted out of the interest referred to in subsection (4) above is to the grant of a sublease of land subject to that interest, and

(b)

references to the lease so granted are to be construed as references to the sublease.

(10)

F244. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87ASection 87(2) and (3) and reductions in receipts under ITTOIA 2005

(1)

This section applies if—

(a)

a lease has been granted out of the interest referred to in section 87(4),

(b)

in calculating the amount that falls to be treated as a receipt of a UK property business under Chapter 4 of Part 3 of ITTOIA 2005 in respect of the lease, there is a reduction under section 288 of that Act by reference to a taxed receipt, and

(c)

the taxed receipt is the amount chargeable for the purposes of section 87.

(2)

Section 37A (section 37(4) and reductions in receipts under ITTOIA 2005) shall apply for modifying the operation of section 87(2) and (3) as it applies for modifying the operation of section 37(4).

(3)

In this section the following expressions have the same meaning as in Chapter 4 of Part 3 of ITTOIA 2005—

  • “reduction under section 288 by reference to a taxed receipt” (see section 290(6) of that Act), and

  • “taxed receipt” (see section 287(4) of that Act).

88 Payments to Export Credit Guarantee Department.

M29Any sums paid by F245a company to the Export Credits Guarantee Department under an agreement entered into under arrangements made by the Secretary of State in pursuance of section 11 of the M30Export Guarantees and Overseas Investment Act 1978, or with a view to entering into such an agreement, shall be included—

(a)

in the sums to be deducted in computing for the purposes of Case I or Case II of Schedule D the F246profits of any F247trade or profession carried on by that company; or

F248(b)

F249if that company is a company with investment business, in the expenses of management that are deductible under section 75 in computing the company’s profits for the purpose of corporation tax;

whether or not they would fall to be so included apart from this section.

F25088A Debts of overseas governments etc.

F251. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F25288B Section 88A debts: restriction on deductions under section 74(j).

F253. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F25488C Section 88A debts: restriction on other deductions.

F255. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88DRestriction of deductions in respect of certain debts

(1)

This section applies to debts to which the following provisions do not apply—

(a)

Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships, etc);

(b)

Schedule 26 to the Finance Act 2002 (derivative contracts);

(c)

Schedule 29 to that Act (intangible fixed assets).

(2)

In calculating the profits of a company's trade for the purposes of corporation tax, no deduction is allowed in respect of a debt owed to the company, except—

(a)

by way of impairment loss, or

(b)

to the extent that the debt is released wholly and exclusively for the purposes of that trade as part of a statutory insolvency arrangement.

(3)

In this section “debt” includes an obligation or liability that falls to be discharged otherwise than by the payment of money.

(4)

In this section “trade” has the meaning given by section 6(4).

F25689Debts proving to be irrecoverable after discontinuance etc

(1)

This section applies if—

(a)

section 337(1) applies to treat a trade as discontinued by reason of any event, or

(b)

a person permanently ceases to carry on a trade or profession,

and a company carries on the trade or profession after that event or cessation.

(2)

In computing for corporation tax purposes the profits of the trade or profession in any period after the event or cessation, there may be deducted a sum equal to any amount proved during that period to be irrecoverable in respect of any debts—

(a)

which were credited in computing for tax purposes the profits for any period before the event or cessation, and

(b)

in respect of which the benefit was assigned to the company carrying on the trade or profession after the event or cessation.

(3)

Subsection (2) applies only so far as the total amount proved to be irrecoverable in respect of the debts exceeds any F257relevant deduction in respect of them in a computation for any period before the event or cessation.

F258(4)

In this section “debt” includes an obligation or liability that falls to be discharged otherwise than by the payment of money.

The references to a debt being irrecoverable shall be read accordingly.

(5)

For the purposes of this section “relevant deduction”, in relation to a debt, means a deduction made for tax purposes in respect of an impairment loss or release.

90 Additional payments to redundant employees.

F259(1)

Where a payment is made by way of addition to a redundancy payment or to the corresponding amount of any other employer’s payment and the additional payment would be—

(a)

allowable as a deduction in computing for the purposes of Schedule D the profits or losses of a trade F260or profession,

(b)

deductible under section 75 as expenses of management of a business, or

(c)

regarded as expenses payable for the purposes of section 76,

but for the permanent discontinuance of the trade, F261profession or business, the additional payment shall, subject to subsection (2) below, be so allowable, deductible or regarded notwithstanding that discontinuance.

If the additional payment—

  1. (i)

    is made after discontinuance, or

  2. (ii)

    is for the purposes of section 75 or 76 referable to an accounting period beginning after the discontinuance,

it shall be treated as made, or (as the case may be) as referable to the accounting period ending, on the last day on which the trade, F261profession or business was carried on.

F262(1A)

To the extent that the additional payment would, apart from this subsection, be regarded as expenses payable for the purposes of Step 5 in subsection (7) of section 76, it shall not be so regarded for the purposes of that subsection (or of subsection (1) above so far as relating to that section).

(2)

Subsection (1) above applies to an additional payment only so far as it does not exceed three times the amount of the redundancy payment or of the corresponding amount of the other employer’s payment.

(3)

In this section references to the permanent discontinuance of a trade, F263profession or business include references to any occasion on which it is treated as permanently discontinued by virtue of section F264. . . 337(1).

(4)

In this section references to a redundancy payment or to the corresponding amount of an employer’s payment shall be construed as in sections 579 and 580.

91 Cemeteries.

(1)

M31In computing F265for corporation tax purposes the F266profits or losses for any period of a trade which consists of or includes the carrying on of a cemetery, there shall be allowed as a deduction—

(a)

any capital expenditure incurred by F267the company engaged in carrying on the trade in providing any land in the cemetery sold during that period for the purpose of interments, and

(b)

the appropriate fraction of the residue at the end of that period of the relevant capital expenditure.

(2)

M32Subject to subsection (3) below, the relevant capital expenditure is capital expenditure incurred for the purposes of the trade in question by F268the company engaged in carrying it on, being—

(a)

expenditure on any building or structure other than a dwelling-house, being a building or structure in the cemetery likely to have little or no value when the cemetery is full; and

(b)

expenditure incurred in providing land taken up by any such building or structure, and any other land in the cemetery not suitable or adaptable for use for interments and likely to have little or no value when the cemetery is full.

(3)

Relevant capital expenditure—

(a)

does not include expenditure incurred on buildings or structures which have been destroyed before the beginning of the first period to which subsection (1) above applies in the case of the trade in question; and

(b)

of other expenditure incurred before that time, includes only the fraction—

AA+Bmath

where—

A is the number of grave-spaces which at that time were or could have been made available in the cemetery for sale, and

B is the number already sold.

(4)

M33For the purposes of this section—

(a)

the residue of any expenditure at the end of a period is the amount incurred before that time which remains after deducting—

(i)

any amount allowed in respect of that expenditure under subsection (1)(b) above F269, or under section 170(2)(b) of ITTOIA 2005 (relief for income tax purposes) in computing F270for tax purposes the F266profits or losses of the trade for any previous period, and

(ii)

if, after the beginning of the first period to which subsection (1) above applies in the case of a trade and before the end of the period mentioned at the beginning of this subsection, any asset representing that expenditure is sold or destroyed, the net proceeds of sale or, as the case may be, any insurance money or other compensation of any description received by F271the company carrying on the trade in respect of the destruction and any money received by F272it for the remains of the asset; and

(b)

the appropriate fraction of the residue of any expenditure at the end of any period is—

AA+Bmath

where—

A is the number of grave-spaces in the cemetery sold in the period, and

B is the number of grave-spaces which at the end of the period are or could be made available in the cemetery for sale.

(5)

Where in any chargeable period there is a change in the persons engaged in carrying on a trade which consists of or includes the carrying on of a cemetery, any allowance to be made under this section to F273the company carrying on the trade after the change shall, whether or not it is to be assumed for other purposes that the trade was discontinued and a new trade set up and commenced, be computed—

(a)

as if F274the company had at all times been engaged in carrying on the trade;

(b)

as if everything done to or by any of F275its predecessors in carrying on the trade had been done to or by F276it; and

(c)

without regard to the price paid on any sale on the occasion of any such change.

F277(6)

No expenditure shall be taken into account—

(a)

under both paragraphs (a) and (b) of subsection (1) above, or

(b)

under both subsection (1)(a) above and section 170(2)(b) of ITTOIA 2005 or under both subsection (1)(b) above and section 170(2)(a) of ITTOIA 2005,

whether for the same or different periods.

(7)

This section shall apply in relation to a trade which consists of or includes the carrying on of a crematorium and, in connection therewith, the maintenance of memorial garden plots, as it applies in relation to a trade which consists of or includes the carrying on of a cemetery, but subject to the modifications that—

(a)

references to the cemetery or land in the cemetery shall be taken as references to the land which is devoted wholly to memorial garden plots, and

(b)

references to grave-spaces shall be taken as references to memorial garden plots, and

(c)

references to the sale or use of land for interments shall be taken as references to its sale or use for memorial garden plots.

(8)

In this section—

(a)

references to the sale of land include references to the sale of a right of interment in land, and to the appropriation of part of a memorial garden in return for a dedication fee or similar payment;

(b)

references to capital expenditure incurred in providing land shall be taken as references to the cost of purchase and to any capital expenditure incurred in levelling or draining it or otherwise rendering it suitable for the purposes of a cemetery or a memorial garden; and

(c)

the reference in subsection (4)(a)(ii) to subsection (1) above includes a reference to section 141 of the 1970 Act and section 22 of the M34Finance Act 1952 (which made similar provision to that made by this section).

F278(9)

Section 532 of the Capital Allowances Act (general rule excluding contributions) shall apply for the purposes of this section as it applies for the purposes of that Act.

F27991A Waste disposal: restoration payments.

(1)

This section applies where on or after 6th April 1989 a F280company makes a site restoration payment in the course of carrying on a trade.

(2)

Subject to subsection (3) below, for the purposes of F281. . . corporation tax the payment shall be allowed as a deduction in computing the F282profits of the trade for the period of account in which the payment is made.

(3)

Subsection (2) above shall not apply to so much of the payment as—

(a)

represents expenditure which has been allowed as a deduction in computing the F282profits of the trade for any period of account preceding the period of account in which the payment is made, or

(b)

represents capital expenditure in respect of which an allowance has been, or may be, made under the enactments relating to capital allowances.

(4)

For the purposes of this section a site restoration payment is a payment made—

(a)

in connection with the restoration of a site or part of a site, and

(b)

in order to comply with any condition of a relevant licence, or any condition imposed on the grant of planning permission to use the site for the carrying out of waste disposal activities, or F283any relevant obligation.

(5)

For the purposes of this section waste disposal activities are the collection, treatment, conversion and final depositing of waste materials, or any of those activities.

(6)

For the purposes of this section a relevant icence is—

(a)

a disposal licence under Part I of the M35Control of Pollution Act 1974 or Part II of the M36Pollution Control and Local Government (Northern Ireland) Order 1978, or

(b)

a waste management licence under Part II of the Environmental Protection Act 1990 or any corresponding provision for the time being in force in Northern Ireland, F284 or

F285(ba)

a permit under regulations under section 2 of the Pollution Prevention and Control Act 1999, F286or a permit under regulations under Article 4 of the Environment (Northern Ireland) Order 2002, or

F287(ba)

a permit granted under regulations under section 2 of the Pollution Prevention and Control Act 1999, F286or a permit under regulations under Article 4 of the Environment (Northern Ireland) Order 2002, or

(c)

any authorisation under the M37Radioactive Substances Act 1960 or the M38Radioactive Substances Act 1993 for the disposal of radioactive waste or any nuclear site licence under the M39Nuclear Installations Act 1965.

F288(7)

For the purposes of this section a relevant obligation is—

(a)

an obligation arising under an agreement made under—

(i)

section 106 of the M40Town and Country Planning Act 1990, as originally enacted;

(ii)

F289section 75 of the Town and Country Planning (Scotland) Act 1997;

(b)

a planning obligation entered into under section 106 of the Act of 1990, as substituted by section 12 of the M41Planning and Compensation Act 1991, or under section 299A of the Act of 1990;

(c)

an obligation arising under or under an agreement made under any provision—

(i)

corresponding to section 106 of the M40Town and Country Planning Act 1990, as originally enacted or as substituted by the Act of 1991 or to section 299A of the Act of 1990; and

(ii)

for the time being in force in Northern Ireland.

(8)

F290. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91B Waste disposal: preparation expenditure.

(1)

This section applies where a F291company—

(a)

incurs, in the course of carrying on a trade, site preparation expenditure in relation to a waste disposal site (the site in question),

(b)

holds, at the time the F291company first deposits waste materials on the site in question, a relevant licence which is then in force,

(c)

makes a claim for relief under this section in such form as the Board may direct, and

(d)

submits such plans and other documents (if any) as the Board may require;

and it is immaterial whether the expenditure is incurred before or after the coming into force of this section.

(2)

In computing the F292profits of the trade for a period of account ending after 5th April 1989, the allowable amount shall be allowed as a deduction for the purposes of F293. . . corporation tax.

(3)

In relation to a period of account (the period in question) the allowable amount shall be determined in accordance with the formula—

(A-B)×CC+Dmath

(4)

A is the site preparation expenditure incurred by the F294company at any time before the beginning of, or during, the period in question—

(a)

in relation to the site in question, and

(b)

in the course of carrying on the trade;

but this subsection is subject to subsections (5) and (9) below.

(5)

A does not include any expenditure—

(a)

which has been allowed as a deduction in computing F295for the purposes of corporation tax or income tax the F292profits of the trade for any period of account preceding the period in question, or

(b)

which constitutes capital expenditure in respect of which an allowance has been, or may be, made F296for the purposes of corporation tax or income tax under the enactments relating to capital allowances.

(6)

B is an amount equal to any amount allowed as a deduction under this section F297or section 165 of ITTOIA 2005 (relief for income tax purposes), if allowed—

(a)

in computing the F292profits of the trade for any period of account preceding the period in question, and

(b)

as regards expenditure incurred in relation to the site in question;

and if different amounts have been so allowed as regards different periods, B is the aggregate of them.

(7)

C is the volume of waste materials deposited on the site in question during the period in question; but if the period is one beginning before 6th April 1989 C shall be reduced by the volume of any waste materials deposited on the site during the period but before that date.

(8)

D is the capacity of the site in question not used up for the deposit of waste materials, looking at the state of affairs at the end of the period in question.

(9)

Where any of the expenditure which would be included in A (apart from this subsection) was incurred before 6th April 1989, A shall be reduced by an amount determined in accordance with the formula—

E×FF+Gmath

(10)

For the purposes of subsection (9) above—

(a)

E is so much of the initial expenditure (that is, the expenditure which would be included in A apart from subsection (9) above) as was incurred before 6th April 1989,

(b)

F is the volume of waste materials deposited on the site in question before 6th April 1989, and

(c)

G is the capacity of the site in question not used up for the deposit of waste materials, looking at the state of affairs immediately before 6th April 1989.

F298(10A)

For the purposes of this section any expenditure incurred for the purposes of a trade by a F299company about to carry it on shall be treated as if it had been incurred by that F299company on the first day on which F300it does carry it on and in the course of doing so.

(11)

For the purposes of this section—

(a)

a waste disposal site is a site used (or to be used) for the disposal of waste materials by their deposit on the site,

(b)

in relation to such a site, site preparation expenditure is expenditure on preparing the site for the deposit of waste materials (and may include expenditure on earthworks),

(c)

in relation to such a site, “capacity” means capacity expressed in volume,

(d)

“relevant licence” has the same meaning as in section 91A, F301. . .

(e)

F301. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91BA Waste disposal: entitlement of successor to allowances.

(1)

This section applies where—

(a)

site preparation expenditure has been incurred in relation to a waste disposal site,

(b)

that expenditure was incurred by a person in the course of carrying on a trade, and

(c)

on or after 21st March 2000—

(i)

that person (“the predecessor”) ceases to carry on that trade, or ceases to carry it on so far as it relates to that site, and

(ii)

another person F302that is a company (“the successor”) begins to carry on that trade, or to carry on in the course of a trade the activities formerly carried on by the predecessor in relation to that site.

(2)

If the conditions specified in the following provisions of this section are met, then, for the purposes of section 91B above—

(a)

the trade carried on by the successor shall be treated as the same trade as that carried on by the predecessor, and

(b)

allowances shall be made to the successor (and not to the predecessor) as if everything done to or by the predecessor had been done to or by the successor.

(3)

The first condition is that the whole of the site in question is transferred to the successor.

Provided the successor holds an estate or interest in the whole of the site, it need not be the same as that held by the predecessor.

(4)

The second condition is that the successor, at the time F303it first deposits waste material at the site, holds a relevant licence in respect of the site which is then in force.

(5)

Expressions used in this section have the same meaning as in section 91B.

91C Mineral exploration and access.

Where—

(a)

a F304company carrying on a trade incurs expenditure on mineral exploration and access as defined in F305section 396(1) of the Capital Allowances Act in an area or group of sands in which the presence of mineral deposits in commercial quantities has already been established, and

(b)

if the presence in that area or group of sands of mineral deposits in commercial quantities had not already been established, that expenditure would not have been allowed to be deducted in computing the F306profits of the trade for the purposes of F307corporation tax,

that expenditure shall not be so deducted.

F308Payments for restrictive undertakings

76ZAPayments for restrictive undertakings

(1)

This section applies if a payment—

(a)

is treated as earnings of an employee by virtue of section 225 of ITEPA 2003 (payments for restrictive undertakings), and

(b)

is made, or treated as made for the purposes of section 226 of that Act (valuable consideration given for restrictive undertakings), by a company in relation to which section 76 applies.

(2)

The payment is treated as expenses payable which fall to be brought into account at Step 1 in section 76(7), so far as it otherwise would not be.

F309Seconded employees

76ZBEmployees seconded to charities and educational establishments

(1)

This section applies if a company to which section 76 applies makes the services of a person employed for the purposes of the company's life assurance business available to—

(a)

a charity, or

(b)

an educational establishment,

on a basis that is stated and intended to be temporary.

(2)

Expenses of the employer that are attributable to the employee's employment during the period of the secondment are treated as expenses payable which fall to be brought into account at Step 1 in section 76(7).

(3)

In this section—

“educational establishment” has the same meaning as in section 70 of CTA 2009, and

“the period of the secondment” means the period for which the employee's services are made available to the charity or educational establishment.

F310Counselling and retraining expenses

76ZCCounselling and other outplacement services

(1)

This section applies if—

(a)

a company carrying on life assurance business (“the employer”) incurs counselling expenses,

(b)

the expenses are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer, and

(c)

the relevant conditions are met.

(2)

The expenses are brought into account under section 76 as expenses payable (so far as they otherwise would not be).

(3)

In this section “counselling expenses” means expenses incurred—

(a)

in the provision of services to the employee in connection with the cessation of the office or employment,

(b)

in the payment or reimbursement of fees for such provision, or

(c)

in the payment or reimbursement of travelling expenses in connection with such provision.

(4)

In this section “the relevant conditions” means—

(a)

conditions A to D for the purposes of section 310 of ITEPA 2003 (employment income exemptions: counselling and other outplacement services), and

(b)

in the case of travel expenses, condition E for those purposes.

F31176ZDRetraining courses

(1)

This section applies if—

(a)

a company carrying on life assurance business (“the employer”) incurs training course expenses,

(b)

they are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer, and

(c)

the relevant conditions are met.

(2)

The expenses are brought into account under section 76 as expenses payable (so far as they otherwise would not be).

(3)

In this section—

“retraining course expenses” means expenses incurred in the payment or reimbursement of retraining course expenses within the meaning given by section 311(2) of ITEPA 2003, and

“the relevant conditions” means—

(a)

the conditions in subsections (3) and (4) of section 311 of ITEPA 2003 (employment income exemptions: retraining courses), and

(b)

in the case of travel expenses, the conditions in subsection (5) of that section.

F31276ZERetraining courses: recovery of tax

(1)

This section applies if—

(a)

an employer's liability to corporation tax for an accounting period is determined on the assumption that it is entitled by virtue of section 76ZD to bring an amount into account in determining the amount of a deduction to be made under section 76, and

(b)

without section 76ZD the employer would not have been so entitled.

(2)

If, subsequently—

(a)

the condition in section 311(4)(a) of ITEPA 2003 is not met because of the employee's failure to begin the course within the period of one year after ceasing to be employed, or

(b)

the condition in section 311(4)(b) of ITEPA 2003 is not met because of the employee's continued employment or re-employment,

an assessment of an amount or further amount of corporation tax due as a result of the condition not being met may be made under paragraph 41 of Schedule 18 to FA 1998.

(3)

Such an assessment must be made before the end of the period of 6 years immediately following the end of the accounting period in which the failure to meet the condition occurred.

(4)

If subsection (2) applies, the employer must give an officer of Revenue and Customs a notice containing particulars of—

(a)

the employee's failure to begin the course,

(b)

the employee's continued employment, or

(c)

the employee's re-employment,

within 60 days of coming to know of it.

(5)

If an officer of Revenue and Customs has reason to believe that the employer has failed to give such a notice, the officer may by notice require the employer to provide such information as the officer may reasonably require for the purposes of this section about—

(a)

the failure to begin the course,

(b)

the continued employment, or

(c)

the re-employment.

(6)

A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided.

F313Redundancy payments etc

76ZFRedundancy payments and approved contractual payments

(1)

Sections 76ZG to 76ZI apply if—

(a)

a company to which section 76 applies (“the employer”) makes a redundancy payment or an approved contractual payment to another person (“the employee”), and

(b)

the payment is in respect of the employee's employment wholly in the employer's life assurance business or partly in the employer's life assurance business and partly in one or more other capacities.

(2)

For the purposes of this section and sections 76ZG to 76ZH “redundancy payment” means a redundancy payment payable under—

(a)

Part 11 of the Employment Rights Act 1996, or

(b)

Part 12 of the Employment Rights (Northern Ireland) Order 1996.

(3)

For the purposes of this section and those sections—

“contractual payment” means a payment which, under an agreement, an employer is liable to make to an employee on the termination of the employee's contract of employment, and

a contractual payment is “approved” if, in respect of that agreement, an order is in force under—

(a)

section 157 of the Employment Rights Act 1996, or

(b)

Article 192 of the Employment Rights (Northern Ireland) Order 1996.

F31476ZGPayments in respect of employment wholly in employer's business

(1)

This section applies if the payment is in respect of the employee's employment wholly in the employer's life assurance business.

(2)

The payment is treated as expenses payable which fall to be brought into account at Step 1 in section 76(7), so far as it otherwise would not be.

(3)

The amount brought into account by virtue of this section for an approved contractual payment must not exceed the amount which would have been due to the employee if a redundancy payment had been payable.

(4)

If the payment is referable to an accounting period beginning after the business has permanently ceased to be carried on, it is treated as referable to the last accounting period in which the business was carried on.

F31576ZHPayments in respect of employment in more than one capacity

(1)

This section applies if the payment is in respect of the employee's employment with the employer—

(a)

partly in the employer's life assurance business, and

(b)

partly in one or more other capacities.

(2)

The amount of the redundancy payment, or the amount which would have been due if a redundancy payment had been payable, is to be apportioned on a just and reasonable basis between—

(a)

the employment in the life assurance business, and

(b)

the employment in the other capacities.

(3)

The part of the payment apportioned to the employment in the life assurance business is treated as a payment in respect of the employee's employment wholly in the life assurance business for the purposes of section 76ZG.

F31676ZIAdditional payments

(1)

This section applies if the employer's business, or part of it, ceases (permanently) to be carried on and the employer makes a payment to the employee in addition to—

(a)

the redundancy payment, or

(b)

if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.

(2)

If—

(a)

the additional payment would not otherwise be regarded as expenses payable for the purposes of section 76, but

(b)

that is only because the business, or the part of the business, has ceased to be carried on,

the additional payment is regarded as expenses payable for the purposes of section 76.

(3)

So far as the additional payment would, apart from this subsection, be regarded as expenses payable for the purposes of Step 5 in subsection (7) of section 76, it is not to be so regarded for the purposes of that subsection (or of subsection (2) above so far as relating to section 76).

(4)

The amount treated under this section as expenses payable for the purposes of section 76 is limited to 3 times the amount of—

(a)

the redundancy payment, or

(b)

if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.

(5)

If the payment is referable to an accounting period beginning after the business or the part of the business has ceased to be carried on, it is treated as referable to the last accounting period in which the business, or the part concerned, was carried on.

F31776ZJPayments by the Government

(1)

This section applies if—

(a)

a redundancy payment or an approved contractual payment is payable by a company to which section 76 applies (“the employer”), and

(b)

a payment to which subsection (2) applies is made in respect of the payment.

(2)

This subsection applies to—

(a)

payments made by the Secretary of State under section 167 of the Employment Rights Act 1996, and

(b)

payments made by the Department for Employment and Learning under Article 202 of the Employment Rights (Northern Ireland) Order 1996.

(3)

So far as the employer reimburses the Secretary of State or Department for the payment, sections 76ZG to 76ZI apply as if the payment were—

(a)

a redundancy payment, or

(b)

an approved contractual payment,

made by the employer.

F318Contributions to local enterprise organisations or urban regeneration companies

76ZKContributions to local enterprise organisations or urban regeneration companies

(1)

This section applies if a company to which section 76 applies (“the contributor”) incurs expenses in making a contribution (whether in cash or in kind)—

(a)

to a local enterprise organisation, or

(b)

to an urban regeneration company.

(2)

The expenses are treated for the purposes of section 76 as expenses payable which fall to be brought into account at Step 1 in section 76(7).

(3)

But if, in connection with the making of the contribution, the contributor or a connected person—

(a)

receives a disqualifying benefit of any kind, or

(b)

is entitled to receive such a benefit,

the amount treated in accordance with subsection (2) is restricted to the amount of the expenses less the value of the benefit.

(4)

For this purpose it does not matter whether a person receives, or is entitled to receive, the benefit—

(a)

from the local enterprise organisation or urban regeneration company concerned, or

(b)

from anyone else.

(5)

Subsection (6) applies if—

(a)

an amount has been brought into account in accordance with subsection (2), and

(b)

the contributor or a connected person receives a disqualifying benefit that is in any way attributable to the contribution.

(6)

The contributor is to be treated as receiving, when the benefit is received, an amount—

(a)

which is equal to the value of the benefit (so far as not brought into account in determining the amount of the deduction), and

(b)

to which the charge to corporation tax on income applies.

(7)

In this section—

“disqualifying benefit” means a benefit the expenses of obtaining which, if incurred by the contributor directly in a transaction at arm's length, would not be expenses payable for the purposes of section 76,

“local enterprise organisation” has the meaning given by section 83 of CTA 2009,

“urban regeneration company” has the meaning given by section 86 of CTA 2009.

(8)

Section 839 (“connected person”) applies for the purposes of subsections (3) and (5).

F319Unpaid remuneration

76ZLUnpaid remuneration

(1)

This section applies if—

(a)

an amount is charged in respect of employees' remuneration in the accounts for a period of a company to which section 76 applies,

(b)

the amount would apart from this section be brought into account under section 76 as expenses payable, and

(c)

the remuneration is not paid before the end of the period of 9 months immediately following the end of the period of account.

(2)

If the remuneration is paid after the end of that period of 9 months, the amount is brought into account for the period of account in which it is paid.

(3)

But—

(a)

subsection (2) is subject to section 86 of FA 1989 (spreading of relief for acquisition expenses), and

(b)

in interpreting that section the remuneration is treated as expenses payable which fall to be included at Step 1 in section 76(7) for the period of account in which the remuneration is paid.

(4)

The amount is not brought into account under section 76 as expenses payable if it is not paid.

F32076ZMUnpaid remuneration: supplementary

(1)

For the purposes of section 76ZL an amount charged in the accounts in respect of employees' remuneration includes an amount for which provision is made in the accounts with a view to its becoming employees' remuneration.

(2)

For the purposes of section 76ZL it does not matter whether an amount is charged for—

(a)

particular employments, or

(b)

employments generally.

(3)

If the profits of the company are calculated before the end of the 9 month period mentioned in section 76ZL(1)(c)—

(a)

it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b)

if the remuneration is subsequently paid before the end of that period, nothing in this subsection prevents the calculation being revised and any tax return being amended accordingly.

(4)

For the purposes of this section and section 76ZL remuneration is paid when it—

(a)

is treated as received by an employee for the purposes of ITEPA 2003 by section 18 or 19 of that Act (receipt of money and non-money earnings), or

(b)

would be so treated if it were not exempt income.

(5)

In this section and section 76ZL—

“employee” includes an office-holder and “employment” therefore includes an office, and

“remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of ITEPA 2003.

F321Car or motor cycle hire

F32276ZNCar or motor cycle hire

(1)

Subsection (2) applies if—

(a)

in calculating the corporation tax to which a company is liable for an accounting period, an amount representing expenses incurred on the hiring of a car or motor cycle can be brought into account under section 76 as expenses payable,

(b)

the car or motor cycle is not a qualifying hire car or motor cycle, and

(c)

the retail price of the car or motor cycle when new exceeds £12,000.

(2)

The amount that would otherwise be capable of being brought into account as expenses payable is reduced by multiplying the amount by the fraction—

£12,000+RP2×RPmath

where RP is the retail price of the car or motor cycle when new.

(3)

Subsection (4) applies if an amount is reduced as a result of subsection (2), or a corresponding provision, and—

(a)

subsequently—

(i)

there is a rebate (however described) of the hire charges, or

(ii)

a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency agreement, and

(b)

an amount is brought into account in respect of the rebate or release.

(4)

For the purposes of subsection (3)(b) an amount is brought into account in respect of a rebate of hire charges or the release of a debt if—

(a)

the amount of a reversal representing the rebate or release falls to be deducted under Step 4 in section 76(7), or

(b)

(in the case of a rebate of hire charges) an amount representing the rebate is chargeable under section 85(1) of the Finance Act 1989 (c. 26).

(5)

The amount that would otherwise be deductible as mentioned in subsection (4)(a) or chargeable as mentioned in subsection (4)(b) is reduced by multiplying it by the fraction set out in subsection (2).

(6)

In this section “corresponding provision” means—

(a)

section 56(2) of CTA 2009 (car or motor cycle hire: trade profits and property income),

(b)

section 1251(2) of CTA 2009 (car or motor cycle hire: companies with investment business), and

(c)

section 48(2) of ITTOIA 2005 (car or motor cycle hire: trade profits and property income).

(7)

The power under section 74(4) of CAA 2001 to increase or further increase the sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power to increase or further increase the sum of money specified in subsection (1)(c) or (2).

(8)

In this section “car or motor cycle” and “qualifying hire car or motor cycle” have the meanings given by section 57 of CTA 2009.

F32376ZOHiring cars (but not motor cycles) with low CO2 emissions before 1 April 2013

(1)

Section 76ZN does not apply to expenses incurred on the hiring of a car with low CO2 emissions, or an electrically-propelled car, if—

(a)

the car was first registered on or after 17 April 2002, and

(b)

the period of hire begins before 1 April 2013 under a contract entered into before that date.

(2)

For this purpose—

“car with low CO2 emissions” has the meaning given by section 45D of CAA 2001, and

“electrically-propelled car” has the meaning given by that section.

Treatment of regional development and other grants and debts released etc.

92 Regional development grants.

(1)

M42A regional development grant which, apart from this subsection, would be taken into account as a receipt in computing the profits of a trade, profession or vocation which are chargeable under Case I or II of Schedule D, shall not be taken into account as a receipt in computing those profits.

(2)

M43A regional development grant which is made to an investment company—

(a)

shall not be taken into account as a receipt in computing its profits under Case VI of Schedule D; and

(b)

shall not be deducted, by virtue of section 75(2), from the amount treated as expenses of management.

(3)

In this section “regional development grant” means a payment by way of grant under Part II of the M44Industrial Development Act 1982.

Annotations:
Marginal Citations

M42SOURCE-1984 s. 54(1), (4)

M43SOURCE-1984 s. 54(2), (3)

M441982 c. 52.

93 Other grants under Industrial Development Act 1982 etc.

(1)

M45A payment to which this section applies which is made to a F324company carrying on a trade the profits of which are chargeable F325to corporation tax under Case I of Schedule D shall be taken into account as a receipt in computing those profits; and any such payment which is made to F326a company with investment business shall be taken into account as a receipt in computing its profits under Case VI of Schedule D.

(2)

M46This section applies to any payment which would not, apart from this section, be taken into account as mentioned in subsection (1) above, being a payment by way of a grant under—

(a)

section 7 or 8 of the Industrial Development Act 1982 or section 7 or 8 of the M47Industry Act 1972; or

(b)

section 1 of the M48Industries Development Act (Northern Ireland) 1966 or section 4 of the M49Industries Development Act (Northern Ireland) 1971; or

(c)

M50any of Articles 7, 9 and 30 of the M51Industrial Development (Northern Ireland) Order 1982;

other than a grant designated as made towards the cost of specified capital expenditure or as made by way of compensation for the loss of capital assets and other than a grant falling within subsection (3) below.

(3)

M52A payment by way of grant which is made—

(a)

under Article 7 of the Order referred to in subsection (2)(c) above, and

(b)

in respect of a liability for corporation tax (including a liability which has already been met),

shall not be taken into account as mentioned in subsection (1) above, whether by virtue of this section or otherwise.

94 Debts deducted and subsequently released.

F327(1)

M53Where, in computing for F328corporation tax purposes the F329profits of a F330trade or profession, a deduction has been allowed for any debt incurred for the purposes of the F330trade or profession, then, if the whole or any part of the debt is thereafter released F331otherwise than as part of a F332statutory insolvency arrangement, the amount released shall be treated as a receipt of the F330trade or profession arising in the period in which the release is effected.

(2)

F333. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95F334Taxation of dealers in respect of distributions etc.

F335F336(1)

Where a dealer—

(a)

receives a relevant distribution, that is to say—

(i)

any distribution which is made by a company resident in the United Kingdom (“a UK distribution”), or

(ii)

any payment which is representative of a UK distribution, or

(b)

makes any payment which is representative of a UK distribution,

the distribution or, as the case may be, the payment shall be taken into account in computing the profits of the dealer which are chargeable to F337corporation tax in accordance with the provisions of this Act applicable to Case I or II of Schedule D.

(1A)

Accordingly, where a dealer receives a F338relevant distribution—

(a)

F339. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

F340. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)

F341section 208 shall not apply to that distribution; and

(d)

F342. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F343(e)

F344. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1B)

F345. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F346(1C)

The application of subsection (1) above in relation to a payment made by a dealer is subject to paragraph 7A of Schedule 23A (manufactured payments under arrangements having an unallowable purpose).

(2)

For the purposes of this section a person is a dealer in relation to any F347. . . distribution if—

(a)

were there a sale by that person of the shares F348or stock in respect of which the distribution is made, and

(b)

the circumstances of that sale were such that the price would not fall to be treated as a F347. . . distribution,

the price would be taken into account in computing the profits of that person which are chargeable to F349corporation tax in accordance with the provisions of this Act applicable to Case I or II of Schedule D.

F350(2A)

The reference in subsection (2) above to the profits of a person does not include the profits of that person in respect of insurance business or any category of insurance business.

(4)

F351. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

F351. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35295ZATaxation of UK distributions received by insurance companies

(1)

If the total amount of relevant distributions received by a company in an accounting period exceeds £50,000, those distributions are to be taken into account in calculating for corporation tax purposes the profits of the company in that period (and accordingly section 208 does not apply in relation to those distributions).

(2)

A company (“company A”) receives a “relevant distribution” if—

(a)

it receives a distribution made by a company resident in the United Kingdom (“company B”),

(b)

the value of the shares or stock in respect of which the distribution is made (“the holding”) is materially reduced by reason of the distribution,

(c)

a profit on the sale of the holding (to anyone other than company B) would be taken into account in calculating company A's profits in respect of relevant insurance business, and

(d)

either—

(i)

the holding amounts to, or is an ingredient in a holding amounting to, 10% of all holdings of the same class in company B, or

(ii)

the period between the acquisition by company A of the holding and that company first taking steps to dispose of the holding does not exceed 30 days.

(3)

In this section “relevant insurance business” means any kind of insurance business other than life assurance business.

(4)

Section 177(7) of TCGA 1992 (provision supplementing provision corresponding to subsection (2)(d)(i) above) applies for the purposes of subsection (2)(d)(i).

(5)

Section 731(4) below (interpretation of “taking steps to dispose of securities”) applies for the purposes of subsection (2)(d)(ii) as if the reference to the securities were to the holding.

Special provisions

F35395A Creative artists: relief for fluctuating profits

F354. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96 Farming and market gardening: relief for fluctuating profits.

F355. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97 Treatment of farm animals etc.

M54Schedule 5 shall have effect with respect to the treatment, in computing F356profits for the purposes of Case I of Schedule D, of animals and other living creatures kept for the purposes of farming or any other trade.

F35798 Tied premises: receipts and expenses treated as those of trade.

(1)

This section applies F358for corporation tax purposes where F359a company (“the trader”)—

(a)

carries on a trade,

(b)

in the course of the trade supplies, or is concerned in the supply of, goods sold or used on premises occupied by F360a person other than the trader,

(c)

has an estate or interest in those premises, and

(d)

deals with that estate or interest as property employed for the purposes of the trade.

(2)

Where this section applies the receipts and expenses in connection with the premises that would otherwise fall to be brought into account in computing the profits of a Schedule A business carried on by the trader shall instead be brought into account in computing the profits of the trade.

(3)

Any necessary apportionment shall be made on a just and reasonable basis of receipts or expenses—

(a)

which do not relate only to the premises concerned, or

(b)

where the conditions in subsection (1) are met only in relation to part of the premises.

(4)

This section applies to premises outside the United Kingdom as if the premises were in the United Kingdom.

99 Dealers in land.

(1)

M55In computing for F361corporation tax purposes the F362profits of a trade of dealing in land, there shall be disregarded—

(a)

so much of the cost of woodlands in the United Kingdom purchased in the course of the trade as is attributable to trees or saleable underwood growing on the land; and

(b)

where any amount has been disregarded under paragraph (a) above and, on a subsequent sale of the woodlands in the course of the trade, all or any of the trees or underwood to which the amount disregarded was attributable are still growing on the land, so much of the price for the land as is equal to the amount so disregarded in respect of those trees or underwood.

(2)

M56In computing the F362profits of a trade of dealing in land, any trading receipt falling within subsection (1), (4) or (5) of section 34 or section 35 or 36 shall be treated as reduced by the amount on which F363corporation tax is chargeable by virtue of that section.

(3)

Where, on a claim being made under subsection (2)(b) of section 36, the amount on which F364corporation tax was chargeable by virtue of that section is treated as reduced, subsection (2) above shall be deemed to have applied to the amount as reduced, and any such adjustment of liability to F364corporation tax shall be made (for all relevant F365accounting periods) whether by means of an assessment or otherwise, as may be necessary, and may be so made at any time at which it could be made if it related only to F364corporation tax for the F366accounting period in which that claim is made.

(4)

M57Subsection (1) above shall not apply where the purchase mentioned in paragraph (a) of that subsection was made under a contract entered into before 1st May 1963.

CHAPTER VI DISCONTINUANCE F367. . .

Valuation of trading stock etc.

100 Valuation of trading stock at discontinuance of trade.

(1)

M58In computing for F368any corporation tax purpose the F369profits of a trade which has been discontinued, any trading stock belonging to the trade at the discontinuance shall be valued as follows—

(a)

if—

(i)

the stock is sold or transferred for valuable consideration to a person who carries on, or intends to carry on, a trade in the United Kingdom, and

(ii)

the cost of the stock may be deducted by the purchaser as an expense in computing for any tax purpose the F369profits of that trade,

the value of the stock shall be taken to be the amount F370determined in accordance with subsections (1A) to (1C) below; and

(b)

if the stock does not fall to be valued under paragraph (a) above, its value shall be taken to be the amount which it would have realised if it had been sold in the open market at the discontinuance of the trade.

F371(1ZA)

This section does not apply in relation to any trading stock if paragraph 1(2) of Schedule 28AA (provision not at arm’s length) has effect in relation to any provision made or imposed in relation to that stock and having effect in connection with the discontinuance of the trade.

F372(1A)

Subject to subsections (1B) and (1C) below and to paragraph 2 of Schedule 12 to the M59Finance Act 1988 (gilt-edged securities and other financial trading stock), the value of any trading stock falling to be valued under paragraph (a) of subsection (1) above shall be taken—

(a)

except where the person to whom it is sold or transferred is connected with F373the company which makes the sale or transfer, to be the amount (“the price actually received for it”) which is in fact realised on the sale or, as the case may be, which is in fact the value of the consideration given for the transfer; and

(b)

if F374that person and that company are connected with each other, to be what would have been the price actually received for it had the sale or transfer been a transaction between independent persons dealing at arm’s length.

(1B)

In a case falling within subsection (1)(a) above—

(a)

F375. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

stock sold in circumstances in which the amount realised on the sale would be taken to be an amount determined in accordance with paragraph 5 of Schedule 5 shall be taken to have the value so determined, instead of the value for which subsection (1A)(a) or (b) above provides.

(1C)

If—

(a)

trading stock is sold or transferred to a person in circumstances where paragraph (b) of subsection (1A) above would apply (apart from this subsection) for determining the value of the stock so sold or transferred,

(b)

the amount which would be taken in accordance with that paragraph to be the value of all of the stock sold or transferred to that person is more than the acquisition value of that stock and also more than the price actually received for it, and

(c)

both parties to the sale or transfer, by notice signed by them and sent to the inspector no later than two years after the end of the F376accounting period in which the trade is discontinued, elect that this subsection shall apply,

then the stock sold or transferred to that person shall be taken to have a value equal to whichever is the greater (taking all the stock so sold or transferred together) of its acquisition value and the price actually received for it or, in a case where they are the same, to either of them.

(1D)

In subsection (1C) above “acquisition value”, in relation to any trading stock, means the amount which, in computing for any F377corporation tax purposes the F369profits of the discontinued trade, would have been deductible as representing the acquisition value of that stock if—

(a)

the stock had, immediately before the discontinuance, been sold in the course of the trade for a price equal to whatever would be its value in accordance with subsection (1A)(b) above; and

(b)

the period for which those F369profits were to be computed began immediately before the sale.

(1E)

F378Where the value of the trading stock is determined in accordance with subsections (1A) to (1C) above, or sections 176 to 178 of ITTOIA 2005 or section 127 of that Act (by virtue of section 175(3)) (corresponding provisions for income tax purposes), the amount to be brought into account as the value of that stock in computing F369profits of the discontinued trade shall also be taken, for the purpose of making F379for corporation tax purposes any deduction in computing the F369profits of any trade carried on by the purchaser, to be the cost of that stock to the purchaser.

(1F)

For the purposes of this section two persons are connected with each other if—

(a)

they are connected with each other within the meaning of section 839;

(b)

one of them is a partnership and the other has a right to a share in the partnership;

(c)

one of them is a body corporate and the other has control over that body;

(d)

both of them are partnerships and some other person has a right to a share in each of them; or

(e)

both of them are bodies corporate or one of them is a partnership and the other is a body corporate and, in either case, some other person has control over both of them;

and in this subsection the references to a right to a share in a partnership are references to a right to a share of the assets or income of the partnership and “control” has the meaning given by section 840.

(1G)

In this section “purchaser”, in relation to a transfer otherwise than by sale, means the person to whom the transfer is made.

(2)

M60For the purposes of this section “trading stock”, in relation to any trade—

(a)

means property of any description, whether real or personal, being either—

(i)

property such as is sold in the ordinary course of the trade, or would be so sold if it were mature or if its manufacture, preparation or construction were complete; or

(ii)

materials such as are used in the manufacture, preparation or construction of any such property as is referred to in sub-paragraph (i) above; and

(b)

includes also any services, article or material which would, if the trade were a profession F380. . . , be treated, for the purposes of section 101, as work in progress of the profession F380. . . , and references to the sale or transfer of trading stock shall be construed accordingly.

F381(3)

Where trading stock falling to be valued under paragraph (a) of subsection (1) above is sold or transferred together with other assets, so much of the amount realised on the sale or, as the case may be, of the value of the consideration given for the transfer as on a just and reasonable apportionment is properly attributable to each asset shall be treated for the purposes of this section as the amount realised on the sale or, as the case may be, the value of the consideration given for the transfer, of that asset.

101 Valuation of work in progress at discontinuance of profession or vocation.

(1)

M61Where, in computing for F382any corporation tax purpose the F383profits of a profession F384. . . which has been discontinued, a valuation is taken of the work of the profession F384. . . in progress at the discontinuance, that work shall be valued as follows—

(a)

if—

(i)

the work is transferred for money or any other valuable consideration to a person who carries on, or intends to carry on, a profession F384. . . in the United Kingdom, and

(ii)

the cost of the work may be deducted by that person as an expense in computing for any tax purpose the F383profits of that profession F384. . . ,

the value of the work shall be taken to be the amount paid or other consideration given for the transfer; and

(b)

if the work does not fall to be valued under paragraph (a) above, its value shall be taken to be the amount which would have been paid for a transfer of the work on the date of the discontinuance as between parties at arm’s length.

(2)

M62Where a profession F385. . . is discontinued, and the F386company by which it was carried on immediately before the discontinuance so elects by notice sent to the inspector at any time within F387the period specified in subsection (2A) below—

(a)

the amount (if any) by which the value of the work in progress at the discontinuance (as ascertained under subsection (1) above) exceeds the actual cost of the work shall not be brought into account in computing the F383profits of the period immediately before the discontinuance; but

(b)

the amount by which any sums received for the transfer of the work exceed the actual cost of the work shall be included in the sums chargeable to tax by virtue of section 103 as if it were a sum to which that section applies received after the discontinuance.

F388(2A)

The period mentioned in subsection (2) above is—

(a)

F389. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

F390. . . the period of two years beginning at the end of the accounting period in which the profession F390. . . is discontinued.

(3)

M63References in this section to work in progress at the discontinuance of a profession F391. . . shall be construed as references to—

(a)

any services performed in the ordinary course of the profession F391. . . , the performance of which was wholly or partly completed at the time of the discontinuance and for which it would be reasonable to expect that a charge would have been made on their completion if the profession F391. . . had not been discontinued; and

(b)

any article produced, and any such material as is used, in the performance of any such services,

and references in this section to the transfer of work in progress shall include references to the transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the carrying out of the work.

102 Provisions supplementary to sections 100 and 101.

(1)

M64Any question arising under section 100(1)(a) or 101(1)(a) shall be determined as follows, for the purpose of computing for any tax purpose the F392profits of both the trades or, as the case may be, the professions F393. . . concerned—

(a)

in a case where the same body of General Commissioners have jurisdiction with respect to F394each of the persons whose F395trade or profession is one of those concerned, the question shall be determined by those Commissioners unless all parties concerned agree that it shall be determined by the Special Commissioners;

(b)

in any other case, the question shall be determined by the Special Commissioners; and

(c)

the General or Special Commissioners shall determine the question in like manner as an appeal.

(2)

M65Where, by virtue of section F396. . . 337(1), a F397trade or profession is treated as having been permanently discontinued for the purpose of computing F398corporation tax, it shall also be so treated for the purposes of sections 100 and 101F396. . . .

Case VI charges on receipts

103 Receipts after discontinuance: earnings basis charge and related charge affecting conventional basis.

M66(1)

Where any trade, profession or vocation F399carried on wholly or partly in the United Kingdom the F400profits of which are chargeable to tax F401. . . has been permanently discontinued, F402corporation tax shall be charged under Case VI of Schedule D in respect of any sums to which this section applies which are received after the discontinuance.

(2)

Subject to subsection (3) below, this section applies to the following sums arising from the carrying on of the trade, profession or vocation during any period before the discontinuance (not being sums otherwise chargeable to tax)—

(a)

where the F400profits for that period were computed by reference to earnings, all such sums in so far as their value was not brought into account in computing the F400profits for any period before the discontinuance, and

(b)

where those F400profits were computed on a conventional basis (that is to say, were computed otherwise than by reference to earnings), any sums which, if those F400profits had been computed by reference to earnings, would not have been brought into the computation for any period before the discontinuance because the date on which they became due, or the date on which the amount due in respect thereof was ascertained, fell after the discontinuance.

(3)

This section does not apply to any of the following sums—

(a)

sums received by a F403company beneficially entitled thereto F404which is not resident in the United Kingdom, or by a person acting on F405its behalf, which represent income arising directly or indirectly from a country or territory outside the United Kingdom, or

(b)

F406. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F407(bb)

F406. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)

sums realised by the transfer of trading stock belonging to a trade at the discontinuance of the trade, or by the transfer of the work of a profession or vocation in progress at its discontinuance.

F408. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

Where—

(a)

in computing for tax purposes the F400profits of a trade, profession or vocation a deduction has been allowed for any debt incurred for the purposes of the trade, profession or vocation, and

(b)

the whole or any part of that debt is thereafter released F409otherwise than as part of a F410statutory insolvency arrangement, and

(c)

the trade, profession or vocation has been permanently discontinued at or after the end of the period for which the deduction was allowed and before the release was effected,

subsections (1) to (3) above shall apply as if the amount released were a sum received after the discontinuance.

F411(4A)

F412. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

For the purposes of this section the value of any sum received in payment of a debt shall be treated as not brought into account in the computation of the F400profits of a trade, profession or vocation to the extent that F413a deduction has been made for tax purposes in respect of an impairment loss or a release of liability.

104 Conventional basis: general charge on receipts after discontinuance F414. . . .

(1)

M67Where any trade, profession or vocation F415carried on wholly or partly in the United Kingdom the F416profits of which are chargeable to tax F417. . . has been permanently discontinued, and the F416profits for any period before the discontinuance were computed on a conventional basis, F418corporation tax shall be charged under Case VI of Schedule D in respect of any sums to which this subsection applies which are received on or after the discontinuance.

(2)

Subject to subsection (3) below, subsection (1) above applies to all sums arising from the carrying on of the trade, profession or vocation during any period before the discontinuance, not being sums otherwise chargeable to tax, in so far as the amount or value of the sums was not brought into account in computing the F416profits for any period before the discontinuance.

(3)

In subsection (2) above the reference to sums otherwise chargeable to tax includes any sums which (disregarding this section) are chargeable to F419corporation tax under section 103 or to which that section would have applied but for subsection (3)(a) F420. . . of that section.

(4)

F421. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

F421. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

M68It is hereby declared that where work in progress at the discontinuance of a profession or vocation, or the responsibility for its completion, is transferred, the sums to which subsection (1) above applies include any sums received by way of consideration for the transfer, and any sums received by way of realisation by the transferee, on behalf of the transferor, of the work in progress transferred.

(7)

F421. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105 Allowable deductions.

M69(1)

In computing the charge to F422corporation tax in respect of sums received by any F423company which are chargeable to F422corporation tax by virtue of section 103 or 104(1) (including amounts treated as sums received by F424it by virtue of section 103(4)), there shall be deducted from the amount which, apart from this subsection, would be chargeable to F422corporation tax—

(a)

any loss, expense or debit (not being a loss, expense or debit arising directly or indirectly from the discontinuance itself) which, if the trade, profession or vocation had not been discontinued, would have been deducted in computing for tax purposes the F425profits of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those F425profits as so computed, and

(b)

any capital allowance to which the person who carried on the trade, profession or vocation was entitled immediately before the discontinuance and to which effect has not been given by way of relief before the discontinuance.

(2)

No amount shall be deducted under subsection (1) above if that amount has been allowed under any other provision of the Tax Acts F426or by virtue of section 90(4) of the Finance Act 1995.

(3)

No amount shall be deducted more than once under subsection (1) above; and—

(a)

any expense or debit shall be apportioned between a sum chargeable under section 103 and a sum chargeable under section 104(1) in such manner as may be just;

(b)

as between sums chargeable, whether under section 103 or 104(1), for one F427accounting period and sums so charged for a subsequent F427accounting period, any deduction in respect of a loss or capital allowance shall be made against sums chargeable for the earlier F427accounting period;

(c)

subject to paragraph (b) above, as between sums chargeable for any F427accounting period under section 103 and sums so chargeable under section 104(1), any deduction in respect of a loss or capital allowance shall be made against the last-mentioned sums rather than the first-mentioned;

but, in the case of a loss which is to be allowed after the discontinuance, not so as to authorise its deduction from any sum chargeable for a F427accounting period preceding that in which the loss is incurred.

(4)

F428. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106 Application of charges where rights to payments transferred.

M70(1)

Subject to subsection (2) below, in the case of a transfer for value of the right to receive any sum to which section 103, 104(1) or 104(4) applies, any F429corporation tax chargeable by virtue of either of those sections shall be charged in respect of the amount or value of the consideration (or, in the case of a transfer otherwise than at arm’s length, in respect of the value of the right transferred as between parties at arm’s length), and references in this Chapter, except section 101(2), to sums received shall be construed accordingly.

(2)

Where a trade, profession or vocation is treated as permanently discontinued by reason of a change in the persons carrying it on, and the right to receive any sum to which section 103 or 104(1) applies is or was transferred at the time of the change to F430the company carrying on the trade, profession or vocation after the change, F431corporation tax shall not be charged by virtue of either of those sections, but any sum received by F432that company by virtue of the transfer shall be treated for F433corporation tax purposes as a receipt to be brought into the computation of the F434profits of the trade, profession or vocation in the period in which it is received.

Reliefs

107 Treatment of receipts as earned income.

F435. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108 Election for carry-back.

F436. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109 Charge under section 104: relief for individuals born before 6th April 1917.

F437. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F438 Relief for post-cessation expenditure

109A Relief for post-cessation expenditure.

(1)

Where in connection with a trade, profession or vocation formerly carried on by him which has been permanently discontinued a person makes, within seven years of the discontinuance, a payment to which this section applies, he may, by notice given within twelve months from the 31st January next following the year of assessment in which the payment is made, claim relief from income tax on an amount of his income for that year equal to the amount of the payment.

(2)

This section applies to payments made wholly and exclusively—

(a)

in remedying defective work done, goods supplied or services rendered in the course of the former trade, profession or vocation or by way of damages (whether awarded or agreed) in respect of any such defective work, goods or services; or

(b)

in defraying the expenses of legal or other professional services in connection with any claim that work done, goods supplied or services rendered in the course of the former trade, profession or vocation was or were defective;

(c)

in insuring against any liabilities arising out of any such claim or against the incurring of such expenses; or

(d)

for the purpose of collecting a debt taken into account in computing the F439profits of the former trade, profession or vocation.

(3)

F440. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

Where a trade, profession or vocation carried on by a person has been permanently discontinued and subsequently an unpaid debt which was taken into account in computing the F439profits of that trade, profession or vocation and to the benefit of which he is entitledF441 is released in whole or in part as part of a relevant arrangement or compromise (within the meaning of section 74), he shall be treated as making a payment to which this section applies of—

(a)

an amount equal to the amount released, or

(b)

if he was entitled to only part of the benefit of the debt, an amount equal to an appropriate proportion of that amount.

F442. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F443(4A)

Where a trade, profession or vocation carried on by a person has been permanently discontinued and subsequently an unpaid debt which was taken into account in computing the F439profits of that trade, profession or vocation and to the benefit of which he is entitled, proves to be bad, then if—

(a)

in making a claim for a year of assessment under subsection (1) above he gives notice that the debt was bad in any part of that year, and

(b)

he has not given such a notice in respect of that debt in the making of any other such claim,

he shall be treated as making in that year a payment to which this section applies of an amount equal to the amount of the debt or, if he was entitled to only part of the benefit of the debt, to an appropriate proportion of that amount.

F444. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

Where in the case of a trade, profession or vocation which has subsequently been permanently discontinued a deduction was made in computing the profits or losses of the trade, profession or vocation in respect of an expense not actually paid (an “unpaid expense”), then—

(a)

if relief under this section in connection with that trade, profession or vocation is claimed in respect of any year of assessment, the amount of the relief shall be reduced by the amount of any unpaid expenses at the end of that year;

(b)

for the purposes of the application of paragraph (a) above in relation to a subsequent year of assessment, any amount by which relief under this section has been reduced by virtue of that paragraph shall be treated as having been paid in respect of the expense in question; and

(c)

if subsequently any amount is in fact paid in respect of an expense in respect of which a reduction has been made under paragraph (a), that amount (or, if less, the amount of the reduction) shall be treated as a payment to which this section applies.

(6)

Relief shall not be given under this section in respect of an amount for which relief has been given or is available under any other provision of the Income Tax Acts.

In applying this subsection relief available under F445section 254 of ITTOIA 2005 (allowable deductions against post-cessation receipts charged to income tax) shall be treated as given in respect of other amounts before any amount in respect of which relief is available under this section.

F446(6A)

This section applies in relation to a UK property business as it applies in relation to a trade, profession or vocation.

(7)

This section does not apply for the purposes of corporation tax.

Supplemental

110 Interpretation etc.

(1)

M71The following provisions have effect for the purposes of F447sections 103 to 109A.

F448(1A)

In the case of a trade carried on by a person other than a company or a profession or vocation within the charge to income tax carried on by any person, any reference to the permanent discontinuance of a trade, profession or vocation includes a reference to—

(a)

a person permanently ceasing to carry on a trade, profession or vocation, or

(b)

in relation to a trade or profession carried on by a person in partnership with other persons, the occurrence of an event treated under section 246(4) of ITTOIA 2005 (basic meaning of “post-cessation receipt”) as a person permanently ceasing to carry on a trade or profession.

(1B)

In the case of a trade carried on by a company, any reference to the permanent discontinuance of a trade includes a reference to the occurrence of an event treated under section 337(1) below as a discontinuance or treated under section 18 of ITTOIA 2005 (companies beginning or ceasing to carry on trade) as the company permanently ceasing to carry on the trade.

(1C)

In the case of a UK property business carried on by a person other than a company, any reference to the permanent discontinuance of a UK property business includes a reference to—

(a)

a person permanently ceasing to carry on a UK property business, or

(b)

in relation to a UK property business carried on by a person in partnership with other persons, the occurrence of an event treated under section 353(3) of ITTOIA 2005 (basic meaning of “post-cessation receipt”) as a person permanently ceasing to carry on a UK property business.

(1D)

In the case of a UK property business carried on by a company, any reference to the permanent discontinuance of a UK property business includes a reference to the occurrence of an event treated under section 362 of ITTOIA 2005 (companies beginning or ceasing to be within the charge to income tax) as the company permanently ceasing to carry on the business.

(3)

M72The F449profits of a trade, profession or vocation in any period shall be treated as computed by reference to earnings where all credits and liabilities accruing during that period as a consequence of its being carried on are brought into account in computing those F449profits for tax purposes, and not otherwise, and “earnings basis” shall be construed accordingly.

(4)

“Conventional basis” has the meaning given by section 103(2), so that F449profits are computed on a conventional basis if computed otherwise than by reference to earnings.

(5)

There is a change from a conventional basis to the earnings basis at the end of a period the F449profits of which were computed on a conventional basis if the F449profits of the next succeeding period are computed by reference to earnings; and, if the F449profits of two successive periods are computed on different conventional bases, a change of conventional basis occurs at the end of the earlier period.

(6)

In sections 103 and 104—

(a)

“trading stock” has the meaning given by section 100(2);

(b)

references to work in progress at the discontinuance of a profession or vocation, and to the transfer of work in progress, are to be construed in accordance with section 101(3); and

(c)

the reference to work in progress at the time of a change of basis is also to be construed in accordance with section 101(3), substituting therein for this purpose references to the change of basis for references to the discontinuance.

F450F451 Change of residence

110A Change of residence.

F452. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER VII PARTNERSHIPS AND SUCCESSIONS

General

F453111 Treatment of partnerships.

(1)

Where a trade or profession is carried on by persons in partnership, the partnership shall not, unless the contrary intention appears, be treated for F454corporation tax purposes as an entity which is separate and distinct from those persons.

(2)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13)

F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

112 Partnerships controlled abroad.

F456. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113 Effect, for income tax, of change in ownership of trade, profession or vocation.

F457. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Partnerships involving companies

114 Special rules for computing profits and losses.

(1)

M73So long as a trade F458profession or business is carried on by persons in partnership, and any of those persons is a company, the profits and losses (including terminal losses) of the trade F458profession or business shall be computed for the purposes of corporation tax in like manner, and by reference to the like accounting periods, as if the partnership were a company F459and, subject to section 115(4), as if that company were resident in the United Kingdom, and without regard to any change in the persons carrying on the trade F458profession or business, except that—

(a)

references to distributions shall not apply; and

(b)

subject to section 116(5), no deduction or addition shall be made for charges on income, or for capital allowances and charges, nor in any accounting period for losses incurred in any other period nor for any expenditure to which section 401(1) applies; and

(c)

a change in the persons engaged in carrying on the trade F458profession or business shall be treated as the transfer of the trade F458profession or business to a different company if there continues to be a company so engaged after the change, but not a company that was so engaged before the change.

(2)

M74A company’s share in the profits or loss of any accounting period of the partnership, or in any matter excluded from the computation by subsection (1)(b) above, shall be determined according to the interests of the partners during that period, and corporation tax shall be chargeable as if that share derived from a trade F458profession or business carried on by the company alone in its corresponding accounting period or periods; and the company shall be assessed and charged to tax for its corresponding accounting period or periods accordingly.

In this subsection “corresponding accounting period or periods” means the accounting period or periods of the company comprising or together comprising the accounting period of the partnership, and any necessary apportionment shall be made between corresponding accounting periods if more than one.

(3)

F460. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

F461. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115 Provisions supplementary to section 114.

(1)

F462. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)

F462. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

F462. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F463(4)

So long as a trade, profession or business is carried on by persons in partnership and any of those persons is a company which is not resident in the United Kingdom, section 114 shall have effect in relation to that company as if—

(a)

the reference in subsection (1) to a company resident in the United Kingdom were a reference to a company that is not so resident; and

(b)

in subsection (2), after “carried on” there were inserted “in the United Kingdom through a F464permanent establishment”.

F465(5)

Subsections (5A) and (5B) apply if—

(a)

a company resident in the United Kingdom (“the resident partner”) is a member of a partnership which resides outside the United Kingdom or which carries on any trade, profession or business the control and management of which is situated outside the United Kingdom, and

(b)

by virtue of any arrangements falling within section 788 (“the arrangements”) any of the income or capital gains of the partnership is relieved from corporation tax in the United Kingdom.

(5A)

The arrangements do not affect any liability to corporation tax in respect of the resident partner's share of any income or capital gains of the partnership (and section 114 has effect accordingly).

(5B)

If the resident partner's share of the income of the partnership consists of or includes a share in a qualifying distribution made by a company resident in the United Kingdom, the resident partner (and not the partnership) is, despite the arrangements, entitled to the share of the tax credit in respect of the distribution which corresponds to the partner's share of the distribution (and section 114 has effect accordingly).

F466(5C)

For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership.

(6)

F462. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)

For the purposes of this section and section 114 “profits” shall not be taken as including chargeable gains.

116 Arrangements for transferring relief.

M75(1)

The provisions of subsection (2) below shall apply in relation to a company (“the partner company”) which is a member of a partnership carrying on a trade if arrangements are in existence (whether as part of the terms of the partnership or otherwise) whereby—

(a)

in respect of the whole or any part of the value of, or of any portion of, the partner company’s share in the profits or loss of any accounting period of the partnership, another member of the partnership or any person connected with another member of the partnership receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money’s worth; or

(b)

in respect of the whole or any part of the cost of, or of any portion of, the partner company’s share in the loss of any accounting period of the partnership, the partner company or any person connected with that company receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money’s worth, other than a payment in respect of group relief to the partner company by a company which is a member of the same group as the partner company for the purposes of group relief.

(2)

In any case where the provisions of this subsection apply in relation to the partner company—

(a)

the company’s share in the loss of the relevant accounting period of the partnership and its share in any charges on income, within the meaning of section 338, paid by the partnership in that accounting period shall not be available for set-off for the purposes of corporation tax except against its share in the profits of the trade carried on by the partnership; and

(b)

except in accordance with paragraph (a) above, no trading losses shall be available for set-off for the purposes of corporation tax against the company’s share in the profits of the relevant accounting period of the partnership; and

(c)

except in accordance with paragraphs (a) and (b) above, no amount which, apart from this subsection, would be available for relief against profits shall be available for set-off for the purposes of corporation tax against so much of the company’s total profits as consists of its share in the profits of the relevant accounting period of the partnership; and

(d)

F467. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

In subsection (2) above “relevant accounting period of the partnership” means any accounting period of the partnership in which any such arrangements as are specified in subsection (1) above are in existence or to which any such arrangements apply.

(4)

If a company is a member of a partnership and F468corporation tax in respect of any profits of the partnership is chargeable under Case VI of Schedule D, this section shall apply in relation to the company’s share in the profits or loss of the partnership as if—

(a)

the profits or loss to which the company’s share is attributable were the profits of, or the loss incurred in, a trade carried on by the partnership; and

F469(b)

any allowance to be given effect under Part 2 of the Capital Allowances Act in respect of a special leasing of plant or machinery were an allowance to be given effect in calculating the profits of that trade.

(5)

For the purposes of this section, subsection (2) of section 114 shall have effect for determining a company’s share in the profits or loss of any accounting period of a partnership as if, in subsection (1)(b) of that section, the words “ or for capital allowances and charges ” were omitted.

(6)

In this section “arrangements” means arrangements of any kind whether in writing or not.

(7)

Section 839 shall apply for the purposes of this section.

Limited partners

117 Restriction on relief: individuals.

(1)

M76An amount which may be given F470. . . to an individual under section F471. . . 380 or 381 below F472. . . —

(a)

in respect of a loss sustained by him in a trade F473. . . in a relevant year of assessment;F474. . .

(b)

F474. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

may be given F470. . . otherwise than against income consisting of F475profits arising from the trade only to the extent that the amount given F470. . . or (as the case may be) the aggregate amount does not exceed the relevant sum.

(2)

M77In this section—

“limited partner” means—

  1. (i)

    a person who is carrying on a trade as a limited partner in a limited partnership registered under the M78Limited Partnerships Act 1907;

  2. (ii)

    a person who is carrying on a trade as a general partner in a partnership, who is not entitled to take part in the management of the trade and who is entitled to have his liabilities, or his liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade discharged or reimbursed by some other person; or

  3. (iii)

    a person who carries on a trade jointly with others and who, under the law of any territory outside the United Kingdom, is not entitled to take part in the management of the trade and is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;

“relevant year of assessment” means a year of assessment at any time during which the individual carried on the trade as a limited partner;

“the aggregate amount” means the aggregate of any amounts given F476. . . to him at any time under section F477. . . 380 or 381 below F478. . . —

(a)

in respect of a loss sustained by him in the trade F479. . . in a relevant year of assessment F480or a qualifying year of assessment within the meaning of section 118ZE; F481. . .

(b)

F481. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F482less the amount of any reclaimed relief at that time;

F483“the amount of any reclaimed relief” at any time means the total of any amounts at that time which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade;

“the relevant sum” means the amount of his contribution to the trade as at the appropriate time; and

“the appropriate time” is the end of the relevant year of assessment in which the loss is sustained F484. . . or for which the allowance falls to be made (except that where he ceased to carry on the trade during that year of assessment it is the time when he so ceased).

(3)

M79A person’s contribution to a trade at any time is the aggregate of—

(a)

the amount which he has contributed to it as capital and has not, directly or indirectly, drawn out or received back (other than anything which he is or may be entitled so to draw out or receive back at any time when he carries on the trade as a limited partner or which he is or may be entitled to require another person to reimburse to him), and

(b)

the amount of any F475profits of the trade to which he is entitled but which he has not received in money or money’s worth.

(4)

M80To the extent that an allowance is taken into account in computing F475profits or losses in the year of the loss by virtue of section 383(1) it shall, for the purposes of this section, be treated as falling to be made in the year of the loss (and not the year of assessment for which the year of loss is the basis year).

F485(5)

This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).

118 Restriction on relief: companies.

(1)

M81An amount which may be given F486. . . under section 338, F487393A(1) or F488403 below F489. . . —

(a)

in respect of a loss incurred by a company in a trade, or of charges paid by a company in connection with the carrying on of a trade, in a relevant accounting period; F490. . .

(b)

F490. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

may be given F486. . . to that company (“the partner company”) otherwise than against F491profits arising from the trade, or to another company, only to the extent that the amount given F486. . . or (as the case may be) the aggregate amount does not exceed the relevant sum.

(2)

M82In this section—

“relevant accounting period” means an accounting period of the partner company at any time during which it carried on the trade as a limited partner (within the meaning of section 117(2));

“the aggregate amount” means the aggregate of any amounts given F492. . . to the partner company or another company at any time under section 338, F493393A(1) or F488403 below F494. . . —

(a)

in respect of a loss incurred by the partner company in the trade, or of charges paid by it in connection with carrying it on, in any relevant accounting period; F495. . .

(b)

F495. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“the relevant sum” means the amount of the partner company’s contribution (within the meaning of section 117(3)) to the trade as at the appropriate time; and

“the appropriate time” is the end of the relevant accounting period in which the loss is incurred or the charges paid or for which the allowance falls to be made (except that where the partner company ceased to carry on the trade during that accounting period it is the time when it so ceased).

F496Limited liability partnerships

118ZA Treatment of limited liability partnerships.

F497(1)

For F498corporation tax purposes, where a limited liability partnership carries on a trade, profession or other business with a view to profit—

(a)

all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such),

(b)

anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and

(c)

the property of the partnership is treated as held by the members as partnership property.

References in this subsection to the activities of the limited liability partnership are to anything that it does, whether or not in the course of carrying on a trade, profession or other business with a view to profit.

(2)

For all purposes, except as otherwise provided, in F499the Corporation Tax Acts—

(a)

references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

(b)

references to members of a partnership include members of such a limited liability partnership,

(c)

references to a company do not include such a limited liability partnership, and

(d)

references to members of a company do not include members of such a limited liability partnership.

(3)

Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade, profession or other business with a view to profit—

(a)

if the cessation is only temporary, or

(b)

during a period of winding up following a permanent cessation, provided—

(i)

the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

(ii)

the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

(4)

Subsection (1) above ceases to apply in relation to a limited liability partnership—

(a)

on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

(b)

on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.

118ZB Restriction on relief.

F500(1)

Sections 117 and 118 have effect in relation to a member of a limited liability partnership as in relation to a limited partner, but subject to sections 118ZC and 118ZD.

F501(2)

However, section 117 does not apply in relation to a loss sustained by an individual in a trade F502. . . in a qualifying year of assessment within the meaning of section 118ZE.

118ZC Member’s contribution to trade.

(1)

Subsection (3) of section 117 does not have effect in relation to a member of a limited liability partnership.

(2)

But, for the purposes of that section and section 118, such a member’s contribution to a trade at any time (“the relevant time”) is the greater of—

(a)

the amount subscribed by him, and

(b)

the amount of his liability on a winding up.

(3)

The amount subscribed by a member of a limited liability partnership is the amount which he has contributed to the limited liability partnership as capital, less so much of that amount (if any) as—

(a)

he has previously, directly or indirectly, drawn out or received back,

(b)

he so draws out or receives back during the period of five years beginning with the relevant time,

(c)

he is or may be entitled so to draw out or receive back at any time when he is a member of the limited liability partnership, or

(d)

he is or may be entitled to require another person to reimburse to him.

(4)

The amount of the liability of a member of a limited liability partnership on a winding up is the amount which—

(a)

he is liable to contribute to the assets of the limited liability partnership in the event of its being wound up, and

(b)

he remains liable so to contribute for the period of at least five years beginning with the relevant time (or until it is wound up, if that happens before the end of that period).

F503(5)

This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).

118ZD Carry forward of unrelieved losses.

(1)

Where amounts relating to a trade carried on by a member of a limited liability partnership are, in any one or more chargeable periods, prevented from being given or allowed by section 117 or 118 as it applies otherwise than by virtue of this section (his “total unrelieved loss”), subsection (2) applies in each subsequent chargeable period in which—

(a)

he carries on the trade as a member of the limited liability partnership, and

(b)

any of his total unrelieved loss remains outstanding.

(2)

Sections 380, 381, 393A(1) and 403 (and sections 117 F504, 118 and 118ZE as they apply in relation to those sections) shall have effect in the subsequent chargeable period as if—

(a)

any loss sustained or incurred by the member in the trade in that chargeable period were increased by an amount equal to so much of his total unrelieved loss as remains outstanding in that period, or

(b)

(if no loss is so sustained or incurred) a loss of that amount were so sustained or incurred.

(3)

To ascertain whether any (and, if so, how much) of a member’s total unrelieved loss remains outstanding in the subsequent chargeable period, deduct from the amount of his total unrelieved loss the aggregate of—

(a)

any relief given under any provision of the Tax Acts (otherwise than as a result of subsection (2)) in respect of his total unrelieved loss in that or any previous chargeable period, and

(b)

any amount given or allowed in respect of his total unrelieved loss as a result of subsection (2) in any previous chargeable period (or which would have been so given or allowed had a claim been made).

F505Non-active general partners and non-active members of limited liability partnerships

118ZERestriction on relief for non-active partners

(1)

This section applies to an amount which may be given to an individual under section F506. . . 380 or 381 in respect of a loss sustained by him in a trade F506. . . in a qualifying year of assessment.

(2)

The amount may be given otherwise than against income consisting of profits arising from the trade only to the extent that—

(a)

the amount given, or

(b)

(as the case may be) the aggregate amount,

does not exceed the amount of the individual’s contribution to the trade as at the end of that year of assessment.

(3)

A “qualifying year of assessment” means a year of assessment—

(a)

at any time during which the individual carried on the trade as a general partner or a member of a limited liability partnership,

(b)

in which he did not devote a significant amount of time to the trade (within the meaning given by section 118ZH),

(c)

which is the year of assessment in which the trade is first carried on by him or any of the next three years of assessment,

(d)

the basis period for which ends on or after 10 February 2004, and

(e)

which is not a year of assessment at any time during which he carried on the trade as a limited partner.

(4)

In this section—

(a)

a “general partner” means any partner who is not a limited partner, and

(b)

“limited partner” has the meaning given by section 117(2),

and in paragraph (a) “any partner” does not include a member of a limited liability partnership.

(5)

In this section and sections 118ZF to 118ZK, “basis period” means (subject to subsection (6)) the basis period given by F507Chapter 15 of Part 2 of ITTOIA 2005 as applied by section 853 of that Act.

(6)

The basis period for a year of assessment to which F508section 199(1) of ITTOIA 2005 applies is to be taken for the purposes of this section and sections 118ZF to 118ZK F509below to be the period beginning with the date when the individual first carried on the trade and ending with the end of the year of assessment.

(7)

In subsection (1) “a trade” does not include underwriting business within the meaning of section 184 of the Finance Act 1993 (Lloyd’s underwriters).

(8)

This section has effect subject to sections 118ZJ and 118ZK (transitional provision).

118ZFMeaning of “the aggregate amount”

(1)

In section 118ZE(2) “the aggregate amount” means (subject to section 118ZK) the aggregate of any amounts given to the individual at any time under section F510. . . 380 or 381 in respect of a loss sustained by him in the trade F510. . . in a year of assessment falling within subsection (2) F511, less the amount of any reclaimed relief.

F512(1A)

For the purposes of subsection (1) “the amount of any reclaimed relief” means the total of any amounts which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade.

(2)

A year of assessment falls within this subsection if—

(a)

it is a qualifying year of assessment within the meaning of section 118ZE, or

(b)

it is a year of assessment—

(i)

at any time during which the individual carried on the trade as a member of a limited liability partnership or as a limited partner within the meaning given by section 117(2), and

(ii)

the basis period for which ends on or after 10 February 2004.

118ZG“The individual’s contribution to the trade”

(1)

For the purposes of section 118ZE(2), the individual’s contribution to the trade at any time (“the relevant time”) is the sum of—

(a)

the amount subscribed by him,

(b)

the amount of any profits of the trade to which he is entitled but which he has not received in money or money’s worth, and

(c)

where there is a winding up, the amount that he has contributed to the assets of the partnership on its winding up.

(2)

For the purposes of subsection (1)(a) the “amount subscribed”by an individual is the sum of—

(a)

the total amount (if any) contributed by him to the trade as capital on or after 10 February 2004, reduced (but not below nil) by his withdrawn capital, and

(b)

the total amount (if any) contributed by him to the trade as capital before 10 February 2004, reduced (but not below nil) by—

(i)

the pre-announcement allowance (within the meaning given by section 118ZJ),

(ii)

the aggregate of any amounts given to him at any time under section F513. . . 380 or 381 in respect of a loss sustained by him in a trade F513. . . in a year of assessment falling within subsection (3), and

(iii)

the amount (if any) of his withdrawn capital that has not been used in the reduction to nil required by paragraph (a).

(3)

A year of assessment falls within this subsection if—

(a)

it does not fall within section 118ZE(3)(d), and

(b)

it is either—

(i)

a year of assessment that would be a qualifying year of assessment but for section 118ZE(3)(d), or

(ii)

a year of assessment at any time during which the individual carried on the trade as a member of a limited liability partnership or as a limited partner within the meaning given by section 117(2).

(4)

The individual’s “withdrawn capital”is so much, if any, of the amount that he has contributed to the trade as capital as—

(a)

he has previously, directly or indirectly, drawn out or received back,

(b)

he so draws out or receives back during the period of five years beginning with the relevant time,

(c)

he is or may be entitled so to draw out or receive back at any time when he carries on the trade as a member of the partnership, or

(d)

he is or may be entitled to require another person to reimburse to him.

(5)

An amount drawn out or received back that would otherwise fall within subsection (4)(a) or (b), or an entitlement that would otherwise fall within subsection (4)(c), shall be treated as not so falling if the amount drawn out or received back is chargeable to income tax as profits of the trade.

(6)

In relation to a member of a limited liability partnership, references in this section to an amount contributed to the trade as capital shall be read as references to an amount contributed to the limited liability partnership as capital.

F514(7)

This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).

118ZH“A significant amount of time”

(1)

For the purposes of section 118ZE the individual shall be treated as having “devoted a significant amount of time to the trade”in a given year of assessment if, for the whole of the relevant period, he spent an average of at least ten hours a week personally engaged in activities carried on for the purposes of the trade.

(2)

“The relevant period” means the basis period for the year of assessment in question, except that—

(a)

if the basis period is less than six months and begins with the date when the individual first carried on the trade, “the relevant period” means six months beginning with that date, and

(b)

if the basis period is less than six months and ends with the date when the individual ceased to carry on the trade, “the relevant period” means six months ending with that date.

(3)

Where relief has been given on the assumption that an individual will meet the condition in subsection (1) and he fails to do so, the relief shall be withdrawn by the making of an assessment F515to income tax.

118ZICarry forward of unrelieved losses of non-active partners

(1)

Where amounts relating to a trade carried on by an individual in a qualifying year of assessment are prevented from being given by section 118ZE as it applies otherwise than by virtue of this section or section 118ZD, subsection (3) of this section applies as respects each subsequent year of assessment in which—

(a)

the individual carries on the trade in partnership or makes a contribution to the assets of the partnership on its winding up, and

(b)

any of his total restricted loss remains outstanding.

(2)

His “total restricted loss” means the total of any amounts, relating to any one or more qualifying years of assessment, that have been prevented from being given by section 118ZE as it applies otherwise than by virtue of this section or section 118ZD.

(3)

Sections 380 and 381 (and section 118ZE as it applies in relation to those sections) shall have effect in the subsequent year of assessment as if—

(a)

any loss sustained by the individual in the trade in that year of assessment were increased by an amount equal to so much of his total restricted loss as remains outstanding in that year of assessment, or

(b)

(if no loss is sustained) a loss of that amount were so sustained.

(4)

To ascertain whether any (and, if so, how much) of the individual’s total restricted loss remains outstanding in the subsequent year of assessment, deduct from the amount of his total restricted loss the aggregate of—

(a)

any relief given (otherwise than as a result of subsection (3)) under any provision of the Tax Acts, in that or any previous year of assessment, in respect of any of his total restricted loss, and

(b)

any amount which was given as a result of subsection (3), in any previous year of assessment, in respect of any of his total restricted loss (or which would have been so given had a claim been made).

(5)

For the purposes of sections 118ZE and 118ZF (and of sections 117 and 118ZB(2))—

(a)

any additional amount of loss deemed by subsection (3)(a) to have been sustained in the subsequent year of assessment, and

(b)

any loss deemed by subsection (3)(b) to have been so sustained,

shall be treated as having been sustained in a qualifying year of assessment.

(6)

Subsection (7) applies where the subsequent year of assessment—

(a)

is one in which the trade is not carried on in partnership by the individual, but

(b)

is one in which he contributes to the assets of the partnership on its winding up.

(7)

Where this subsection applies, nothing in section 381(4) or 384 (restrictions on right of set-off) applies to—

(a)

an additional amount of loss deemed by subsection (3)(a) to have been sustained in the subsequent year of assessment, or

(b)

a loss deemed by subsection (3)(b) to have been so sustained.

(8)

In this section “qualifying year of assessment” has the meaning given by section 118ZE.

18ZJCommencement: the first restricted year

(1)

This section applies where the year of assessment referred to in section 118ZE(1) is a year of assessment the basis period for which includes 10 February 2004 (“the first restricted year”).

(2)

If this section would (but for this subsection) apply in relation to more than one year of assessment as respects the same individual and the same trade, it applies only in relation to the first of those years of assessment and “the first restricted year” means that year of assessment.

(3)

Where this section applies, section 118ZE(2) shall have effect as if for the words from “only to the extent that” there were substituted only to the extent that the total amount given under section F516. . . 380 and 381 in respect of losses sustained by him in the trade F516. . . in that year of assessment does not exceed the sum of—

(a)

the pre-announcement allowance, and

(b)

the post-announcement allowance.

(4)

The “pre-announcement allowance” is F517. . . —

(a)

the loss (if any) sustained by the individual in the trade in the period beginning with the start of the basis period for the first restricted year and ending with 9 February 2004, F518. . .

(b)

F518. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

The “post-announcement allowance”is so much of—

(a)

the loss (if any) sustained by the individual in the trade in the period beginning with 10 February 2004 and ending with the end of the basis period for the first restricted year, F519. . .

(b)

F519. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

as does not exceed the individual’s contribution to the trade as at the end of the year of assessment, computed in accordance with section 118ZG.

(6)

In each of subsections (4)(a) and (5)(a), the reference to the loss sustained by the individual in the trade in the period there mentioned is a reference to his share of any losses of the partnership arising for that period from the trade, and—

(a)

subject to subsection (7), the losses of the partnership arising for that period from the trade shall be computed in the same way as if the period were one for which profits and losses had to be computed for the purposes of section 111(2), and

(b)

subject to subsection (8), the individual’s share of the losses shall be determined according to his interest in the partnership during that period.

(7)

In computing for the purposes of subsection (6) the losses of the partnership arising for the period mentioned in subsection (4)(a) or (5)(a)—

(a)

any capital allowance treated as an expense of the trade for the purposes of the computation required by section 111(2) for the first restricted year is to be regarded as belonging to the period mentioned in subsection (4)(a) unless the capital expenditure to which it relates is incurred after 9 February 2004, and

(b)

any amount deducted under section 42(1) of the Finance (No. 2) Act 1992 for the purposes of that computation is to be regarded as belonging to the period mentioned in subsection (4)(a) unless the expenditure to which it relates is incurred after 9 February 2004.

(8)

If the individual had an interest in the partnership at any time that falls within—

(a)

the basis period for the first restricted year, and

(b)

the period beginning with 10 February 2004 and ending with 25 March 2004,

he shall be deemed for the purposes of subsection (6)(b) to have had the interest on 9 February 2004.

118ZKTransitional provision for years after the first restricted year

(1)

This section applies where the year of assessment referred to in section 118ZE(1) is a year of assessment later than the first restricted year.

(2)

Section 118ZE(2) shall not apply to any part of the amount mentioned in section 118ZE(1) that—

(a)

derives from a capital allowance treated as an expense of the trade where the capital expenditure to which the allowance relates was incurred before 10 February 2004, or

(b)

derives from a deduction made under section 42(1) of the Finance (No. 2) Act 1992 F520or any of sections 138 to 140 of ITTOIA 2005 where the expenditure to which the deduction relates was incurred before 10 February 2004.

(3)

In computing for the purposes of section 118ZE(2)(a) or (b) the amount given or (as the case may be) the aggregate amount, any part of an amount given that falls within subsection (2)(a) or (b) of this section shall be left out of account.

(4)

In computing the aggregate amount for the purposes of section 118ZE(2), any amount given in respect of the pre-announcement allowance shall be left out of account.

(5)

For the purposes of subsections (2) and (3) the part of an amount that derives from a capital allowance or a deduction made under section 42(1) of the Finance (No. 2) Act 1992 F520or any of sections 138 to 140 of ITTOIA 2005 shall be determined on such basis as is just and reasonable.

(6)

In this section “the first restricted year” and “the pre-announcement allowance” have the meanings given by section 118ZJ.

F521Partnerships exploiting films

118ZLPartnerships exploiting films

(1)

Where (apart from this section) an amount may be given to an individual under section 380 or 381 in respect of a loss (“the loss in question”) sustained by him—

(a)

in a trade consisting of or including the exploitation of films, and

(b)

in an affected year of assessment,

none of that amount may be given otherwise than against income consisting of profits arising from the trade; but this is subject to subsection (4).

(2)

An “affected year of assessment” means a year of assessment at any time during which the individual carried on the trade in partnership which is also—

(a)

the year of assessment in which the trade is first carried on by him or any of the next three years of assessment,

(b)

a year of assessment in which he did not devote a significant amount of time to the trade, and

(c)

a year of assessment at any time during which there existed a relevant agreement guaranteeing him an amount of income.

(3)

For the purposes of subsection (2)(c)—

(a)

“a relevant agreement” means—

(i)

an agreement that was made with a view to the individual’s carrying on the trade or in the course of his carrying it on (including any agreement under which he is or may be required to contribute an amount to the trade), or

(ii)

an agreement related to an agreement falling within sub-paragraph (i),

(b)

an agreement “guarantees” the individual an amount of income if the agreement, or any part of it, is designed to secure the receipt by the individual of that amount (or at least that amount) of income, and

(c)

it is immaterial when the amount of income would be received under the agreement.

(4)

If the loss in question derives to any extent from exempt expenditure, amounts that (apart from this section) may be given under section 380 or 381 in respect of the loss otherwise than against income consisting of profits arising from the trade may be so given to the extent that the total of the amounts so given does not exceed the exempt part of the loss.

(5)

The exempt part of the loss is so much of the loss in question as derives from exempt expenditure.

(6)

Expenditure is exempt expenditure for the purposes of this section if it is—

(a)

expenditure incurred before 26 March 2004 in a case where this paragraph applies, or

(b)

expenditure that, for the purposes of the computation required by F522section 849 of ITTOIA 2005 (calculation of firm's profits or losses), was deducted under F523any of sections 137 to 140 of ITTOIA 2005, or

(c)

incidental expenditure that, although deductible apart from F524sections 137 to 140 of that Act, was incurred in connection with the production or acquisition of a film in relation to which expenditure was deducted under F525any of those sections.

(7)

Subsection (6)(a) applies where the individual carried on the trade before 26 March 2004.

118ZMPartnerships exploiting films: supplementary

(1)

In section 118ZL and this section any reference to a film is to be construed in accordance with paragraph 1 of Schedule 1 to the Films Act 1985.

(2)

Section 118ZH (meaning of “a significant amount of time” etc) applies for the purposes of section 118ZL as it applies for the purposes of section 118ZE.

(3)

For the purposes of section 118ZL(3) agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).

(4)

The reference in section 118ZL(6) to the acquisition of a film is a reference to F526the acquisition of the original master version of the film; and this subsection is to be construed as if contained in Chapter 9 of Part 2 of ITTOIA 2005.

(5)

In section 118ZL(6) “incidental expenditure” means expenditure on management, administration or obtaining finance.

(6)

The part of the loss in question that derives from exempt expenditure shall be determined on such basis as is just and reasonable.

(7)

The extent to which any expenditure falls within section 118ZL(6)(c) shall be determined on such basis as is just and reasonable.

(8)

In any case where sections 380 and 381 have effect as mentioned in section 118ZD(2) or 118ZI(3) (cases where sections 380 and 381 have effect as if loss carried forward from earlier year sustained in subsequent year), section 118ZL also has effect as mentioned in section 118ZD(2) or (as the case may be) section 118ZI(3).

F527Partners: meaning of “contribution to the trade”

118ZNPartners: meaning of “contribution to the trade”

(1)

This section applies for the purposes of the application of any of the following provisions (“the relevant provisions”)—

(a)

section 117 (restriction on relief for limited partners),

(b)

that section as applied by section 118ZB in relation to a member of a limited liability partnership, and

(c)

section 118ZE (restriction on relief for non-active partners),

to an amount which may be given to an individual under section 380 or 381 in respect of a relevant loss sustained by him in a trade (“the relevant trade”).

(2)

The Board may by regulations provide that, for those purposes, any amount of a description specified in the regulations is to be excluded when computing the amount of the individual's contribution to the relevant trade at any time for the purposes of the relevant provisions.

(3)

Regulations under this section may—

(a)

make provision having effect before the date on which the regulations are made,

(b)

make such supplementary, incidental, consequential or transitional provision as appears to the Board to be necessary or expedient, and

(c)

make different provision for different cases or different purposes.

(4)

The provision mentioned in subsection (3)(b) may include provision amending or repealing any provision of an Act passed before the passing of the Finance Act 2005.

(5)

No regulations may be made under this section unless a draft has been laid before and approved by a resolution of the House of Commons.

118ZOMeaning of “relevant loss” in section 118ZN

(1)

For the purposes of section 118ZN a “relevant loss” means—

(a)

a loss sustained by the individual in the relevant trade in a year of assessment the basis period for which begins on or after 2nd December 2004, or

(b)

a post-announcement loss sustained by the individual in the relevant trade in a straddling year of assessment.

(2)

For the purposes of this section—

“basis period” means the basis period given by Chapter 15 of Part 2 of ITTOIA 2005, as applied by section 853 of that Act, except that the basis period for a year of assessment to which section 199(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the relevant trade and ending with the end of the year of assessment;

“post-announcement loss”, in relation to a straddling year of assessment, means the loss (if any) sustained by the individual in the relevant trade in the period which—

(a)

begins with 2nd December 2004, and

(b)

ends with the end of the basis period for that straddling year of assessment;

“straddling year of assessment” means a year of assessment the basis period for which begins before and includes 2nd December 2004.

(3)

In the definition of “post-announcement loss” in subsection (2), the reference to the loss sustained by the individual in the relevant trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—

(a)

the losses of the partnership arising for that period from the trade are to be computed in the same way as if the period were one for which profits and losses had to be computed for the purposes of section 849 of ITTOIA 2005, and

(b)

the individual's share of the losses is to be determined according to his interest in the partnership during that period.

(4)

In subsection (3) the references to “the partnership” are to the partnership as a member of which the individual carries on the relevant trade.

(5)

In relation to years of assessment which are before the year 2005-06, this section has effect as if—

(a)

in subsection (2) for the definition of “basis period” there were substituted—

““basis period” means the basis period given by sections 60 to 63 as applied by section 111(4) and (5), except that the basis period for a year of assessment to which section 61(1) applies is to be taken to be the period beginning with the date when the individual first carried on the trade and ending with the end of the year of assessment;”, and

(b)

the reference in subsection (3)(a) to section 849 of ITTOIA 2005 were a reference to section 111(2) of this Act.

F528F529Chapter VIIA Paying and collecting agents

118A Definitions.

F530. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118B Paying agents.

F531. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118C Collecting agents.

F532. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118D Chargeable payments and chargeable receipts.

F533. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118E Deduction of tax from chargeable payments and chargeable receipts.

F534. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118F Accounting for tax on chargeable payments and chargeable receipts.

F535. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118G Relevant securities of eligible persons.

F536. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118H Relevant securities of eligible persons: administration.

F537. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118I Deduction of tax at reduced rate.

F538. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118J Prevention of double accounting.

F539. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118K Regulations.

F540. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER VIII MISCELLANEOUS AND SUPPLEMENTAL

119 Rent etc. payable in connection with mines, quarries and similar concerns.

M83(1)

Where rent is payable in respect of any land or easement, and either—

(a)

the land or easement is used, occupied or enjoyed in connection with any of the concerns specified in section 55(2); or

(b)

the lease or other agreement under which the rent is payable provides for the recoupment of the rent by way of reduction of royalties or payments of a similar nature in the event of the land or easement being so used, occupied or enjoyed,

the rent shall, subject to section 122 F541and section 201 of the 1992 Act, be charged to F542corporation tax under Schedule D, F543. . . .

(2)

Where the rent is rendered in produce of the concern, it shall, F544. . . , be charged under Case III of Schedule D, and the value of the produce so rendered shall be taken to be the amount of the profits or income arising therefrom.

(3)

For the purposes of this section—

“easement” includes any right, privilege or benefit in, over or derived from land; and

“rent” includes a rent service, rentcharge, fee farm rent F545. . . or other rent, toll, duty, royalty or annual or periodical payment in the nature of rent, whether payable in money or money’s worth or otherwise.

120 Rent etc. payable in respect of electric line wayleaves.

M84(1)

F546Subject to subsection (1A) below, where rent is payable in respect of any easement enjoyed in the United Kingdom in connection with any electric, telegraphic or telephonic wire or cable (not being such an easement as is mentioned in section 119(1)), the rent shall be charged to F547corporation tax under Schedule D F548. . . .

F549(1A)

If—

(a)

the profits and gains arising to any person for any F550accounting period include both rent in respect of any such easement as is mentioned in subsection (1) above and amounts which are charged to F551corporation tax under Schedule A, and

(b)

some or all of the land to which the easement relates is included in the land by reference to which the amounts charged under Schedule A arise,

then, for that period, that rent shall be charged to F551corporation tax under Schedule A, instead of being charged under Schedule D.

(2)

F552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

F552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

F552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

In this section—

(a)

“easement” and “rent” have the same meanings as in section 119;

(b)

the reference to easements enjoyed in connection with any electric, telegraphic or telephonic wire or cable includes (without prejudice to the generality of that expression) references to easements enjoyed in connection with any pole or pylon supporting any such wire or cable, or with any apparatus (including any transformer) used in connection with any such wire or cable; F553. . .

(c)

F553. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

121 Management expenses of owner of mineral rights.

F554M85(1)

F555. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

In computing for the purposes of corporation tax the income of a company for any accounting period from the letting of rights to work minerals in the United Kingdom, there may be deducted any sums disbursed by the company wholly, exclusively and necessarily as expenses of management or supervision of those minerals in that period.

122 Relief in respect of mineral royalties.

(1)

M86Subject to the following provisions of this section, F556a company resident in the United Kingdom which in any accounting period is entitled to receive any mineral royalties under a mineral lease or agreement shall be treated—

(a)

F557. . . for the purposes of corporation tax on profits exclusive of chargeable gains, as if the total of the mineral royalties receivable by F558it under that lease or agreement in that F557. . . period and any management expenses available for set-off against those royalties in that F557. . . period were each reduced by one-half; F559. . .

F559(b)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and this section shall have effect notwithstanding any provision of section 119(1) making the whole of certain kinds of mineral royalties chargeable to tax under Schedule D F560. . . .

(2)

M87For the purposes of subsection (1)(a) above, “management expenses available for set-off” against royalties means—

(a)

where section 121 applies in respect of the royalties, any sum F561. . . deductible from those royalties under F562subsection (3) of that section in computing the income of a company for the purposes of corporation tax; and

(b)

if the royalties are chargeable to tax under Schedule A, any sums deductible under Part II as payments made in respect of management of the property concerned;

and if neither paragraph (a) nor paragraph (b) above applies, the reference in subsection (1)(a) above to management expenses available for set-off shall be disregarded.

(3) F563

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

F564. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

In this section references to mineral royalties refer only to royalties receivable on or after 6th April 1970, and the expression “mineral royalties” means so much of any rents, tolls, royalties and other periodical payments in the nature of rent payable under a mineral lease or agreement as relates to the winning and working of minerals; and the Board may by regulations—

(a)

provide whether, and to what extent, payments made under a mineral lease or agreement and relating both to the winning and working of minerals and to other matters are to be treated as mineral royalties; and

(b)

provide for treating the whole of such payments as mineral royalties in cases where the extent to which they relate to matters other than the winning and working of minerals is small.

(6)

In this section—

“minerals” means all minerals and substances in or under land which are ordinarily worked for removal by underground or surface working but excluding water, peat, top-soil and vegetation; and

“mineral lease or agreement” means—

(a)

a lease, profit à prendre, licence or other agreement conferring a right to win and work minerals in the United Kingdom;

(b)

a contract for the sale, or a conveyance, of minerals in or under land in the United Kingdom; and

(c)

a grant of a right under section 1 of the M88Mines (Working Facilities and Support) Act 1966, other than an ancillary right within the meaning of that Act.

(7)

In the application of this section to Northern Ireland—

(a)

references to mineral royalties include references to periodical payments—

(i)

of compensation under section 29 or 35 of the M89Mineral Development Act (Northern Ireland) 1969 (“the 1969 Act”) or under section 4 of the M90Petroleum (Production) Act (Northern Ireland) 1964 (“the 1964 Act”); and

(ii)

made as mentioned in section 37 of the 1969 Act or under section 55(4)(b) of that Act or under section 11 of the 1964 Act (payments in respect of minerals to persons entitled to a share of royalties under section 13(3) of the M91Irish Land Act 1903); and

(b)

in its application to any such payments as are mentioned in paragraph (a) above, references to the mineral lease or agreement under which mineral royalties are payable shall be construed as references to the enactment under which the payments are made.

F563(8)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

123 Foreign dividends.

F565. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

124 Interest on quoted Eurobonds.

F566. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125F567Annual payments for dividends or non-taxable consideration

M92(1)

Any payment to which this subsection applies shall be made without deduction of F568income tax and shall not be allowed as a deduction in computing the income or total income of the person by whom it is made F569. . . .

(2)

Subject to the following provisions of this section, subsection (1) above applies to any payment which—

F570(a)

is not interest but is—

(i)

an annuity or other annual payment charged with income tax under Part 5 of ITTOIA 2005 otherwise than as relevant foreign income; or

(ii)

an annuity or other annual payment charged with corporation tax under Case III of Schedule D; and

F571(b)

is made under a liability incurred for consideration in money or money's worth all or any of which—

(i)

consists of, or of the right to receive, a dividend, or

(ii)

is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.

(3)

Subsection (1) above does not apply to—

(a)

any payment which in the hands of the recipient is income falling within F572section 627(1) or (2)(a) of ITTOIA 2005;

(b)

any payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest;

(c)

any annuity granted in the ordinary course of a business of granting annuities; or

(d)

any annuity charged on an interest in settled property and granted at any time before 30th March 1977 by an individual to a company whose business at that time consisted wholly or mainly in the acquisition of interests in settled property or which was at that time carrying on life assurance business in the United Kingdom.

(4)

In the application of this section to Scotland the references in subsection (3) above to settled property shall be construed as references to property held in trust.

(5)

Subsection (1) above applies to a payment made after 5th April 1988 irrespective of when the liability to make it was incurred.

126 Treasury securities issued at a discount.

F573. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:
Amendments (Textual)

F573Ss. 126, 126A repealed (with effect in accordance with s. 105(1) of the repealing Act) by Finance Act 1996, Sch. 41 Pt. 5(3), Note

126A Charge to tax on appropriation of securities and bonds.

F574. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:
Amendments (Textual)

F574Ss. 126, 126A repealed (with effect in accordance with s. 105(1) of the repealing Act) by Finance Act 1996, Sch. 41 Pt. 5(3), Note

127 Enterprise allowance.

F575. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F576127A Futures and options: transactions with guaranteed returns.

F577. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128 Commodity and financial futures etc.: losses and gains. M93

F578(1)

F579. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F580(2)

For the purposes of corporation tax, any gain arising to any company in the course of dealing in financial futures or in qualifying options, which apart from this subsection would constitute profits or gains chargeable to tax under Schedule D otherwise than as the profits of a trade, shall not be chargeable to tax under Case V or VI of Schedule D.

F581(3)

In this section “commodity or financial futures” and “qualifying options” have the same meaning as in section F582143 of the 1992 Act, and the reference to a gain arising in the course of dealing in commodity or financial futures includes any gain which is regarded as arising in the course of such dealing by virtue of subsection F582(3) of that section.

129 Stock lending.

F583. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F584129A Stock lending: interest on cash collateral.

F585. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F586129B Stock lending fees.

(1)

The income which, as income deriving from investments of a description specified in any of the relevant provisions, is eligible for relief from tax by virtue of that provision shall be taken to include any relevant stock lending fee.

(2)

For the purposes of this section the relevant provisions are F587sections 613(4) and 614(3) and section 186 of the Finance Act 2004.

(3)

In this section “relevant stock lending fee”, in relation to investments of any description, means any amount, in the nature of a fee, which is payable in connection with F588any stock lending arrangement relating to investments which, but for any transfer under the arrangement, would be investments of that description.

F589(4)

In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act.

130F590 Meaning of “company with investment business” and “investment company” in Part 4

M94In this Part of this Act F591—

“company with investment business” means any company whose business consists wholly or partly in the making of investments;

“investment company”, means any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom, but includes any savings bank or other bank for savings except any which, for the purposes of the M95Trustee Savings Bank Act 1985, is a successor or a further successor to a trustee savings bank.