401 Relief for pre-trading expenditure.U.K.
(1)M1Where a [F1company] incurs expenditure for the purposes of a [F2trade or profession] before the time when [F3the company] begins to carry it on and the expenditure—
(a)is incurred not more than [F4seven] years before that time; and
(b)is not allowable as a deduction in computing [F5the company's][F6profits] from the [F2trade or profession] for the purposes of Case I or II of Schedule D but would have been so allowable if incurred after that time,
the expenditure shall be [F7treated as incurred on the day on which the [F2trade or profession] is first carried on by [F8the company]].
[F9(1A)F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
[F11(1AA)Subsection (1) above shall not apply to any expenditure in relation to which any debit falls, or (but for subsection (1AB) below) would fall, to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships).
(1AB)Where, in the case of any company—
(a)a non-trading debit is given for any accounting period for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships), and
(b)an election for the purposes of this section is made by that company with respect to that debit within the period of 2 years beginning with the end of that accounting period,
that debit shall not be brought into account for the purposes of that Chapter as a non-trading debit for that period, but subsection (1AC) below shall apply instead.
(1AC)If a company—
(a)begins to carry on a trade within the period of seven years after the end of the accounting period for which a non-trading debit is given for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships),
(b)that debit is such that, if it had been given for the accounting period in which the company begins to carry on that trade, it would have been brought into account by reference to that trade in accordance with section 82(2) of that Act (trading debits and credits), and
(c)an election is or has been made with respect to that debit under subsection (1AB) above,
that debit shall be treated for the purposes of that Chapter as if it were a debit for the accounting period in which the company begins to carry on the trade and shall be brought into account for that period in accordance with section 82(2) of that Act.]
[F12(1B)F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]
(2)F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F1Word in s. 401(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 172(a) (with Sch. 2)
F2Words in s. 401(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 172(b) (with Sch. 2)
F3Words in s. 401(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 172(c) (with Sch. 2)
F4Word in s. 401(1) substituted (27.7.1993 with effect as mentioned in s. 109(4) of the amending Act) by virtue of s. 109(1)(4)
F5Words in s. 401(1)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 172(d) (with Sch. 2)
F6Words in s. 401(1)(b) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3), Sch. 7 para. 1
F7Words in s. 401(1) substituted (with effect in accordance with s. 120(2) of the amending Act) by Finance Act 1995 (c. 4), s. 120(1)(a)
F8Words in s. 401(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 172(e) (with Sch. 2)
F9S. 401(1A) inserted (27.7.1993 with effect as mentioned in s. 109(4) of the amending Act) by 1993 c. 34, s. 109(2)(4)
F10S. 401(1A) repealed (with effect in accordance with s. 105(1) of the repealing Act) by Finance Act 1996 (c. 8), Sch. 14 para. 20(2), Sch. 41 Pt. 5(3), Note (with Sch. 15)
F11S. 401(1AA)-(1AC) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 20(1) (with Sch. 15)
F12S. 401(1B) inserted (with effect in accordance with s. 39(4)(5) of the amending Act) by Finance Act 1995 (c. 4), Sch. 6 para. 20
F13S. 401(1B) repealed (with effect in accordance with s. 38(2)(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 27 Pt. 3(4), Note
F14S. 401(2) repealed (with effect in accordance with s. 120(2) of the repealing Act) by Finance Act 1995 (c. 4), s. 120(1)(b), Sch. 29 Pt. 8(15), Note 2
Modifications etc. (not altering text)
C1S. 401 excluded (with effect in accordance with s. 69(1) of the excluding Act) by Finance Act 2000 (c. 17), Sch. 20 paras. 1(3), 26
C2S. 401 excluded (with effect in accordance with s. 53(1) of the excluding Act) by Finance Act 2002 (c. 23), Sch. 12 para. 20(1)
C3S. 401 excluded (with effect in accordance with Sch. 13 para. 28(1)(2) of the excluding Act) by Finance Act 2002 (c. 23), Sch. 13 para. 15(3)
C4S. 401 excluded (with effect in accordance with s. 56 of the excluding Act) by Finance Act 2002 (c. 23), Sch. 15 para. 2(2)
Marginal Citations
M1Source—1980 s.39(1), (2), (4); 1982 s.50