SCHEDULES
SCHEDULE 2 Schedule 2 to the Social Security Contributions and Benefits Act 1992: Levy of Class 4 Contributions with Income Tax
Interpretation
1
In this Schedule—
a
“the Act of 1988” means the M1Income and Corporation Taxes Act 1988;
F9ab
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;
F18ac
“ITA 2007” means the Income Tax Act 2007;
F1b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c
“year” means year of assessment within the meaning of F32the Income Tax Acts (see section 989 of ITA 2007).
Method of computing profits or gains
2
Subject to the following paragraphs, Class 4 contributions shall be payable in respect of the full amount of all F10profits—
a
which are the profits of any relevant trade, profession or vocation which is not carried on wholly outside the United Kingdom, and
b
which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005.
Reliefs
3
C11
For the purposes of computing the amount of profits F11... in respect of which Class 4 contributions are payable, relief shall be available under, and in the manner provided by, the following provisions of F19ITA 2007—
a
F2b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c
F21section 83 (carry-forward of loss against subsequent profits); and
d
F22section 89 (carry-back of terminal losses).
2
The following relief provisions F23... shall not apply, that is to say—
a
Chapter I of Part VII F24of the Act of 1988 and Chapters 2 and 3 of Part 3 and sections 457, 458 and 459 of ITA 2007 (personal reliefs);
b
F25section 383 of ITA 2007 (relief for payment of interest);
F26c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d
F27sections 88 and 94 of ITA 2007 (treatment of interest as a loss for purposes of carry-forward or carry-back);
F3. . . and
f
sections 619 and 620 (premiums or other consideration under annuity contracts and trust schemes).
3
Where in the year 1989-90 or any previous year of assessment for which a person claims and is allowed relief by virtue of sub-paragraph (1) above—
a
there falls to be made in computing his total income for income tax purposes, or that of his spouse, a deduction in respect of any loss, and
b
the deduction or part of it falls to be so made from income other than profits or gains of a trade, profession or vocation,
the amount of the deduction made from the other income shall be treated as reducing the person’s profits or gains (that is to say the profits or gains of any relevant trade, profession or vocation as computed for the purpose of the charge to Class 4 contributions) for subsequent years (being deducted as far as may be from those of the immediately following year, whether or not he claims or is entitled to claim relief under this paragraph for that year, and, so far as it cannot be so deducted, then from those of the next year, and so on).
4
Where in the year 1990-1991 or any subsequent year of assessment for which a person claims and is allowed relief by virtue of sub-paragraph (1) above there falls to be made in computing his F28net income for income tax purposes a deduction in respect of any loss in any relevant trade, profession or vocation—
a
the amount of the deduction shall, as far as may be, be treated for the purpose of the charge to Class 4 contributions as reducing the person’s profits F12... for that year of any relevant trade, profession or vocation, and
b
any excess shall be treated for that purpose as reducing such profits F12... for subsequent years (being deducted as far as may be from those of the immediately following year, whether or not the person claims or is entitled to claim relief under this paragraph for that year, and, so far as it cannot be so deducted, then from those of the next year, and so on).
5
Relief shall be allowed, in respect of—
F29a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
payments under F30section 383 of ITA 2007 (relief for payment of interest), being payments for which relief from income tax is or can be given,
F33c
payments from which a sum representing income tax must be deducted under—
i
section 900(2) of ITA 2007 (commercial payments made by individuals),
ii
section 903(5) of that Act (patent royalties), or
iii
section 906(5) of that Act (certain royalties etc where usual place of abode of owner is abroad),
d
so much of any payment from which a sum representing income tax must be deducted under section 910(2) of ITA 2007 (proceeds of a sale of patent rights: payments to non-UK residents) as is equal to the amount referred to in that provision as “the chargeable amount”, or
e
a payment from which a sum representing income tax must be deducted as a result of a direction under section 944(2) of ITA 2007 (tax avoidance: certain payments to non-UK residents),
F34so far as the payment is incurred wholly or exclusively for the purposes of any relevant trade, profession or vocation, by way of deduction from or set-off against profits F12... chargeable to Class 4 contributions for the year in which the payments are made; and, in the case of any insufficiency of the profits F12... of that year, the payments shall be carried forward and deducted from or set off against the profits F12... of any subsequent year (being deducted or set off as far as may be from or against the profits F12... of the immediately following year, whether or not relief can be claimed under this paragraph for that year, and so far as it cannot be so deducted, from or against those of the next year, and so on).
Partnerships
4
1
Where a trade or profession is carried on by two or more persons jointly, the liability of any one of them in respect of Class 4 contributions shall arise in respect of his share of the profits F13... of that trade or profession (so far as immediately derived by him from carrying it on); and for this purpose his share shall be aggregated with his share of the profits F13... of any other trade, profession or vocation (so far as immediately derived by him from carrying it on or exercising it).
2
Trustees, etc.
5
In any circumstances in which apart from this paragraph a person would—
a
b
such contributions shall not be payable either by him or by any other person.
Other provisions
6
1
F5Section 86 of the M3Taxes Management Act 1970 (interest on overdue tax) shall apply in relation to any amount due in respect of Class 4 contributions F6as it applies in relation to income tax; and section 824 of the Act of 1988 (repayment supplements) shall, with the necessary modifications, apply in relation to Class 4 contributions as it applies in relation to income tax.
F72
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Where an assessment has become final and conclusive for the purposes of income tax for any year, that assessment shall also be final and conclusive for the purposes of computing liability for Class 4 contributions; and no allowance or adjustment of liability, on the ground of diminution of income or loss, shall be taken into account in computing profits F17... chargeable to Class 4 contributions unless that allowance or adjustment has previously been made on an application under the special provisions of the Income Tax Acts relating to it, or falls to be allowed under paragraph 3(5) of this Schedule.
8
The provisions of Part V of the Taxes Management Act 1970 (appeals, etc.) shall apply with the necessary modifications in relation to Class 4 contributions as they apply in relation to income tax; F8but nothing in this Schedule affects the extent to which the Income Tax Acts apply with respect to any decision falling to be made—
a
under subsection (1) of section 17 above or subsection (1) of section 17 of the Northern Ireland Contributions and Benefits Act as to whether by regulations under that subsection a person is excepted from liability for Class 4 contributions, or his liability is deferred; or
b
under regulations made by virtue of section 17(3) or (4) or 18 above or section 17(3) or (4) or 18 of the Northern Ireland Contributions and Benefits Act.
Husband and wife - 1989-90 and previous years of assessment
9
1
For the year 1989-90 and previous years of assessment Chapter II of Part VII of the Act of 1988 shall apply for the purposes of Class 4 contributions as it applies for those of income tax; and an application by a husband or wife for separate assessment under section 283 of that Act, and an election by them under section 287 of that Act (separate taxation of wife’s earnings) shall operate as respects liability for such contributions as it does for income tax, the wife being liable for Class 4 contributions in respect of her own profits or gains.
2
Such an application or election as is referred to in sub-paragraph (1) above shall not be made separately for the purposes of Class 4 contributions apart from those of income tax.
3
Where section 279 of the Act of 1988 applies and there is no separate assessment under section 283 of that Act and no election under section 287 of that Act, the wife’s profits and gains are to be computed, for the purposes of Class 4 contributions as if section 279 did not apply, but the contributions shall be assessed on, and recoverable from, the husband.
4
In this paragraph “year of assessment” has the meaning assigned to it by F31section 989 of ITA 2007.