Income Tax (Trading and Other Income) Act 2005 (c. 5)

Part 2 U.K. Trading income

Chapter 5 U.K. Trade profits: rules allowing deductions

Expenses connected with foreign trades U.K.

92 Expenses connected with foreign trades U.K.

(1) This section applies if—

(a) an individual (“the trader”) carries on a foreign trade (alone or in partnership),

(b) the trader is absent from the United Kingdom wholly and exclusively for the purpose of carrying on the foreign trade or the foreign trade and one or more other trades (whether or not foreign trades),

(c) qualifying expenses are incurred in connection with the foreign trade, and

(d) a deduction for the expenses would not otherwise be allowable in calculating the profits of the foreign trade because (and only because) they were not incurred wholly and exclusively for the purposes of the foreign trade.

(2) In calculating any profits of the foreign trade which are not charged in accordance with section 832 (relevant foreign income charged on the remittance basis), a deduction is allowed for the expenses.

(3) Any of the following expenses are qualifying expenses incurred in connection with the foreign trade—

(a) expenses incurred by the trader in travelling between a place in the United Kingdom and a place where the foreign trade is carried on,

(b) expenses incurred by the trader on board and lodging at a place where the foreign trade is carried on,

(c) if the trader's absence from the United Kingdom is for a continuous period of 60 days or more, family expenses (as defined in section 94), and

(d) if the trader also carries on another trade outside the United Kingdom (whether or not a foreign trade), expenses incurred by the trader in travelling between a place where the foreign trade is carried on and a place outside the United Kingdom where the other trade is carried on.

(4) In this section and section 93 “foreign trade” means a trade carried on wholly outside the United Kingdom.

93 Allocation of expenses U.K.

(1) Expenses within section 92(3)(a), (b) or (c) are allocated to the foreign trade.

(2) If—

(a) the expenses are within section 92(3)(a) or (b), and

(b) the trader carries on more than one foreign trade at the place in question outside the United Kingdom,

those expenses are allocated between the foreign trades on a just and reasonable basis.

(3) If—

(a) the expenses are within section 92(3)(c), and

(b) the trader's absence is for the purpose of carrying on more than one foreign trade,

those expenses are allocated between the foreign trades on a just and reasonable basis.

(4) Expenses within section 92(3)(d) are allocated—

(a) to the trade carried on at the trader's place of destination, if that trade is a foreign trade, and

(b) in any other case, to the foreign trade carried on at the trader's place of departure.

(5) If the trader carries on more than one foreign trade at—

(a) the place of destination (in a case falling within subsection (4)(a)), or

(b) the place of departure (in a case falling within subsection (4)(b)),

the expenses are allocated between the foreign trades on a just and reasonable basis.

94 Family expenses U.K.

(1) In section 92(3)(c) “family expenses” means expenses of a journey made by the trader's spouse [F1 or civil partner] or child if the journey—

(a) is between a place in the United Kingdom and a place outside the United Kingdom where any of the trades is carried on, and

(b) is made in order to accompany the trader at the beginning of the period of absence or to visit the trader during that period or to return after a journey made for either purpose.

(2) But no more than two outward and two return journeys made by the same person in a tax year fall within subsection (1).

(3) In this section “child” includes a stepchild but does not include a person who is aged 18 or over at the start of the outward journey.

Textual Amendments

F1 Words in s. 94(1) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), reg. 184