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Income Tax (Trading and Other Income) Act 2005

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Income Tax (Trading and Other Income) Act 2005 List of acts
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CONTENTS

Income Tax (Trading and Other Income) Act 2005

2005 CHAPTER 5

Go to Preamble

Part 1

Overview

1. Overview of Act

2. Overview of priority rules

Part 2

Trading income

Chapter 1

Introduction

3. Overview of Part 2

4. Provisions which must be given priority over Part 2

Chapter 2

Income taxed as trade profits

Charge to tax on trade profits

5. Charge to tax on trade profits

6. Territorial scope of charge to tax

7. Income charged

8. Person liable

Trades and trade profits

9. Farming and market gardening

10. Commercial occupation of land other than woodlands

11. Commercial occupation of woodlands

12. Profits of mines, quarries and other concerns

13. Visiting performers

14. Visiting performers: supplementary

15. Divers and diving supervisors

16. Oil extraction and related activities

Starting and ceasing to trade

17. Effect of becoming or ceasing to be a UK resident

18. Effect of company starting or ceasing to be within charge to income tax

Trading income and property income

19. Tied premises

20. Caravan sites where trade carried on

21. Surplus business accommodation

22. Payments for wayleaves

Rent-a-room and foster-care relief

23. Rent-a-room and foster-care relief

Chapter 3

Trade profits: basic rules

24. Professions and vocations

25. Generally accepted accounting practice

26. Losses calculated on same basis as profits

27. Receipts and expenses

28. Items treated under CAA 2001 as receipts and expenses

29. Interest

30. Animals kept for trade purposes

31. Relationship between rules prohibiting and allowing deductions

Chapter 4

Trade profits: rules restricting deductions

Introduction

32. Professions and vocations

Capital expenditure

33. Capital expenditure

Wholly and exclusively and losses rules

34. Expenses not wholly and exclusively for trade and unconnected losses

Bad and doubtful debts

35. Bad and doubtful debts

Unpaid remuneration

36. Unpaid remuneration

37. Unpaid remuneration: supplementary

Employee benefit contributions

38. Restriction of deductions

39. Making of “employee benefit contributions”

40. Provision of qualifying benefits

41. Timing and amount of certain qualifying benefits

42. Provision or payment out of employee benefit contributions

43. Profits calculated before end of 9 month period

44. Interpretation of sections 38 to 44

Business entertainment and gifts

45. Business entertainment and gifts: general rule

46. Business entertainment: exceptions

47. Business gifts: exceptions

Car or motor cycle hire

48. Car or motor cycle hire

49. Car or motor cycle hire: supplementary

50. Hiring cars (but not motor cycles) with low carbon dioxide emissions

Patent royalties

51. Patent royalties

Interest payments

52. Exclusion of double relief for interest

Social security contributions

53. Social security contributions

Penalties, interest and VAT surcharges

54. Penalties, interest and VAT surcharges

Crime-related payments

55. Crime-related payments

Chapter 5

Trade profits: rules allowing deductions

Introduction

56. Professions and vocations

Pre-trading expenses

57. Pre-trading expenses

Incidental costs of obtaining finance

58. Incidental costs of obtaining finance

59. Convertible loans and loan stock etc.

Tenants under taxed leases

60. Tenants under taxed leases: introduction

61. Tenants occupying land for purposes of trade treated as incurring expenses

62. Limit on deductions if tenant entitled to mineral extraction allowance

63. Tenants dealing with land as property employed for purposes of trade

64. Restrictions on section 61 expenses: lease premium receipts

65. Restrictions on section 61 expenses: lease of part of premises

66. Corporation tax receipts treated as taxed receipts

67. Restrictions on section 61 expenses: corporation tax receipts

Renewals

68. Replacement and alteration of trade tools

Payments for restrictive undertakings

69. Payments for restrictive undertakings

Seconded employees

70. Employees seconded to charities and educational establishments

71. Educational establishments

Contributions to agents' expenses

72. Payroll deduction schemes: contributions to agents' expenses

Counselling and retraining expenses

73. Counselling and other outplacement services

74. Retraining courses

75. Retraining courses: recovery of tax

Redundancy payments etc.

76. Redundancy payments and approved contractual payments

77. Payments in respect of employment wholly in employer’s trade

78. Payments in respect of employment in more than one capacity

79. Additional payments

80. Payments made by the Government

Personal security expenses

81. Personal security expenses

Contributions to local enterprise organisations or urban regeneration companies

82. Contributions to local enterprise organisations or urban regeneration companies

83. Meaning of “local enterprise organisation”

84. Approval of local enterprise agencies

85. Supplementary provisions with respect to approvals

86. Meaning of “urban regeneration company”

Scientific research

87. Expenses of research and development

88. Payments to research associations, universities etc.

Expenses connected with patents, designs and trade marks

89. Expenses connected with patents

90. Expenses connected with designs or trade marks

Export Credits Guarantee Department

91. Payments to Export Credits Guarantee Department

Expenses connected with foreign trades

92. Expenses connected with foreign trades

93. Allocation of expenses

94. Family expenses

Chapter 6

Trade profits: receipts

Introduction

95. Professions and vocations

Capital receipts

96. Capital receipts

Debts released

97. Debts incurred and later released

Amounts received following earlier cessation

98. Acquisition of trade: receipts from transferor’s trade

Reverse premiums

99. Reverse premiums

100. Excluded cases

101. Tax treatment of reverse premiums

102. Arrangements not at arm’s length

103. Connected persons and property arrangements

Assets of mutual concerns

104. Distribution of assets of mutual concerns

Industrial development grants

105. Industrial development grants

Proceeds of insurance etc.

106. Sums recovered under insurance policies etc.

Chapter 7

Trade profits: gifts to charities etc.

107. Professions and vocations

108. Gifts of trading stock to charities etc.

109. Receipt by donor or connected person of benefit attributable to certain gifts

110. Meaning of “designated educational establishment”

Chapter 8

Trade profits: herd basis rules

Introduction

111. Election for application of herd basis rules

112. Meaning of “animal”, “herd”, “production herd” etc.

113. Other interpretative provisions

The herd basis rules

114. Initial cost of herd and value of herd

115. Addition of animals to herd

116. Replacement of animals in herd

117. Amount of receipt if old animal slaughtered under disease control order

118. Sale of animals from herd

119. Sale of whole or substantial part of herd

120. Acquisition of new herd begun within 5 years of sale

121. Section 120: sale for reasons outside farmer’s control

122. Replacement of part sold begun within 5 years of sale

123. Section 122: sale for reasons outside farmer’s control

Elections

124. Herd basis elections

125. Five year gap in which no production herd kept

126. Slaughter under disease control order

Preventing abuse of the herd basis rules

127. Preventing abuse of the herd basis rules

Supplementary

128. Information if election made

129. Further assessment etc. if herd basis rules apply

Chapter 9

Trade profits: films and sound recordings

Introduction

130. Expenditure to which this Chapter applies

131. Meaning of “film” and related expressions

132. Meaning of “original master version” and “certified master version”

133. Meaning of “relevant period”

Expenditure treated as revenue in nature

134. Expenditure treated as revenue in nature

Films and sound recordings: normal rules for allocating expenditure

135. Films and sound recordings: production or acquisition expenditure

Certified master versions: special rules for allocating expenditure

136. Application of provisions about certified master versions

137. Certified master versions: preliminary expenditure

138. Certified master versions: production or acquisition expenditure

Certified master versions: limited-budget films

139. Certified master versions: production expenditure on limited-budget films

140. Certified master versions: acquisition expenditure on limited-budget films

141. “Total production expenditure in respect of the original master version”

142. When expenditure is incurred

Election for sections 134 to 140 not to apply

143. Election for sections 134 to 140 not to apply

Supplementary

144. Meaning of “genuinely intended for theatrical release”

Chapter 10

Trade profits: certain telecommunication rights

145. Professions and vocations

146. Meaning of “relevant telecommunication right”

147. Expenditure and receipts treated as revenue in nature

148. Credits or debits arising from revaluation

Chapter 11

Trade profits: other specific trades

Dealers in securities etc.

149. Taxation of amounts taken to reserves

150. Conversion etc. of securities held as circulating capital

151. Exchanges of gilts for gilt strips

152. Consolidation of gilt strips

153. Meaning of “gilt-edged security” and “strip”

154. Regulations for determining market value of securities or strips

Persons authorised for purposes of FISMA 2000

155. Levies and repayments under FISMA 2000

Dealers in land etc.

156. Purchase or sale of woodlands

157. Relief in respect of mineral royalties

158. Lease premiums etc: reduction of receipts

Ministers of religion

159. Ministers of religion

Barristers and advocates

160. Alternative basis of calculation in early years of practice

Mineral exploration and access

161. Mineral exploration and access

Persons liable to pool betting duty

162. Payments by persons liable to pool betting duty

Intermediaries treated as making employment payments

163. Deduction for deemed employment payment

164. Special rules for partnerships

Waste disposal

165. Deduction for site preparation expenditure

166. Allocation of site preparation expenditure

167. Site preparation expenditure: supplementary

168. Site restoration payments

Cemeteries and crematoria

169. Cemeteries and crematoria: introduction

170. Deduction for capital expenditure

171. Allocation of ancillary capital expenditure

172. Exclusion of expenditure met by subsidies

Chapter 12

Trade profits: valuation of stock and work in progress

Valuation of trading stock

173. Valuation of trading stock on cessation

174. Meaning of “trading stock”

175. Basis of valuation of trading stock

176. Sale basis of valuation: sale to unconnected person

177. Sale basis of valuation: sale to connected person

178. Sale basis of valuation: election by connected persons

179. Connected persons

180. Cost to buyer of stock valued on sale basis of valuation

181. Meaning of “sale” and related expressions

Valuation of work in progress

182. Valuation of work in progress on cessation

183. Meaning of “work in progress”

184. Basis of valuation of work in progress

185. Election for valuation at cost

Supplementary

186. Determination of questions by Commissioners

Chapter 13

Deductions from profits: unremittable amounts

187. Professions and vocations

188. Application of Chapter

189. Relief for unremittable amounts

190. Restrictions on relief

191. Withdrawal of relief

Chapter 14

Disposal and acquisition of know-how

192. Meaning of “know-how” etc.

193. Disposal of know-how if trade continues to be carried on

194. Disposal of know-how as part of disposal of all or part of a trade

195. Seller controlled by buyer etc.

Chapter 15

Basis periods

Introduction

196. Professions and vocations

Accounting date

197. Meaning of “accounting date”

The normal rules

198. General rule

199. First tax year

200. Second tax year

201. Tax year in which there is no accounting date

202. Final tax year

Apportionment of profits

203. Apportionment etc. of profits to basis periods

Overlap profits and losses

204. Meaning of “overlap period” and “overlap profit”

205. Deduction for overlap profit in final tax year

206. Restriction on bringing losses into account twice

207. Treatment of business start-up payments received in an overlap period

Rules where first accounting date shortly before end of tax year

208. When the late accounting date rules apply

209. Rule if there is an accounting date

210. Rules if there is no accounting date

Slight variations in accounting date

211. Treating middle date as accounting date

212. Consequence of treating middle date as accounting date

213. Circumstances in which middle date not treated as accounting date

Special rules if accounting date changes

214. When a change of accounting date occurs

215. Change of accounting date in third tax year

216. Change of accounting date in later tax year

217. Conditions for basis period to end with new accounting date

218. Commercial reasons for change of accounting date

219. The year after an ineffective change of accounting date

220. Deduction for overlap profit on change of accounting date

Chapter 16

Averaging profits of farmers and creative artists

221. Claim for averaging of fluctuating profits

222. Circumstances in which claim may be made

223. Adjustment of profits

224. Effect of adjustment

225. Effect of later adjustment of profits

Chapter 17

Adjustment income

Introduction

226. Professions and vocations

Adjustment on change of basis

227. Application of Chapter

228. Adjustment income and adjustment expense

229. Income charged

230. Person liable

231. Calculation of the adjustment

Treatment of adjustment income and adjustment expense

232. Treatment of adjustment income

233. Treatment of adjustment expense

Expenses previously brought into account

234. No adjustment for certain expenses previously brought into account

Realising or writing off assets

235. Cases where adjustment not required until assets realised or written off

Mark to market

236. Change from realisation basis to mark to market

237. Election for spreading if section 236 applies

Spreading of adjustment income: barristers and advocates

238. Spreading on ending of exemption for barristers and advocates

239. Election to accelerate charge under section 238

Supplementary

240. Liability of personal representatives if person liable dies

Chapter 18

Post-cessation receipts

Introduction

241. Professions and vocations

Charge to tax on post-cessation receipts

242. Charge to tax on post-cessation receipts

243. Extent of charge to tax

244. Income charged

245. Person liable

Meaning of “post-cessation receipts”

246. Basic meaning of “post-cessation receipt”

247. Other rules about what counts as post-cessation receipts

Sums treated as post-cessation receipts

248. Debts paid after cessation

249. Debts released after cessation

250. Receipts relating to post-cessation expenditure

251. Transfer of rights if transferee does not carry on trade

Sums that are not post-cessation receipts

252. Transfer of trading stock or work in progress

253. Lump sums paid to personal representatives for copyright etc.

Deductions

254. Allowable deductions

255. Further rules about allowable deductions

Reliefs

256. Treatment of post-cessation receipts

257. Election to carry back

Chapter 19

Supplementary

258. Changes in trustees and personal representatives

259. Meaning of “statutory insolvency arrangement”

Part 3

Property income

Chapter 1

Introduction

260. Overview of Part 3

261. Provisions which must be given priority over Part 3

262. Priority between Chapters within Part 3

Chapter 2

Property businesses

Introduction

263. Introduction

Basic meaning of UK and overseas property business

264. UK property business

265. Overseas property business

Generating income from land

266. Meaning of “generating income from land”

267. Activities not for generating income from land

Chapter 3

Profits of property businesses: basic rules

Charge to tax on profits of a property business

268. Charge to tax on profits of a property business

269. Territorial scope of charge to tax

270. Income charged

271. Person liable

Calculation of profits

272. Profits of a property business: application of trading income rules

273. Amounts not brought into account as part of a property business

274. Relationship between rules prohibiting and allowing deductions

Apportionment of profits

275. Apportionment etc. of profits to tax year

Chapter 4

Profits of property businesses: lease premiums etc.

Introduction

276. Introduction

Amounts treated as receipts: leases

277. Lease premiums

278. Amount treated as lease premium where work required

279. Sums payable instead of rent

280. Sums payable for surrender of lease

281. Sums payable for variation or waiver of term of lease

282. Assignments for profit of lease granted at undervalue

283. Provisions supplementary to section 282

Other amounts treated as receipts

284. Sales with right to reconveyance

285. Sale and leaseback transactions

286. Provisions supplementary to sections 284 and 285

Additional calculation rule for reducing certain receipts

287. Circumstances in which additional calculation rule applies

288. The additional calculation rule

289. The additional calculation rule: special cases

290. Meaning of “unused amount” and “unreduced amount”

Deductions in relation to certain receipts

291. Deductions for expenses under section 292

292. Tenants under taxed leases treated as incurring expenses

293. Restrictions on section 292 expenses: the additional calculation rule

294. Restrictions on section 292 expenses: lease of part of premises

Limit on effect of additional calculation rule and deductions

295. Limit on reductions and deductions

Relationship with ICTA

296. Corporation tax receipts treated as taxed receipts

297. Taking account of reductions in corporation tax receipts

298. Taking account of deductions for rent as a result of section 37(4) or 87(2) of ICTA

Certain administrative provisions

299. Payment of tax by instalments

300. Statement of accuracy for purposes of section 282

301. Claim for repayment of tax payable by virtue of section 284

302. Claim for repayment of tax payable by virtue of section 285

Effective duration of lease

303. Rules for determining effective duration of lease

304. Applying the rules in section 303

305. Information about effective duration of lease

Other interpretative provisions

306. Provisions about premiums

307. Interpretation

Chapter 5

Profits of property businesses: other rules about receipts and deductions

Furnished accommodation: receipts and deductions

308. Furnished lettings

309. Rent-a-room relief

Treatment of receipts on acquisition of business

310. Acquisition of business: receipts from transferor’s UK property business

Reverse premiums as receipts

311. Reverse premiums

Deductions for expenditure on energy-saving items

312. Deduction for expenditure on energy-saving items

313. Restrictions on relief

314. Regulations

Deductions for expenditure on sea walls

315. Deduction for expenditure on sea walls

316. Transfer of interest in premises

317. Ending of lease of premises

318. Transfer involving company within the charge to corporation tax

Mineral royalties

319. Relief in respect of mineral royalties

Apportionments on sale of land

320. Nature of item apportioned on sale of estate or interest in land

Mutual business

321. Mutual business

Chapter 6

Commercial letting of furnished holiday accommodation

Introduction

322. Introduction

Definition

323. Meaning of “commercial letting of furnished holiday accommodation”

324. Meaning of “relevant period” in sections 325 and 326

325. Meaning of “qualifying holiday accommodation”

326. Under-used holiday accommodation: averaging elections

Separate profit calculations

327. Capital allowances and loss relief

328. Earned income and relevant UK earnings for pension purposes

Chapter 7

Adjustment income

Adjustment on change of basis

329. Application of Chapter

330. Adjustment income and adjustment expense

331. Income charged

332. Person liable

Treatment of adjustment income and adjustment expense

333. Treatment of adjustment income

334. Treatment of adjustment expense

Chapter 8

Rent receivable in connection with a UK section 12(4) concern

Charge to tax on rent receivable in connection with a UK section 12(4) concern

335. Charge to tax on rent receivable in connection with a UK section 12(4) concern

336. Meaning of “rent receivable in connection with a UK section 12(4) concern”

337. Income charged

338. Person liable

Management expenses of owner of mineral rights

339. Deduction for management expenses of owner of mineral rights

Mineral royalties

340. Relief in respect of mineral royalties

341. Meaning of “mineral lease or agreement” and “mineral royalties”

342. Extended meaning of “mineral royalties” etc. in Northern Ireland

343. Power of Board to determine what counts as “mineral royalties”

Chapter 9

Rent receivable for UK electric-line wayleaves

Charge to tax on rent receivable for UK electric-line wayleaves

344. Charge to tax on rent receivable for a UK electric-line wayleave

345. Meaning of “rent receivable for a UK electric-line wayleave”

346. Extent of charge to tax

347. Income charged

348. Person liable

Chapter 10

Post-cessation receipts

Charge to tax on post-cessation receipts

349. Charge to tax on post-cessation receipts

350. Extent of charge to tax

351. Income charged

352. Person liable

Meaning of “post-cessation receipts”

353. Basic meaning of “post-cessation receipt”

354. Other rules about what counts as a “post-cessation receipt”

355. Transfer of rights if transferee does not carry on UK property business

Supplementary

356. Application to Schedule A businesses

Chapter 11

Overseas property income

357. Charge to tax on overseas property income

358. Meaning of “overseas property income”

359. Income charged

360. Person liable

Chapter 12

Supplementary

361. Changes in trustees and personal representatives

362. Effect of company starting or ceasing to be within charge to income tax

363. Overseas property businesses and overseas land: adaptation of rules

364. Meaning of “lease” and “premises”

Part 4

Savings and investment income

Chapter 1

Introduction

365. Overview of Part 4

366. Provisions which must be given priority over Part 4

367. Priority between Chapters within Part 4

368. Territorial scope of Part 4 charges

Chapter 2

Interest

Charge to tax on interest

369. Charge to tax on interest

370. Income charged

371. Person liable

Other income taxed as interest

372. Building society dividends

373. Open-ended investment company interest distributions

374. Date when interest payments under section 373 made

375. Interpretation of sections 373 and 374

376. Authorised unit trust interest distributions

377. Date when interest payments under section 376 made

378. Interpretation of sections 376 and 377

379. Industrial and provident society payments

380. Funding bonds

381. Discounts

Chapter 3

Dividends etc. from UK resident companies etc.

Introduction

382. Contents of Chapter

Charge to tax on dividends and other distributions

383. Charge to tax on dividends and other distributions

384. Income charged

385. Person liable

Amounts treated as dividends

386. Open-ended investment company dividend distributions

387. Date when dividends paid under section 386

388. Interpretation of sections 386 and 387

389. Authorised unit trust dividend distributions

390. Date when dividends paid under section 389

391. Interpretation of sections 389 and 390

Shares in approved share incentive plans (“SIPs”)

392. SIP shares: introduction

393. Later charge where cash dividends retained in SIPs are paid over

394. Distribution when dividend shares cease to be subject to SIP

395. Reduction in tax due in cases within section 394

396. Interpretation of sections 392 to 395

Tax credits and payment and deduction of tax

397. Tax credits for qualifying distributions: UK residents and eligible non-UK residents

398. Increase in amount or value of dividends where tax credit available

399. Qualifying distributions received by persons not entitled to tax credits

400. Non-qualifying distributions

401. Relief: qualifying distribution after linked non-qualifying distribution

Chapter 4

Dividends from non-UK resident companies

Charge to tax on dividends from non-UK resident companies

402. Charge to tax on dividends from non-UK resident companies

403. Income charged

404. Person liable

Shares in approved share incentive plans (“SIPs”)

405. SIP shares: introduction

406. Later charge where cash dividends retained in SIPs are paid over

407. Dividend payment when dividend shares cease to be subject to SIP

408. Reduction in tax due in cases within section 407

Chapter 5

Stock dividends from UK resident companies

409. Charge to tax on stock dividend income

410. When stock dividend income arises

411. Income charged

412. Cash equivalent of share capital

413. Person liable

414. Income tax treated as paid

Chapter 6

Release of loan to participator in close company

415. Charge to tax under Chapter 6

416. Income charged

417. Person liable

418. Relief where borrowers liable as settlors

419. Loans and advances to persons who die

420. Loans and advances to trustees of trusts that have ended

421. Income tax treated as paid

Chapter 7

Purchased life annuity payments

422. Charge to tax on purchased life annuity payments

423. Meaning of “purchased life annuity”

424. Income charged

425. Person liable

426. Annuity payments received after deduction of tax

Chapter 8

Profits from deeply discounted securities

Charge to tax under Chapter 8

427. Charge to tax on profits from deeply discounted securities

428. Income charged

429. Person liable

Deeply discounted securities

430. Meaning of “deeply discounted security”

431. Excluded occasions of redemption

432. Securities which are not deeply discounted securities

433. Meaning of “excluded indexed security”

434. Securities issued in separate tranches: preliminary

435. Securities issued in separate tranches: basic rule

436. Deeply discounted securities issued in separate tranches: nominal value rule

Disposals

437. Transactions which are disposals

438. Timing of transfers and acquisitions

Calculating profits

439. Calculating the profit from disposals

440. Market value disposals

441. Market value acquisitions

442. Securities issued in accordance with qualifying earn-out right

Special rules for strips of government securities

443. Application of this Chapter to strips of government securities

444. Meaning of “strip” in Chapter 8

445. Strips of government securities: acquisitions and disposals

446. Strips of government securities: relief for losses

447. Restriction of profits on strips by reference to original acquisition cost

448. Restriction of losses on strips by reference to original acquisition cost

449. Strips of government securities: manipulation of acquisition, transfer or redemption payments

450. Market value of strips etc.

451. Market value of strips etc. quoted in foreign stock exchange lists

452. Power to modify this Chapter for strips

Special rules for listed securities held since 26th March 2003

453. Application of sections 454 to 456

454. Listed securities held since 26th March 2003: relief for losses

455. Listed securities held since 26th March 2003: calculating the profit or loss on disposals

456. Securities issued to connected persons etc. at excessive price: subsequent transfers to connected persons

Trustees

457. Trustees

458. Non-UK resident trustees

Miscellaneous and supplementary

459. Transfer of assets abroad

460. Minor definitions

Chapter 9

Gains from contracts for life insurance etc.

Charge to tax under Chapter 9

461. Charge to tax under Chapter 9

462. When gains arise from policies and contracts

463. Income charged

Person liable etc.

464. Person liable for tax: introduction

465. Person liable: individuals

466. Person liable: personal representatives

467. Person liable: UK resident trustees

468. Non-UK resident trustees and foreign institutions

469. Two or more persons interested in policy or contract

470. Interests in rights under a policy or contract for section 469

471. Determination of shares etc.

472. Trusts created by two or more persons

Policies and contracts to which Chapter 9 applies

473. Policies and contracts to which Chapter 9 applies: general

474. Special rules: qualifying policies

475. Special rules: personal portfolio bonds

476. Special rules: foreign policies

477. Special rules: certain older policies and contracts

478. Exclusion of mortgage repayment policies

479. Exclusion of pension policies

480. Exclusion of excepted group life policies

481. Excepted group life policies: conditions about benefits

482. Excepted group life policies: conditions about persons intended to benefit

483. Exclusion of credit union group life policies

When chargeable events occur: general

484. When chargeable events occur

485. Disregard of certain events in relation to qualifying policies

486. Exclusion of maturity of capital redemption policies in certain circumstances

487. Disregard of certain assignments

488. Disregard of some events after alterations of life insurance policy terms

489. Conditions applicable to alterations of life insurance policy terms

490. Last payment under guaranteed income bonds etc. treated as total surrender

Calculating gains: general

491. Calculating gains: general rules

492. The total benefit value of a policy or contract

493. The value of a policy or contract

494. The total allowable deductions for a policy or contract

495. Disregard of certain amounts in calculating gains under section 491

496. Modification of section 494: qualifying endowment policies held as security for company debts

497. Disregard of trivial inducement benefits

Part surrenders and assignments: periodic calculations and excess events

498. Requirement for periodic calculations in part surrender or assignment cases

499. Meaning of “insurance year” and “final insurance year”

500. Events treated as part surrenders

501. Part surrenders: loans

502. Exception from section 501 for loans to buy life annuities

503. Exception from section 501 for certain loans under qualifying policies

504. Part surrenders: payments under guaranteed income bonds etc.

505. Assignments etc. involving co-ownership

506. Assignments occurring when there is a co-ownership transaction

507. Method for making periodic calculations under section 498

508. The value of rights partially surrendered or assigned

509. Chargeable events in certain cases where periodic calculations show gains

Transaction-related calculations and part surrender or assignment events

510. Requirement for transaction-related calculations in certain part surrender and assignment cases

511. Method for making transaction-related calculations under section 510

512. Available premium left for relevant transaction

513. Special rules for part surrenders and assignments in final insurance year

514. Chargeable events where transaction-related calculations show gains

Personal portfolio bonds

515. Requirement for annual calculations in relation to personal portfolio bonds

516. Meaning of “personal portfolio bond”

517. Policies and contracts which are not personal portfolio bonds

518. The index categories

519. The index selection conditions

520. The property categories

521. The property selection conditions

522. Method for making annual calculations under section 515

523. The total amount of personal portfolio bond excesses

524. The total amount of part surrender gains

525. Chargeable events where annual calculations show gains

526. Power to make regulations about personal portfolio bonds

Reductions from gains

527. Reduction for sums taken into account otherwise than under Chapter 9

528. Reduction in amount charged: non-UK resident policy holders

529. Exceptions to section 528

Income tax treated as paid and reliefs

530. Income tax treated as paid etc.

531. Exceptions to section 530

532. Relief for policies and contracts with European Economic Area insurers

533. Meaning of “comparable EEA tax charge”

534. Regulations providing for relief in other cases where foreign tax chargeable

535. Top slicing relief

536. Top slicing relieved liability: one chargeable event

537. Top slicing relieved liability: two or more chargeable events

538. Recovery of tax from trustees

Deficiencies

539. Relief for deficiencies

540. When deficiencies arise: events following calculation events

541. Calculation of deficiencies

Supplementary

542. Replacement of qualifying policies

543. Issue time of qualifying policy replacing foreign policy

544. Application of Chapter to policies and contracts in which companies interested

545. Minor definitions

546. Table of provisions subject to special rules for older policies and contracts

Chapter 10

Distributions from unauthorised unit trusts

547. Charge to tax under Chapter 10

548. Income charged

549. Person liable

550. Income tax treated as paid

Chapter 11

Transactions in deposits

551. Charge to tax on profits from disposal of deposit rights

552. Meaning of “deposit rights”

553. Income charged

554. Person liable

Chapter 12

Disposals of futures and options involving guaranteed returns

Charge to tax under Chapter 12

555. Charge to tax under Chapter 12

556. Income charged

557. Person liable

558. Meaning of “future”, “option” etc.

When disposals involve guaranteed returns

559. When disposals involve guaranteed returns

560. Production of guaranteed returns

561. The return from one or more disposals

When disposals of futures and options occur

562. When disposals of futures and options occur: general

563. Timing of certain grants of options where related disposals occur later

564. Deemed disposal where futures run to delivery or options are exercised

565. Interpretation of section 564

566. When transactions are related

Losses

567. Losses

Trustees

568. Special rule for certain income of trustees

Transfer of assets abroad

569. Anti-avoidance: transfer of assets abroad

Chapter 13

Sales of foreign dividend coupons

570. Charge to tax under Chapter 13

571. Meaning of “foreign holdings” etc.

572. Income charged

573. Person liable

Part 5

Miscellaneous income

Chapter 1

Introduction

574. Overview of Part 5

575. Provisions which must be given priority over Part 5

576. Priority between Chapters within Part 5

577. Territorial scope of Part 5 charges

Chapter 2

Receipts from intellectual property

Introduction

578. Contents of Chapter

Charge to tax on non-trading income from intellectual property

579. Charge to tax on royalties and other income from intellectual property

580. Income charged under section 579

581. Person liable for tax under section 579

582. Deductions in calculating certain income charged under section 579

Disposals of know-how

583. Charge to tax on income from disposals of know-how

584. Exceptions to charge under section 583

585. Income charged under section 583

586. Person liable for tax under section 583

Sales of patent rights

587. Charge to tax on income from sales of patent rights

588. Income charged under section 587

589. Person liable for tax under section 587

590. UK resident sellers: spreading rules

591. Non-UK resident sellers: election for spreading

592. Further provision about elections for spreading: instalments

593. Death of seller

594. Winding up of a body corporate

595. Deduction of tax from payments to non-UK residents

596. Adjustments where tax has been deducted

597. Licences connected with patents

598. Rights to acquire future patent rights

599. Sums paid for Crown use etc. treated as paid under licence

Relief from income tax on patent income

600. Relief for expenses: patent income

601. How relief is given under section 600

Payments received after deduction of tax

602. Payments received after deduction of tax

Supplementary

603. Contributions to expenditure

604. Contributions not made by public bodies nor eligible for tax relief

605. Exchanges

606. Apportionment where property sold together

607. Questions about apportionments affecting two or more persons

608. Meaning of “capital sums” etc.

Chapter 3

Films and sound recordings: non-trade businesses

609. Charge to tax on films and sound recordings businesses

610. Income charged

611. Person liable

612. Calculation of income

613. Application of trading income rules to non-trade businesses

Chapter 4

Certain telecommunication rights: non-trading income

614. Charge to tax on certain telecommunication rights of a non-trader

615. Income charged

616. Person liable

617. Deductions in calculating certain income charged

618. Payments received after deduction of tax

Chapter 5

Settlements: amounts treated as income of settlor

Charge to tax under Chapter 5

619. Charge to tax under Chapter 5

620. Meaning of “settlement” and “settlor”

Income charged and person liable

621. Income charged

622. Person liable

Rules for calculating income

623. Calculation of income

Income treated as income of settlor: retained interests

624. Income where settlor retains an interest

625. Settlor’s retained interest

626. Exception for outright gifts between spouses

627. Exceptions for certain types of income

628. Exception for gifts to charities

Income treated as income of settlor: unmarried children

629. Income paid to unmarried minor children of settlor

630. Exception for gifts to charities

631. Retained and accumulated income

632. Offshore income gains

Capital sums treated as income of settlor: trustees' payments

633. Capital sums paid to settlor by trustees of settlement

634. Meaning of “capital sum” and “sums paid to settlor”

635. Amount of available income

636. Calculation of undistributed income

637. Qualifications to section 636

Trustees' payments: further provisions

638. Capital sums paid by way of loan or repayment of loan

639. Loans to participators in close companies

640. Grossing-up of deemed income

Capital sums treated as income of settlor: connected bodies

641. Capital sums paid to settlor by body connected with settlement

642. Exception for certain loans or repayments of loans

643. Interpretation of sections 641 and 642

Settlements by two or more settlors

644. Application to settlements by two or more settlors

645. Property or income originating from settlor

Other supplementary provisions

646. Adjustments between settlor and trustees etc.

647. Power to obtain information

648. Income arising under a settlement

Chapter 6

Beneficiaries' income from estates in administration

Charge to tax on estate income

649. Charge to tax on estate income

650. Absolute, limited and discretionary interests

651. Meaning of “UK estate” and “foreign estate”

Types of estate income

652. Estate income: absolute interests in residue

653. Meaning of “the administration period” and “the final tax year”

654. Estate income: limited interests in residue

655. Estate income: discretionary interests in residue

Income charged and person liable

656. Income charged: UK estates

657. Income charged: foreign estates

658. Special rules for foreign income

659. Person liable

Basic amount of estate income: general calculation rules

660. Basic amount of estate income: absolute interests

661. Basic amount of estate income: limited interests

662. Basic amount of estate income: discretionary interests

663. The applicable rate for grossing up basic amounts of estate income

664. The aggregate income of the estate

Further provisions for calculating estate income relating to absolute interests

665. Assumed income entitlement

666. The residuary income of the estate

667. Shares of residuary income of estate

668. Reduction in share of residuary income of estate

669. Reduction in residuary income: inheritance tax on accrued income

670. Applicable rate for determining assumed income entitlement (UK estates)

Special rules for successive interests

671. Successive absolute interests

672. Successive interests: assumed income entitlement of holder of absolute interest following limited interest

673. Successive interests: payments in respect of limited interests followed by absolute interests

674. Successive interests: holders of limited interests

675. Basic amount of estate income: successive limited interests

676. Apportionments

Relief where foreign estates have borne UK income tax

677. Relief where UK income tax borne by foreign estate: absolute interests

678. Relief where UK income tax borne by foreign estate: limited and discretionary interests

General

679. Income from which basic amounts are treated as paid

680. Income treated as bearing income tax

681. Transfers of assets etc. treated as payments

682. Assessments, adjustments and claims after the administration period

Chapter 7

Annual payments not otherwise charged

683. Charge to tax on annual payments not otherwise charged

684. Income charged

685. Person liable

686. Payments received after deduction of tax

Chapter 8

Income not otherwise charged

687. Charge to tax on income not otherwise charged

688. Income charged

689. Person liable

Part 6

Exempt income

Chapter 1

Introduction

690. Overview of Part 6

Chapter 2

National savings income

691. National Savings Bank ordinary account interest

692. Income from savings certificates

693. Income from Ulster Savings Certificates

Chapter 3

Income from individual investment plans

694. Income from individual investment plans

695. Investment plans

696. Plan managers

697. Special requirements for certain foreign managers

698. Requirements for discharge of foreign institution’s duties

699. Non-entitlement to exemption

700. Information

701. General and supplementary powers

Chapter 4

SAYE interest

702. Interest under certified SAYE savings arrangements

703. Meaning of “certified SAYE savings arrangement”

704. Types of arrangements and providers

705. Certification of arrangements

706. Withdrawal and variation of certifications and connected requirements

707. Authorisation of providers

708. Withdrawal and variation of authorisations

Chapter 5

Venture capital trust dividends

709. Venture capital trust dividends

710. Treatment of shares where annual acquisition limit exceeded

711. Identification of shares after disposals

712. Identification of shares after reorganisations etc.

Chapter 6

Income from FOTRA securities

713. Introduction: securities free of tax to residents abroad (“FOTRA securities”)

714. Exemption of profits from FOTRA securities

715. Interest from FOTRA securities held on trust

716. Restriction on deductions etc. relating to FOTRA securities

Chapter 7

Purchased life annuity payments

Partial exemption for purchased life annuity payments

717. Exemption for part of purchased life annuity payments

718. Excluded annuities

719. Extent of exemption under section 717

720. Exempt proportion: term dependent solely on duration of life

721. Exempt sum: term dependent solely on duration of life

722. Consideration for the grant of annuities

723. Determinations

724. Regulations

Immediate needs annuities

725. Annual payments under immediate needs annuities

726. Meaning of “care provider”

Chapter 8

Other annual payments

Certain annual payments by individuals

727. Certain annual payments by individuals

728. Commercial payments

729. Payments for non-taxable consideration

730. Foreign maintenance payments

Periodical payments of personal injury damages etc.

731. Periodical payments of personal injury damages

732. Compensation awards

733. Persons entitled to exemptions for personal injury payments etc.

734. Payments from trusts for injured persons

Health and employment insurance payments

735. Health and employment insurance payments

736. Health and employment risks and benefits

737. Period for which payments may be made

738. Risk of significant loss

739. Conditions to be met by policies also providing other benefits

740. Conditions to be met where policies are linked

741. Aggregation of policies where employment ends for health reasons

742. Meaning of “the insured”

743. Policies for the benefit of others who contribute to premiums

Payments to adopters

744. Payments to adopters: England and Wales

745. Payments to adopters: Scotland

746. Payments to adopters: Northern Ireland

747. Power to amend sections 744 to 746

Payments by persons liable to pool betting duty

748. Payments by persons liable to pool betting duty

Chapter 9

Other income

Interest only income

749. Interest paid under repayment supplements

750. Interest from tax reserve certificates

751. Interest on damages for personal injury

752. Interest under employees' share schemes

753. Interest on repayment of student loan

754. Redemption of funding bonds

755. Interest on foreign currency securities etc. owned by non-UK residents

756. Which securities and loans are foreign currency ones for section 755

Interest and royalty payments

757. Interest and royalty payments: introduction

758. Exemption for certain interest and royalty payments

759. The person making the payment

760. The person beneficially entitled to the payment

761. Meaning of “25% associates”

762. Interest payments: exemption notices

763. Special relationships

764. Application of ICTA provisions about special relationships

765. Anti-avoidance

766. Interest and royalty payments: interpretation

767. Power to amend references to the Directive by order

Income from commercial occupation of woodlands

768. Commercial occupation of woodlands

Housing grants

769. Housing grants

Approved share incentive plan distributions

770. Amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment

Foreign income of consular officers and employees

771. Relevant foreign income of consular officers and employees

772. Further provisions about Orders under section 771

Income of non-UK residents from certain securities

773. Income from Inter-American Development Bank securities

774. Income from securities issued by designated international organisations

Other

775. Income towards reducing the national debt

776. Scholarship income

777. VAT repayment supplements

778. Incentives to use electronic communications

779. Gains on commodity and financial futures

780. Disabled person’s vehicle maintenance grant

781. Payments under New Deal 50plus

782. Payments under employment zone programme

Chapter 10

General

783. General disregard of exempt income for income tax purposes

Part 7

Income charged under this Act: rent-a-room and foster-care relief

Chapter 1

Rent-a-room relief

Introduction

784. Overview of Chapter 1

785. Person who qualifies for relief

Basic definitions

786. Meaning of “rent-a-room receipts”

787. Meaning of “residence”

788. Meaning of “total rent-a-room amount”

Individual’s limit

789. The individual’s limit

790. Exclusive receipts condition

Relief if amount does not exceed limit

791. Full rent-a-room relief: introduction

792. Full rent-a-room relief: trading income

793. Full rent-a-room relief: property income

794. Full rent-a-room relief: income chargeable under Chapter 8 of Part 5

Alternative calculation of profits if amount exceeds limit

795. Alternative calculation of profits: introduction

796. Alternative calculation of profits: trading income

797. Alternative calculation of profits: property income

798. Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

Elections

799. Election not to apply full relief

800. Election for alternative method of calculating profits

801. Time limit on adjustment of assessment

Interpretation

802. Minor definitions

Chapter 2

Foster-care relief

Introduction

803. Overview of Chapter 2

804. Person who qualifies for relief

Basic definitions

805. Meaning of “foster-care receipts”

806. Meaning of providing foster care

807. Calculation of “total foster-care receipts”

Individual’s limit

808. The individual’s limit

809. Share of fixed amount: residence used by more than one foster carer

810. Share of fixed amount: income period not a year

811. The amount per child

Relief if amount does not exceed limit

812. Full foster-care relief: introduction

813. Full foster-care relief: trading income

814. Full foster-care relief: income chargeable under Chapter 8 of Part 5

Alternative calculation of profits if amount exceeds limit

815. Alternative calculation of profits: introduction

816. Alternative calculation of profits: trading income

817. Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

818. Election for alternative method of calculating profits

819. Adjustment of assessment

Periods of account not ending on 5th April

820. Periods of account not ending on 5th April

821. Meaning of “relevant limit”

822. Full relief

823. Alternative method of calculating profits

Capital allowances for foster carers carrying on trade

824. Capital allowances: introduction

825. Carried forward unrelieved qualifying expenditure

826. Excluded capital expenditure

827. Excluded capital expenditure: subsequent treatment of asset

Overlap profit

828. Overlap profit

Part 8

Foreign income: special rules

Chapter 1

Introduction

829. Overview of Part 8

830. Meaning of “relevant foreign income”

Chapter 2

Relevant foreign income charged on remittance basis

Remittance basis

831. Claims for relevant foreign income to be charged on the remittance basis

832. Relevant foreign income charged on the remittance basis

833. Income treated as remitted: repayment of UK-linked debts

834. Arrangements treated as repayment of UK-linked debts

Relief for delayed remittances

835. Relief for delayed remittances

836. Relief for delayed remittances: backdated pensions

837. Claims for relief on delayed remittances

Chapter 3

Relevant foreign income charged on arising basis: deductions and reliefs

838. Expenses attributable to collection or payment of relevant foreign income

839. Annual payments payable out of relevant foreign income

840. Relief for backdated pensions charged on the arising basis

Chapter 4

Unremittable income

841. Unremittable income: introduction

842. Claim for relief for unremittable income

843. Withdrawal of relief

844. Income charged on withdrawal of relief after source ceases

845. Valuing unremittable income

Part 9

Partnerships

Introduction

846. Overview of Part 9

847. General provisions

848. Assessment of partnerships

Calculation of partners' shares

849. Calculation of firm’s profits or losses

850. Allocation of firm’s profits or losses between partners

851. Calculations etc. where firm has other income or losses

Firms with trading income

852. Carrying on by partner of notional trade

853. Basis periods for partners' notional trades

Firms with trading and other source income

854. Carrying on by partner of notional business

855. Basis periods for partners' notional businesses

856. Overlap profits from partners' notional businesses

Firms with a foreign element

857. Partners to whom the remittance basis may apply

858. Resident partners and double taxation agreements

Miscellaneous

859. Special provisions about farming and property income

860. Adjustment income

861. Sale of patent rights: effect of partnership changes

862. Sale of patent rights: effect of later cessation of trade

863. Limited liability partnerships

Part 10

General provisions

Chapter 1

Introduction

864. Overview of Part 10

Chapter 2

General calculation rules etc.

Unpaid remuneration

865. Unpaid remuneration: non-trades and non-property businesses

Employee benefit contributions

866. Employee benefit contributions: non-trades and non-property businesses

Business entertainment and gifts

867. Business entertainment and gifts: non-trades and non-property businesses

Social security contributions

868. Social security contributions: non-trades etc.

Penalties, interest and VAT surcharges

869. Penalties, interest and VAT surcharges: non-trades etc.

Crime-related payments

870. Crime-related payments: non-trades and non-property businesses

Apportionment of profits

871. Apportionment etc. of miscellaneous profits to tax year

Calculation of losses

872. Losses calculated on same basis as miscellaneous income

Chapter 3

Supplementary and general provisions

Orders and regulations

873. Orders and regulations made by Treasury or Board

Interpretation

874. Activities in UK sector of continental shelf

875. Meaning of “caravan”

876. Meaning of “farming” and related expressions

877. Meaning of grossing up

878. Other definitions

879. Interpretation: Scotland

880. Interpretation: Northern Ireland

General and final

881. Disapplication of corporation tax: section 9 of ICTA

882. Consequential amendments

883. Commencement and transitional provisions etc.

884. Repeals and revocations

885. Abbreviations and general index in Schedule 4

886. Short title

Schedule 1: Consequential amendments

Part 1: Income and Corporation Taxes Act 1988

Part 2: Other enactments

Schedule 2: Transitionals and savings etc.

Part 1: General provisions

Part 2: Changes in the law

Part 3: Trading income

Part 4: Property income

Part 5: Savings and investment income: general

Part 6: Savings and investment income: insurance contracts and policies made before certain dates

Part 7: Savings and investment income: gains from contracts for life insurance etc. (personal portfolio bonds)

Part 8: Miscellaneous income

Part 9: Exempt income

Part 10: Foster-care relief

Part 11: Foreign income: special rules

Part 12: Other provisions

Schedule 3: Repeals and revocations

Schedule 4: Abbreviations and defined expressions

Part 1: Abbreviations of Acts

Part 2: Index of expressions defined in this Act etc.

 

An Act to restate, with minor changes, certain enactments relating to income tax on trading income, property income, savings and investment income and certain other income; and for connected purposes.

[24th March 2005]

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Part 1

Overview

1 Overview of Act

(1) This Act imposes charges to income tax under—

(a) Part 2 (trading income),

(b) Part 3 (property income),

(c) Part 4 (savings and investment income), and

(d) Part 5 (certain miscellaneous income).

(2) Those charges to tax have effect for the purposes of section 1(1) of ICTA (the general charge to income tax).

(3) Exemptions from those charges are dealt with in Part 6 (exempt income) but any Part 6 exemptions which are most obviously relevant to particular types of income are also mentioned in the provisions about those types of income.

(4) What is or is not mentioned in those provisions does not limit the effect of Part 6.

(5) This Act also contains—

(a) provision about rent-a-room relief and foster-care relief (see Part 7),

(b) special rules for foreign income (see Part 8),

(c) special rules for partnerships (see Part 9), and

(d) certain calculation rules and general provisions (see Part 10).

(6) For abbreviations and defined expressions used in this Act, see section 885 and Schedule 4.

2 Overview of priority rules

(1) This Act contains some rules establishing an order of priority in respect of certain amounts which would otherwise—

(a) fall within a charge to income tax under two or more Chapters or Parts of this Act, or

(b) fall within a charge to income tax under a Chapter or Part of this Act and ITEPA 2003.

(2) See, in particular—

section 4 (provisions which must be given priority over Part 2),

section 261 (provisions which must be given priority over Part 3),

section 262 (priority between Chapters within Part 3),

section 366 (provisions which must be given priority over Part 4),

section 367 (priority between Chapters within Part 4),

section 575 (provisions which must be given priority over Part 5), and

section 576 (priority between Chapters within Part 5).

(3) But the rules in those sections need to be read with other rules of law (whether in this Act or otherwise) about the scope of particular provisions or the order of priority to be given to them.

(4) Section 171(2) of FA 1993 (profits of Lloyd’s underwriters charged only under Chapter 2 of Part 2 of this Act) is one example of another rule of law.

Part 2

Trading income

Chapter 1

Introduction

3 Overview of Part 2

(1) This Part imposes charges to income tax under—

(a) Chapter 2 (the profits of a trade, profession or vocation which meet the territorial conditions mentioned in section 6),

(b) Chapter 17 (amounts treated as adjustment income under section 228), and

(c) Chapter 18 (post-cessation receipts that are chargeable under this Part).

(2) Part 6 deals with exemptions from the charges under this Part.

(3) See, in particular, the exemptions under sections 777 (VAT repayment supplements) and 778 (incentives to use electronic communications).

(4) The charges under this Part apply to non-UK residents as well as UK residents but this is subject to sections 6(2) and (3) and 243(3) and (4) (charges on non-UK residents only on UK income).

(5) The rest of this Part contains rules relevant to the charges to tax under this Part.

(6) This section needs to be read with the relevant priority rules (see sections 2 and 4).

4 Provisions which must be given priority over Part 2

(1) Any receipt or other credit item, so far as it falls within—

(a) Chapter 2 of this Part (receipts of trade, profession or vocation), and

(b) Chapter 3 of Part 3 so far as it relates to a UK property business,

is dealt with under Part 3.

(2) Any receipt or other credit item, so far as it falls within—

(a) this Part, and

(b) Part 2, 9 or 10 of ITEPA 2003 (employment income, pension income or social security income),

is dealt with under the relevant Part of ITEPA 2003.

Chapter 2

Income taxed as trade profits

Charge to tax on trade profits

5 Charge to tax on trade profits

Income tax is charged on the profits of a trade, profession or vocation.

6 Territorial scope of charge to tax

(1) Profits of a trade arising to a UK resident are chargeable to tax under this Chapter wherever the trade is carried on.

(2) Profits of a trade arising to a non-UK resident are chargeable to tax under this Chapter only if they arise—

(a) from a trade carried on wholly in the United Kingdom, or

(b) in the case of a trade carried on partly in the United Kingdom and partly elsewhere, from the part of the trade carried on in the United Kingdom.

(3) This section applies to professions and vocations as it applies to trades.

7 Income charged

(1) Tax is charged under this Chapter on the full amount of the profits of the tax year.

(2) For this purpose the profits of a tax year are the profits of the basis period for the tax year.

(3) For the rules identifying the basis period for a tax year, see Chapter 15.

(4) This section is subject to Part 8 (foreign income: special rules).

(5) And, for the purposes of section 830 (meaning of “relevant foreign income”), the profits of a trade, profession or vocation arise from a source outside the United Kingdom only if the trade, profession or vocation is carried on wholly outside the United Kingdom.

8 Person liable

The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.

Trades and trade profits

9 Farming and market gardening

(1) Farming or market gardening in the United Kingdom is treated for income tax purposes as the carrying on of a trade or part of a trade (whether or not the land is managed on a commercial basis and with a view to the realisation of profits).

(2) All farming in the United Kingdom carried on by a person, other than farming carried on as part of another trade, is treated for income tax purposes as one trade.
(3) In the case of farming carried on by a firm, this rule is explained by section 859(1).

10 Commercial occupation of land other than woodlands

(1) The commercial occupation of land in the United Kingdom is treated for income tax purposes as the carrying on of a trade or part of a trade.

(2) For this purpose the occupation of land is commercial if the land is managed—

(a) on a commercial basis, and

(b) with a view to the realisation of profits.

(3) This section does not apply—

(a) to farming or market gardening (which is dealt with by section 9),

(b) if the land is being prepared for forestry purposes, or

(c) if the land comprises woodlands (which is dealt with by section 11)

11 Commercial occupation of woodlands

(1) The commercial occupation of woodlands in the United Kingdom is not a trade or part of a trade for any income tax purpose.

(2) For this purpose the occupation of woodlands is commercial if the woodlands are managed—

(a) on a commercial basis, and

(b) with a view to the realisation of profits.

(3) See also sections 267 and 768 (which, when read with this section, secure that profits or losses from the commercial occupation of woodlands in the United Kingdom are ignored for income tax purposes).

12 Profits of mines, quarries and other concerns

(1) Profits or losses arising out of land in the case of a concern to which this section applies are calculated as if the concern were a trade.

(2) Any profits arising out of the land are charged to income tax as if the concern were a trade carried on in the United Kingdom.

But this does not impose a charge to tax on a non-UK resident in the case of a concern outside the United Kingdom.

(3) Any losses arising out of the land are treated for the purposes of Chapter 1 of Part 10 of ICTA (loss relief) as losses of a trade carried on in the United Kingdom.

(4) The concerns to which this section applies are—

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

(b) ironworks, gasworks, salt springs or works, alum mines or works, waterworks and streams of water,

(c) canals, inland navigation, docks and drains or levels,

(d) rights of fishing,

(e) rights of markets and fairs, tolls, bridges and ferries,

(f) railways and other kinds of way, and

(g) a concern of the same kind as one specified in paragraph (b), (c), (d) or (e).

(5) This section does not apply to a concern if section 10 (commercial occupation of land other than woodlands) applies to the occupation of the land out of which the profits or losses arise.

13 Visiting performers

(1) This section applies if an entertainer, sportsman or sportswoman of a prescribed description (a “performer”)—

(a) is non-UK resident in a tax year, and

(b) performs a relevant activity in the United Kingdom in the tax year.

(2) If a payment or transfer connected with the relevant activity is made, the performer is treated for income tax purposes as performing the relevant activity in the course of a trade, profession or vocation carried on in the United Kingdom.

(3) It does not matter whether the payment or transfer is made to the performer or anyone else.

(4) Subsection (2) does not apply—

(a) so far as the performer would otherwise be performing the relevant activity in the course of a trade, profession or vocation carried on in the United Kingdom, or

(b) if the relevant activity is performed in the course of an employment or office.

(5) If a payment or transfer connected with the relevant activity is made to —

(a) a person other than the performer, and

(b) that person is of a prescribed description,

the payment or transfer is treated for income tax purposes as made instead to the performer in the course of a trade, profession or vocation carried on in the United Kingdom.

(6) Subsection (5) does not apply in such circumstances as may be prescribed.

(7) If—

(a) income tax is chargeable on profits arising from payments or transfers (made to any person), and

(b) the payments or transfers are connected with the relevant activity,

the tax is charged as if the payments or transfers were received in the course of a separate trade, profession or vocation (distinct from any other trade, profession or vocation carried on by the performer).

(8) In this section and section 14—

“payment” means a payment from which income tax is to be deducted under section 555(2) of ICTA,

“prescribed” means prescribed by regulations,

“regulations” means regulations made by the Treasury,

“relevant activity” means an activity of a prescribed description, and

“transfer” means a transfer in respect of which income tax is to be accounted for under section 555(3) of ICTA,

and a payment or transfer is connected with a relevant activity if it has a connection of the prescribed kind with that activity.

14 Visiting performers: supplementary

(1) Regulations may provide—

(a) for the deduction, in calculating any profits of the performer arising from the payment or transfer, of expenses incurred by other persons in relation to the payment or transfer,

(b) that any liability to income tax (whether of the performer or anyone else) which would, apart from section 13(5), arise in relation to the payment or transfer is not to arise (or is to arise so far as prescribed).

(2) Regulations may provide—

(a) for the apportionment of profits between different trades, professions or vocations of the performer,

(b) for the apportionment between different tax years of the profits arising from relevant activities of the performer,

(c) for losses made in any trade, profession or vocation of the performer to be deducted from or set off against the profits of another trade, profession or vocation of the performer,

(d) that prescribed provisions of the Income Tax Acts about losses, or about expenses, are not to apply (or are to apply with prescribed modifications) in prescribed circumstances relating to the performer.

(3) References in this section to a trade, profession or vocation of the performer include references to the separate one referred to in section 13(7) as well as to any other carried on by the performer.

(4) Regulations may—

(a) make provision generally for giving effect to section 13, and

(b) make different provision for different cases or descriptions of cases.

15 Divers and diving supervisors

(1) This section applies if—

(a) a person performs the duties of employment as a diver or diving supervisor in the United Kingdom or in any area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964 (c. 29),

(b) the duties consist wholly or mainly of seabed diving activities, and

(c) any employment income from the employment would otherwise be chargeable to tax under Part 2 of ITEPA 2003.

(2) The performance of the duties of employment is instead treated for income tax purposes as the carrying on of a trade in the United Kingdom.

(3) For the purposes of this section the following are seabed diving activities—

(a) taking part as a diver in diving operations concerned with the exploration or exploitation of the seabed, its subsoil and their natural resources, and

(b) acting as a diving supervisor in relation to any such diving operations.

 
See more for Income Tax (Trading and Other Income) Act 2005
 
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