Income and Corporation Taxes Act 1970 (repealed 6.4.1992)

• (a) interest received without deduction of income tax in respect of government securities (in this section referred to as " original securities") which have been exchanged for any other government securities (in this section referred to as " substituted securities "), and

• (b) interest taxed by deduction in respect of such substituted securities, and the amount of the interest so included exceeds the full amount of the interest for a complete year on the original securities,

then, if that individual so requires, the excess—

• (i) shall not be taken into account in ascertaining his total income for that year for the purposes of income tax, but

• (ii) shall nevertheless be chargeable to income tax for that year at such rate or rates, and subject to such reliefs, if any, as would be applicable if the excess constituted the highest part of an income equal, subject to section 529 of this Act, to the amount of his total income exclusive of the excess.

• (2) Where an application is made under section 101(2) of this Act with respect to any securities, subsection (1) above shall have effect as if, during the period in which the interest on those securities was paid without deduction of income tax, those securities were original securities within the meaning of the said subsection (1), and as if thereafter they were substituted securities within the meaning of that subsection.

Subscriptions by banks to war loans

105

Any bank carrying on a bona fide banking business in the United Kingdom shall be relieved, by repayment or otherwise, from tax under Schedule C in respect of the interest on any securities which the bank proves to represent subscriptions by the bank to any government loan issued for the purposes of the war which was being carried on at the time of the passing of the Income Tax Act 1918, and the bank shall include the amount of any such interest in the computation of its profits or gains for the purpose of assessment under Case I of Schedule D.

Miscellaneous and supplemental

Exemption for stock and dividends in name of Treasury etc.

106

• (1) No tax shall be chargeable in respect of the stock or dividends transferred to accounts in the books of the Bank of England in the name of the Treasury or the National Debt Commissioners in pursuance of any Act of Parliament, but the Bank of England shall transmit to the Board an account of the total amount thereof.

• (2) No tax shall be chargeable in respect of the stock or dividends belonging to the Crown, in whatever name they may stand in the books of the Bank of England.

• (3) Gains shall not be chargeable gains if accruing on the disposal of stock to which subsection (1) or (2) above applies.

Interpretation

107

In this Part of this Act—

• " dividends " means any interest, public annuities, dividends or shares of annuities,

• " public revenue ", except where the context otherwise requires, includes the public revenue of any government whatsoever, and the revenue of any public authority or institution in any country outside the United Kingdom,

• " public revenue dividends " means dividends payable out of any public revenue,

• " overseas public revenue dividends " means public revenue dividends payable elsewhere than in the United Kingdom (whether they are also payable in the United Kingdom or not) out of any public revenue other than the public revenue of the United Kingdom,

• " banker " includes a person acting as a banker, and

• " coupons ", and " coupons for any overseas public revenue dividends ", include warrants for or bills of exchange purporting to be drawn or made in payment of any overseas public revenue dividends.

PART VI — Schedule D

CHAPTER I — The Charge

The Schedule, and the seven Cases

Schedule D

108

The Schedule referred to as Schedule D is as follows:—

SCHEDULE D (1) Tax under this Schedule shall be charged in respect of— (a) the annual profits or gains arising or accruing— (i) to any person residing in the United Kingdom from any kind of property whatever, whether situated in the United Kingdom or elsewhere, and (ii) to any person residing in the United Kingdom from any trade, profession or vocation, whether carried on in the United Kingdom or elsewhere, and (iii) to any person, whether a British subject or not, although not resident in the United Kingdom, from any property whatever in the United Kingdom, or from any trade, profession or vocation exercised within the United Kingdom, and (b) all interest of money, annuities and other annual profits or gains not charged under Schedule A, B, C or E, and not specially exempted from tax. (2) There shall also be charged under this Schedule, to the extent provided in Chapter VIII of this Part of this Act, income tax (but not corporation tax) in respect of the gains accruing to any person resident and ordinarily resident in the United Kingdom from his acquisition and disposal of assets. (3) The provisions of paragraphs 1 and 2 above are without prejudice to any other provision of the Tax Acts directing tax to be charged under this Schedule, and the tax so directed to be charged shall be charged accordingly.

Tax to be charged under seven Cases

109

• (1) Tax under Schedule D shall be charged under the Cases set out in subsection (2) below, and subject to and in accordance with the provisions of the Tax Acts applicable to those Cases respectively.

• (2) The Cases are—

• Case I—tax in respect of any trade carried on in the United Kingdom or elsewhere ;

• Case II—tax in respect of any profession or vocation not contained in any other Schedule ;

• Case III—tax in respect of— any interest of money, whether yearly or otherwise, or any annuity or other annual payment, whether such payment is payable within or out of the United Kingdom, either as a charge on any property of the person paying the same by virtue of any deed or will or otherwise, or as a reservation out of it, or as a personal debt or obligation by virtue of any contract, or whether the same is received and payable half-yearly or at any shorter or more distant periods, but not including any payment chargeable under Schedule A, and all discounts, and income, except income charged under Schedule C, from securities bearing interest payable out of the public revenue;

• Case IV—tax in respect of income arising from securities out of the United Kingdom, except such income as is charged under Schedule C ;

• Case V—tax in respect of income arising from possessions out of the United Kingdom, not being income consisting of emoluments of any office or employment;

• Case VI—tax in respect of any annual profits or gains not falling under any other Case of Schedule D, and not charged by virtue of Schedule A, B, C or E; and

• Case VII—income tax chargeable by virtue of Chapter VIII of this Part of this Act in respect of gains accruing from the acquisition and disposal of assets.

• (3) The provisions of subsection (1) above are without prejudice to any other provision of the Tax Acts directing tax to be charged under one or other of the said Cases, and the tax so directed to be charged shall be charged accordingly.

Supplementary charging provisions

Farming, and other commercial occupation of land (except woodlands)

110

• (1) All 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 profits or gains thereof shall be charged to tax under Case I of Schedule D accordingly.

• (2) All the farming carried on by any particular person or partnership or body of persons shall be treated as one trade.

• (3) 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 profits or gains thereof shall be charged to tax under Case I of Schedule D accordingly:

Provided that nothing in this subsection shall affect the taxation of woodlands which are managed on a commercial basis and with a view to the realisation of profits.

Woodlands managed on a commercial basis

111

• (1) Any person occupying woodlands which are managed by him on a commercial basis and with a view to the realisation of profits may elect to be assessed and charged to tax in respect of those woodlands under Schedule D instead of under Schedule B.

• (2) The election of any such person shall be signified by notice in writing to the inspector not later than two years after the end of the chargeable period, and, from and after the receipt of the notice, the charge upon him for that period shall be under Schedule D, and the profits or gains arising to him from the occupation of the woodlands shall for all purposes be deemed to be profits or gains of a trade chargeable under that Schedule.

• (3) Any such election shall extend to all woodlands so managed on the same estate:

Provided that woodlands shall be treated for this purpose as being woodlands on a separate estate if the person occupying them gives notice to the inspector within ten years after the time when they are planted or replanted.

• (4) An election under this section shall have effect not only as respects the chargeable period, but also as respects all future chargeable periods so long as the woodlands are occupied by the person making the election.

Mines, quarries and other concerns

112

• (1) Profits or gains arising out of land in the case of any concern specified in subsection (2) below shall be charged to tax under Case I of Schedule D.

• (2) The said 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 navigations, docks, and drains or levels,

• (d) fishings,

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

• (f) railways and other ways, and

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

Foreign pensions

113

• (1) A pension which—

• (a) is paid by or on behalf of a person outside the United Kingdom, and

• (b) is not charged under paragraph 4 of Schedule E,

shall be charged to tax under Case V of Schedule D.

• (2) Where—

• (a) a person has ceased to hold any office or employment, and

• (b) a pension or annual payment is paid to him, or to his widow or child, or to any relative or dependant of his, by the person under whom he held the office or by whom he was employed, or by the successors of that person, and

• (c) that pension or annual payment is paid by or on behalf of a person outside the United Kingdom,

then, notwithstanding that the pension or payment is paid voluntarily, or is capable of being discontinued, it shall be deemed to be income for the purposes of assessment to tax, and shall be assessed and charged under Case V of Schedule D as income from a pension.

Persons chargeable

114

• (1) Subject to subsections (2) and (3) below, income tax under Schedule D shall be charged on and paid by the persons receiving or entitled to the income in respect of which the tax is directed by the Income Tax Acts to be charged.

• (2) Income tax to be charged under Schedule D in respect of any of the concerns mentioned in section 112 above shall be assessed and charged on the person carrying on the concern, or on the agents or other officers who have the direction or management of the concern or receive the profits thereof.

• (3) Where, in accordance with that section, income tax is charged under Schedule D 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) For the purposes of corporation tax, the provisions of Chapter I of Part XI of this Act have effect to the exclusion of subsections (1) to (3) above.

CHAPTER II — Cases I to VI: Income Tax: Basis of Assessment etc.

Cases I and II

Assessment on preceding year basis

115

• (1) Subject to the provisions of this section and sections 116 to 118 below, income tax shall be charged under Cases I and II of Schedule D on the full amount of the profits or gains of the year preceding the year of assessment.

• (2) Where, in the case of the trade, profession or vocation, an account has, or accounts have, been made up to a date or dates within the period of three years immediately preceding the year of assessment, then—

• (a) if an account was made up to a date within the year preceding the year of assessment, and that account was the only account made up to a date in that year, and was for a period of one year beginning either at the commencement of the trade, profession or vocation or at the end of the period on the profits or gains of which the assessment for the last preceding year of assessment was to be computed, the profits or gains of the year ending on that date shall be taken to be the profits or gains of the year preceding the year of assessment, and

• (b) in any other case, the Board shall decide what period of twelve months ending on a date within the year preceding the year of assessment shall be deemed to be the year the profits or gains of which are to be taken to be the profits or gains of the year preceding the year of assessment.

• (3) Where the Board have given a decision under subsection (2)(b) above and it appears to them that, in consequence thereof, income tax for the last preceding year of assessment in respect of the profits or gains from the same source should be computed on the profits or gains of a corresponding period, they may give a direction to that effect, and an assessment or, on a claim therefor, repayment of tax shall be made accordingly.

• (4) The decision whether or not to give a direction under subsection (3) above shall be subject to an appeal, which shall lie to the General Commissioners unless the appellant elects (in accordance with section 46(1) of the Taxes Management Act 1970) to bring it before the Special Commissioners, and the Commissioners hearing the appeal shall grant such relief, if any, as is just.

• (5) An appeal under subsection (4) above shall be brought within thirty days of receipt of notice of the decision, save that, if the decision is to give a direction and an assessment is made in accordance with the direction, the appeal against the decision shall be by way of an appeal against the assessment.

• (6) In the case of the death of a person who, if he had not died, would under the provisions of subsections (2) and (3) above have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.

Special basis at commencement of trade, profession or vocation

116

• (1) Where the trade, profession or vocation has been set up and commenced within the year of assessment, the computation of the profits or gains chargeable to income tax under Case I or Case II of Schedule D shall be made either on the full amount of the profits or gains arising in the year of assessment or according to the average of such period, not being greater than one year, as the case may require and as may be directed by the inspector.

On an appeal to the General or Special Commissioners, the Commissioners shall have jurisdiction to review the inspector's decision under this subsection.

• (2) Where the trade, profession or vocation has been set up and commenced within the year preceding the year of assessment, the computation of the profits or gains chargeable to income tax under Case I or Case II of Schedule D shall be made on the profits or gains for one year from the first setting up thereof.

Special basis for two years following commencement

117

• (1) In this section—

• " charged " means charged to income tax in respect of the profits or gains of a trade, profession or vocation, and

• " the second year of assessment " and " the third year of assessment " mean respectively the year next after, and the year next but one after, the year of assessment in which the trade, profession or vocation was set up and commenced.

• (2) The person charged, or liable to be charged, shall be entitled, on giving notice in writing to the inspector within seven years after the end of the second year of assessment, to require that tax shall be charged for both the second year of assessment and the third year of assessment (but not for one or other only of those years) on the amount of the profits or gains of each such year respectively:

Provided that he may by notice in writing given to the inspector within six years after the end of the third year of assessment revoke the notice, and, in that case, tax shall be charged for both the second year of assessment and the third year of assessment as if the first notice had never been given.

• (3) If, at any time during the second or third year of assessment, any such change as is hereinafter mentioned occurs in the persons engaged in the trade, profession or vocation, that is to say, if either—

• (a) a change occurs in a partnership of persons engaged therein, by reason of retirement or death, or the dissolution of the partnership as to one or more of the partners, or the admission of a new partner, in such circumstances that one or more of the persons who until that time were engaged in the trade, profession or vocation continue to be engaged therein, or

• (b) a person who until that time was engaged in the trade, profession or vocation on his own account continues to be engaged in it, but as a partner in a partnership,

a notice for the purposes of subsection (2) above (including the proviso thereto) must, if given after the occurrence of the change and after notice has been given as respects the change under section 154(2) of this Act (election for change not to be treated as a discontinuance)—

• (i) in the case of a notice given within twelve months after the end of the second year of assessment, be signed by each of the individuals who were engaged in the trade, profession or vocation at any time between the commencement of the second year of assessment and the giving of the notice, or, in the case of a deceased person, by his legal representatives, and

• (ii) in the case of a notice given after the end of the third year of assessment, be signed by each of the individuals who were engaged in the trade, profession or vocation at any time during the second or third year of assessment, or, in the case of a deceased person, by his legal representatives.

• (4) In the case of the death of a person who, if he had not died, would under the provisions of this section have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.

• (5) There shall be made such assessments, reductions of assessments or, on a claim in that behalf, repayments of tax as may in any case be required in order to give effect to the preceding provisions of this section.

Special basis on discontinuance

118

• (1) Where in any year of assessment a trade, profession or vocation is permanently discontinued, then, notwithstanding anything in sections 115 to 117 above—

• (a) the person charged or chargeable with income tax in respect thereof shall be charged for that year on the amount of the profits or gains of the period beginning on the 6th April in that year and ending on the date of the discontinuance, but subject to any deduction or setoff to which he may be entitled under section 171 of this Act (carry-forward) in respect of any loss, and

• (b) if the aggregate of the profits or gains (if any) of the years ending on the 5th April in each of the two years preceding the year of assessment in which the discontinuance occurs exceeds the aggregate of the amounts on which that person has been charged for each of the said two preceding years, or the aggregate of the amounts on which he would have been so charged if no such deduction or set-off as aforesaid had been allowed, he may be charged instead, for each of the said two preceding years, but subject to any such deduction or set-off, on the amount of the profits or gains of the year ending on the 5th April in that year.

• (2) Where a person has been charged with income tax otherwise than in accordance with paragraph (a) or (b) of subsection (1) above, any such assessment to tax, reduction or discharge of an assessment to tax, or, on a claim therefor, repayment of tax, shall be made as may be necessary to give effect to those paragraphs.

• (3) In the case of the death of a person who, if he had not died, would under the provisions of this section have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.

• (4) Subsection (1)(b) above shall not apply where a trade is permanently discontinued in consequence of the nationalisation of any property constituting the assets of the trade.

For the purposes of this subsection " nationalisation " means, in relation to any property, a transfer of the property for which provision is made by any Act passed after the beginning of August 1945 and embodying a scheme for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control, being a transfer, as part of the initial putting into force of the scheme, either to the Crown or to a body corporate constituted for the purposes of the scheme or of some previous scheme for such national ownership or control as aforesaid.

Case III

Assessment on preceding year basis

119

Subject to sections 120 and 121 below, income tax under Case III of Schedule D shall be computed on the full amount of the income arising within the year preceding the year of assessment, and shall be paid on the actual amount of the said income, without any deduction.

Special rules for fresh income

120

• (1) Income tax under Case III of Schedule D shall, in the following cases, be computed on the following amounts, and paid on those actual amounts without any deduction—

• (a) as respects the year of assessment in which the income first arises, on the full amount of the income arising within that year,

• (b) where the income first arose on some day in the year preceding the year of assessment other than the 6th April, on the amount of the income of the year of assessment, and

• (c) where the income first arose on the 6th April in the year preceding the year of assessment, or on some day in the year next before the year preceding the year of assessment other than the 6th April, and the person charged so requires by notice in writing given to the inspector at any time within six years after the end of the year of assessment, on the amount of the income of that year.

• (2) Where subsection (1)(c) above applies, and income tax charged otherwise than in accordance with that provision has been paid, any amount overpaid shall be repaid.

• (3) If at any time a person acquires a new source of any income in respect of which he is chargeable under Case III of Schedule D, or an addition to any source of any such income, then, for the year of assessment in which income first arises from the source or addition and the two following years of assessment, income tax in respect of the income from the source or addition shall, notwithstanding section 128 below (assessment of Case III income in one sum), be computed separately, and subsection (1) above shall apply to the computation thereof.

• (4) If at any time interest on a debt ceases to be payable subject to deduction of income tax, subsection (3) above shall apply as if the debt were a new source of income acquired by the creditor at that time.

Special rules where source of income ceases

121

• (1) Subject to the provisions of this section, if in any year of assessment a person charged or chargeable to income tax in respect of any income chargeable under Case III of Schedule D ceases to possess any particular source of any such income, or any part of any such source, the following provisions shall apply to the tax in respect of the income from that source or part—

• (a) notwithstanding section 128 below (assessment of Case III income in one sum), the tax shall for that year, and (if necessary) for the preceding year, be computed separately,

• (b) subject to paragraph (c) below, the tax shall for that year be computed on the amount of the income arising within the year (instead of the income arising within the preceding year), and shall for that preceding year also be computed on the amount of the income arising within it if greater than the amount on which tax is to be computed for that preceding year apart from this provision, and

• (c) if no income arose within those two years, and the person charged or chargeable makes a claim under this section not later than two years after the end of them, then, subject to subsection (3) below—

• (i) paragraphs (a) and (b) above shall apply to the year of assessment in which income did last arise and the year preceding it as, apart from this paragraph, they would apply to the year in which he ceases to possess the source or part and the year preceding it, and

• (ii) tax shall not for the year of assessment following that in which income did last arise be chargeable on the amount of the income so arising.

• (2) If at any time interest on a debt begins to be payable subject to deduction of income tax, subsection (1) above shall apply as if the debt were a source of income which the creditor ceased to possess at that time.

• (3) A person shall not be entitled by virtue of subsection (1)(c) above to make a claim under this section in respect of any source of income, or any part of such a source, more than eight years after the end of the year of assessment in which income last arose from that source; but a person possessing a source of income chargeable to income tax under Case III of Schedule D, and having possessed it for six consecutive years of assessment without any income arising from it, shall be entitled, if income did arise from it in the year preceding those six years, to make a claim under this section not later than two years after the end of those six years, and, if he does so—

• (a) subsection (1) above shall apply as if he had ceased to possess the source of income immediately before the end of those six years, and

• (b) section 120(3) above shall apply (in relation to later years of assessment) as if he had acquired the source as a new source immediately after the end of those six years.

• (4) There shall be made all such adjustments, whether by way of repayment of tax, assessment or otherwise, as may be necessary to give effect to this section.

• (5) A person's executors or administrators may make any claim under this section which he might have made, if he had not died, in respect of any source of income, or part of such a source, which he ceased to possess before his death, and may also make a claim under this section in respect of sources of income which he ceased to possess by dying ; and after a person's death—

• (a) any tax paid by him and repayable by virtue of a claim under this section (whether made by him or by his executors or administrators) shall be repaid to his executors or administrators, and

• (b) any additional tax chargeable by virtue of such a claim shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.

Cases IV and V

Assessment on preceding year basis, but, in certain cases, only on sums received in United Kingdom

122

• (1) Subject to the provisions of this section and sections 123 and 124 below, income tax chargeable under Case IV or Case V of Schedule D shall be computed on the full amount of the income arising in the year preceding the year of assessment, whether the income has been or will be received in the United Kingdom or not, subject in the case of income not received in the United Kingdom—

• (a) to the same deductions and allowances as if it had been so received, and

• (b) to a deduction on account of any annuity or other annual payment (not being interest) payable out of the income to a person not resident in the United Kingdom, and

• (c) to a deduction on account of any annual interest payable out of the income to a person not resident in the United Kingdom, being interest paid before 6th April 1975 on a debt incurred on or before 15th April 1969.

• (2) Subsection (1) above shall not apply—

• (a) to any person who satisfies the Board that he is not domiciled in the United Kingdom, or that, being a British subject or a citizen of the Republic of Ireland, he is not ordinarily resident in the United Kingdom, or

• (b) to any income which is immediately derived by a person from the carrying on by him of any trade, profession or vocation, either solely or in partnership, or

• (c) to any income which arises from any pension.

Any claim under paragraph (a) above shall be made to the Board.

• (3) In the cases mentioned in subsection (2) above, the tax shall, subject to sections 123 and 124 below, be computed—

• (a) in the case of tax chargeable under Case IV, on the full amount, so far as the same can be computed, of the sums received in the United Kingdom in the year preceding the year of assessment, without any deduction or abatement, and

• (b) in the case of tax chargeable under Case V, on the full amount of the actual sums received in the United Kingdom in the year preceding the year of assessment from remittances payable in the United Kingdom, or from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of any such remittances, property, money or value brought or to be brought into the United Kingdom, without any deduction or abatement other than is allowed under the provisions of the Income Tax Acts in respect of profits or gains charged under Case I of Schedule D.

• (4) For the purposes of subsection (3) above, any income arising from securities or possessions out of the United Kingdom which is applied outside the United Kingdom by a person ordinarily resident in the United Kingdom in or towards satisfaction of—

• (a) any debt for money lent to him in the United Kingdom, or for interest on money so lent, or

• (b) any debt for money lent to him outside the United Kingdom and received in or brought to the United Kingdom, or

• (c) any debt incurred for satisfying in whole or in part a debt falling within paragraph (a) or (b) above,

shall be treated as received by him in the United Kingdom (and, for the purposes of paragraph (b) of the said subsection (3), as so received from remittances payable in the United Kingdom).

• (5) Where a person ordinarily resident in the United Kingdom receives in or brings to the United Kingdom money lent to him outside the United Kingdom, but the debt for that money is wholly or partly satisfied before he does so, subsection (4) above shall apply as if the money had been received in or brought to the United Kingdom before the debt was so satisfied, except that any sums treated by virtue of that subsection as received in the United Kingdom shall be treated as so received at the time when the money so lent is actually received in or brought to the United Kingdom.

• (6) Where a person is indebted for money lent to him, income applied by him in such a way that the money or property representing it is held by the lender on behalf of or to the account of the said person in such circumstances as to be available to the lender for the purpose of satisfying or reducing the debt by set-off or otherwise shall be treated as applied by the said person in or towards its satisfaction if, under any arrangement between the said person and the lender, the amount for the time being of the said person's indebtedness to the lender, or the time at which it is to be repaid in whole or in part, depends in any respect directly or indirectly on the amount or value held by the lender as aforesaid.

• (7) For the purposes of subsections (4) to (6) above—

• (a) a debt for money lent shall, to the extent to which that money is applied in or towards satisfying another debt, be deemed to be a debt incurred for satisfying that other debt, and a debt incurred for satisfying in whole or in part a debt falling within paragraph (c) of the said subsection (4) shall itself be treated as falling within that paragraph, and

• (b) " lender " includes, in relation to any money lent, any person for the time being entitled to repayment.

Special rules for fresh income

123

• (1) Subject to subsection (5) below, income tax under Case IV or Case V of Schedule D shall be computed—

• (a) as respects the year of assessment in which the income first arises, on the full amount of the income arising within that year,

• (b) where the income first arose on some day in the year preceding the year of assessment other than the 6th April, on the income of the year of assessment, and

• (c) where the income first arose on the 6th April in the year preceding the year of assessment, or on some day in the year next before the year preceding the year of assessment other than the 6th April, and the person charged so requires by notice in writing given to the inspector within six years after the end of the year of assessment, on the amount of the income of that year.

• (2) Where subsection (1)(c) above applies, and income tax charged otherwise than in accordance with that provision has been paid, any amount overpaid shall be repaid.

• (3) If at any time any person acquires a new source of any income chargeable to income tax under Case IV or Case V of Schedule D, or an addition to any source of any such income, then, for the year of assessment in which income first arises from the source or addition and the two following years of assessment, income tax in respect of the income from the source or addition shall, notwithstanding section 128 below (assessment of Case IV or V income in one sum), be computed separately, and subsection (1) above shall apply.

• (4) Where income arising to any person from any security or possession in any place out of the United Kingdom ceases at any time to be chargeable to income tax by deduction under the provisions of section 159 below (foreign dividends etc.), subsection (3) above shall apply as if that security or possession were a new source of income acquired by that person at that time.

• (5) The preceding provisions of this section shall, in cases where tax is to be charged by reference to the amount of income received in the United Kingdom, have effect as if references to income which arises or arose were references to income which is or was so received.

Special rules where source of income ceases

124

• (1) Subject to the provisions of this section, if in any year of assessment a person charged or chargeable to income tax in respect of any income chargeable under Case IV or Case V of Schedule D ceases to possess any particular source of any such income, or any part of any such source, the following provisions shall apply to the tax in respect of the income from that source or part—

• (a) notwithstanding section 128 below (assessment of Case IV or V income in one sum), the tax shall for that year, and (if necessary) for the preceding year, be computed separately,

• (b) subject to paragraph (c) below, the tax shall for that year be computed on the amount of the income arising within the year (instead of the income arising within the preceding year), and shall for that preceding year also be computed on the amount of the income arising within it if greater than the amount on which tax is to be computed for that preceding year apart from this provision, and

• (c) if no income arose within those two years, and the person charged or chargeable makes a claim under this section not later than two years after the end of them, then, subject to subsection (3) below—

• (i) paragraphs (a) and (b) above shall apply to the year of assessment in which income did last arise and the year preceding it as, apart from this paragraph, they would apply to the year in which he ceases to possess the source or part and the year preceding it, and

• (ii) tax shall not for the year of assessment following that in which income did last arise be chargeable on the amount of the income so arising.

• (2) Where income in respect of which a person has previously been charged or chargeable to income tax under Case IV or V of Schedule D becomes at any time chargeable to income tax by deduction under the provisions of section 159 below (foreign dividends etc.), subsection (1) above shall apply as if the security or possession in question were a source of income which he ceased to possess at that time.

• (3) A person shall not be entitled by virtue of subsection (1)(c) above to make a claim under this section in respect of any source of income, or any part of such a source, more than eight years after the end of the year of assessment in which income last arose from that source; but a person possessing a source of income chargeable to income tax under Case IV or Case V of Schedule D, and having possessed it for six consecutive years of assessment without any income arising from it, shall be entitled, if income did arise from it in the year preceding those six years, to make a claim under this section not later than two years after the end of those six years, and, if he does so—

• (a) subsection (1) above shall apply as if he had ceased to possess the source of income immediately before the end of those six years, and

• (b) section 123(3) above shall apply (in relation to later years of assessment) as if he had acquired the source as a new source immediately after the end of those six years.

• (4) References in this section to income arising shall, in cases where tax is to be computed by reference to the amount of income received in the United Kingdom, be construed as references to income being so received.

• (5) There shall be made all such adjustments, whether by way of repayment of tax, assessment or otherwise, as may be necessary to give effect to this section.

• (6) A person's executors or administrators may make any claim under this section which he might have made, if he had not died, in respect of any source of income, or part of such a source, which he ceased to possess before his death, and may also make a claim under this section in respect of sources of income which he ceased to possess by dying; and after a person's death—

• (a) any tax paid by him and repayable by virtue of a claim under this section (whether made by him or by his executors or administrators) shall be repaid to his executors or administrators, and

• (b) any additional tax chargeable by virtue of such a claim shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.

Case VI

Assessment on current year basis unless otherwise directed

125

• (1) Income tax under Case VI of Schedule D shall be computed either on the full amount of the profits or gains arising in the year of assessment or according to an average of such period, not being greater than one year, as the case may require and as may be directed by the inspector.

• (2) On an appeal to the General or Special Commissioners, the Commissioners shall have jurisdiction to review the inspector's decision under this section.

Miscellaneous

Tax computed on profits of previous period to be charged though no profits in year of assessment

126

Where it is provided by the Income Tax Acts that income tax under Schedule D in respect of profits or gains or income from any source is to be computed by reference to the amount of the profits or gains or income of some period preceding the year of assessment, tax as so computed shall be charged for that year of assessment notwithstanding that no profits or gains or income arise from that source for or within that year.

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

127

• (1) Where, in the case of any profits or gains chargeable under Case I, Case II or Case VI of Schedule D, it is necessary, in order to arrive for the purposes of income tax at the profits or gains or losses of any year of assessment 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 or gains or losses or any apportioned parts thereof, it shall be lawful to make such a division and apportionment or aggregation.

• (2) Any apportionment under this section shall be made in proportion to the number of months, or fractions of months, in the respective periods.

Single assessments for purposes of Cases III, IV and V

128

Except as otherwise provided by the Income Tax Acts, all income in respect of which a person is chargeable to income tax under Case III, Case IV or Case V of Schedule D may respectively be assessed and charged in one sum.

CHAPTER III — Cases I to VI: Corporation Tax : Basis of Assessment etc.

Basis of assessment, apportionments, single assessments, and miscellaneous special provisions

129

• (1) In accordance with Part XI of this Act (company taxation), 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) Where, in the case of any profits or gains chargeable under Case I, Case II or Case VI of Schedule D, it is necessary, in order to arrive for the purposes of corporation tax at the profits or gains or losses for any 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 or gains or losses or any apportioned parts thereof, it shall be lawful to make such a division and apportionment or aggregation.

• (3) Except as otherwise provided by the Corporation Tax Acts, all income in respect of which a company is chargeable to corporation tax under Case III, Case IV or Case V of Schedule D may respectively be assessed and charged in one sum.

• (4) Where 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.

• (5) Cases IV 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).

CHAPTER IV — Trades, Professions and Vocations: Computational Provisions

General provisions

General rules as to deductions not allowable

130

Subject to the provisions of the Tax Acts, in computing the amount of the profits or gains to be charged 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, profession or vocation,

• (b) any disbursements or expenses of maintenance of the parties, their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of the trade, profession or vocation,

• (c) the rent of any dwelling-house or domestic offices or any part thereof, except such part thereof as is used for the purposes of the trade or 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 the said dwelling-house or 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, profession or vocation, beyond the sum actually expended for those purposes,

• (e) any loss not connected with or arising out of the trade, profession or vocation,

• (f) any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade, profession or vocation, 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, profession or vocation,

• (h) any interest which might have been made if any such sums as aforesaid had been laid out at interest,

• (i) any debts, except bad debts proved to be such, and doubtful debts to the extent that they are respectively estimated to be bad, and in the case of the bankruptcy or insolvency of a debtor the amount which may reasonably be expected to be received on any such debt shall be deemed to be the value thereof,

• (j) any average loss beyond the actual amount of loss after adjustment,

• (k) any sum recoverable under an insurance or contract of indemnity,

• (l) any annuity or other annual payment (other than interest) payable out of the profits or gains,

• (m) any interest paid to a person not resident in the United Kingdom if and so far as it is interest at more than a reasonable commercial rate,

• (n) any royalty or other sum paid in respect of the user of a patent, or

• (o) any rent, royalty or other payment which, by section 156 or 157 of this Act (mining etc. rents and royalties), is declared to be subject to deduction of tax under Part II of this Act as if it were a royalty or other sum paid in respect of the user of a patent.

Income tax: deduction of interest paid to non-residents

131

• (1) In computing the profits or gains arising from a trade, profession or vocation, no sum shall be deducted in respect of any annual interest paid to a person not resident in the United Kingdom unless—

• (a) the person making the payment has deducted income tax from the payment in accordance with section 54 of this Act, and accounts for the tax so deducted, or

• (b) the conditions set out in subsection (2) below are satisfied.

• (2) The conditions referred to in subsection (1)(b) above are as follows—

• (a) that the trade, profession or vocation is carried on by a person residing in the United Kingdom, and

• (b) that the liability to pay the interest was incurred exclusively for the purposes of the trade, profession or vocation, and

• (c) that either—

• (i) the liability to pay the interest was incurred wholly or mainly for the purposes of activities of the trade, profession or vocation carried on outside the United Kingdom, or

• (ii) the interest is payable in the currency of a territory outside the scheduled territories, and

• (d) that, under the terms of the contract under which the interest is payable, the interest is to be paid, or may be required to be paid, outside the United Kingdom, and

• (e) that the interest is in fact paid outside the United Kingdom.

• (3) Where the trade, profession or vocation is carried on by a partnership, subsection (1)(b) above shall not apply to any interest which is payable to any of the partners, or is payable in respect of the share of any partner in the partnership capital.

• (4) Subsection (1)(b) above shall not apply where—

• (a) the trade, profession or vocation is carried on by a body of persons over whom the person entitled to the interest has control, or

• (b) the person entitled to the interest is a body of persons over whom the person carrying on the trade, profession or vocation has control, or

• (c) the person carrying on the trade, profession or vocation, and the person entitled to the interest are both bodies of persons, and some other person has control over both of them.

In this subsection, the references to a body of persons include references to a partnership, and " control" has the meaning given by section 534 of this Act.

• (5) If interest paid under deduction of tax in accordance with section 54 of this Act is deductible in computing the profits or gains of a trade, profession or vocation, the amount so deductible shall be the gross amount.

• (6) In subsection (2)(c)(ii) above " the scheduled territories " means the territories specified in Schedule 1 to the Exchange Control Act 1947 as for the time being in force.

• (7) This section does not apply for the purposes of corporation tax.

Deduction of patent etc. fees and expenses

132

Notwithstanding anything in section 130 above, in computing the profits or gains of a trade, 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, the extension of the period of copyright in a design, 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.

Deduction of payments for technical education

133

• (1) Notwithstanding anything in section 130 above, where a person carrying on a trade makes any payment to be used for the purposes of technical education related to that trade at any university or university college, or at any such technical college or other similar institution as may for the time being be approved for the purposes of this section by the Secretary of State for Education and Science, the payment may be deducted as an expense in computing the profits or gains of the trade for the purposes of tax.

• (2) For the purposes of this section, technical education shall be deemed to be related to a trade if, and only if, it is technical education of a kind specially requisite for persons employed in the class of trade to which that trade belongs.

• (3) In relation to technical colleges or other institutions in Scotland or Northern Ireland, this section shall have effect as if, for the reference to the Secretary of State for Education and Science, there were substituted a reference, in the case of Scotland, to the Secretary of State and, in the case of Northern Ireland, to the Ministry of Education for Northern Ireland.

Deductions where premiums etc. taxable

134

• (1) Where, in relation to any land used in connection with a trade, profession or vocation—

• (a) tax has become chargeable under section 80 (except subsection (6)), 81 or 82 of this Act on any amount (disregarding any reduction in that amount under section 83(1) of this Act), or

• (b) tax would have become so chargeable on that amount but for the operation of the said section 80(6) or the said section 83(1), or but for any exemption from tax,

subsections (2) to (7) below shall have effect, in the cases there provided, for allowing deductions calculated by reference to that amount (hereinafter referred to as " the amount chargeable ") in computing the profits or gains of the trade, profession or vocation chargeable to tax under Case I or Case II of Schedule D ; and in those subsections " the relevant period " means—

• (i) where the amount chargeable arose under the said section 80, the period treated in computing that amount as being the duration of the lease,

• (ii) where that amount arose under the said section 81, the period treated in computing the amount as being the duration of the lease remaining at the date of the assignment, and

• (iii) where that amount arose under the said section 82, the period beginning with the sale and ending on the date fixed under the terms of the sale as the date of the reconveyance or grant, or, if that date is not fixed, ending with the earliest date at which the reconveyance or grant could take place in accordance with the terms of the sale.

• (2) Subject to subsections (3) to (7) below, where during any part of the relevant period the land in relation to which the amount chargeable arose is occupied by the person for the time being entitled to the lease, estate or interest as respects which it arose for the purposes of a trade, profession or vocation carried on by him, he shall be treated, in computing the profits or gains of the trade, profession or vocation chargeable as aforesaid, 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) Where a person, although not in occupation of the said land or a part thereof, deals with his interest in the land or that part as property employed for the purposes of a trade, profession or vocation carried on by him, subsections (2) and (3) above shall apply as if the land or part were occupied by him for those purposes:

Provided that—

• (a) where section 83(1) of this Act has effect in relation to a lease granted out of that interest, subsection (3) of that section shall apply for modifying the operation of subsections (2) and (3) above as it applies for modifying the operation of subsection (2) of that section, and

• (b) in computing profits or gains for any chargeable period, rent shall not by virtue of this subsection be treated as paid by a person for any period in respect of land in so far as rent treated under section 83(2) of this Act as paid by him for that period in respect of the land has in any previous chargeable period been deducted, or falls in that chargeable period to be deducted, under Part III of this Act.

• (5) Where, in respect of expenditure on the acquisition of his interest in the land in relation to which the amount chargeable arose, a person has become entitled to an allowance under section 60 of the Capital Allowances Act 1968 (mineral depletion) for any chargeable period, then—

• (a) if the allowance is in respect of the whole of the expenditure, no deduction shall be allowed him under this section for that or any subsequent chargeable period, or

• (b) if the allowance is in respect of part only of the expenditure, a deduction allowed him under this section for that or any subsequent chargeable period shall be the fraction $A−BA$ 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 said part of the expenditure.

• (6) Where the amount chargeable arose under section 80(2) of this Act 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.

• (7) Where the amount chargeable arose under section 82 of this Act and the reconveyance or grant in question takes place at a price different from that taken in calculating that amount, or on a date different from that taken in determining the relevant period, the preceding provisions of this section shall be deemed to have had effect (for all relevant chargeable periods) as they would have had effect if the actual price or date had been so taken, and such adjustment of liability to tax shall be made, 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 tax for the chargeable period in which the reconveyance or grant takes place.

Deduction for debts proving irrecoverable after event treated as discontinuance

135

Where section 154 or 251(1) of this Act applies to treat a trade, profession or vocation as discontinued by reason of any event, then, in computing for tax purposes the profits or gains of the trade, profession or vocation in any period after the event there may be deducted a sum equal to any amount proved during that period to be irrecoverable in respect of any debts credited in computing for tax purposes the profits or gains for any period before the event (being debts the benefit of which was assigned to the persons carrying on the trade, profession or vocation after the event), in so far as the total amount proved to be irrecoverable in respect of those debts exceeds any deduction allowed in respect of them under section 130(f) above in a computation for any period before the event.

Debts set off against profits and subsequently released

136

Where, in computing for tax purposes the profits or gains of a trade, profession or vocation, a deduction has been allowed for any debt incurred for the purposes of the trade, profession or vocation, then, if the whole or any part of the debt is thereafter released, the amount released shall be treated as a receipt of the trade, profession or vocation arising in the period in which the release is effected.

Valuation of trading stock on discontinuance of trade

137

• (1) In computing for any tax purpose the profits or gains of a trade which has been discontinued, any trading stock belonging to the trade at the discontinuance shall be valued as follows—

• (a) if 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 the cost thereof may be deducted by the purchaser as an expense in computing for any such purpose the profits or gains of that trade, the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer, 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.

• (2) Any question arising under subsection (1)(a) above shall be determined as follows, for the purpose of computing as aforesaid the profits or gains of both the trades concerned—

• (a) in a case where the same body of General Commissioners have jurisdiction with respect to both the trades 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.

• (3) Where, by virtue of section 154 or 251(1) of this Act, a trade is treated as having been discontinued for the purpose of computing tax, it shall also be so treated for the purposes of this section ; but this section shall not apply in a case where a trade carried on by a single individual is discontinued by reason of his death.

• (4) For the purposes of this section, " trading stock ", in relation to any trade, means property of any description, whether real or personal, being either—

• (a) 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

• (b) materials such as are used in the manufacture, preparation or construction of any such property as is referred to in paragraph (a) above.

For the purposes of this section " trading stock ", in relation to a trade, includes also any services, article or material which would, if the trade were a profession or vocation, be treated as work in progress thereof for the purposes of section 138 below, and references to the sale or transfer of trading stock shall be construed accordingly.

Valuation of work in progress at discontinuance of profession or vocation

138

• (1) Where, in computing for any tax purpose the profits or gains of a profession or vocation which has been discontinued a valuation is taken of the work of the profession or vocation in progress at the discontinuance, that work shall be valued as follows—

• (a) if the work is transferred for money or any other valuable consideration to a person who carries on, or intends to carry on, a profession or vocation in the United Kingdom, and the cost of the work may be deducted by that person as an expense in computing for any such, purpose the profits or gains of that profession or vocation, 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 thereof on the date of the discontinuance as between parties at arm's length.

• (2) Section 137(2) above shall apply to the determination of any question arising under subsection (1)(a) of this section as it applies to the determination of any question arising under subsection (1)(a) of that section, but with the substitution of references to professions and vocations for references to trades.

• (3) Where a profession or vocation is discontinued, and the person by whom it was carried on immediately before the discontinuance so elects by notice in writing sent to the inspector at any time within twelve months after the discontinuance, 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 profits or gains of the period immediately before the discontinuance, but 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 143 below as if it were a sum to which that section applies received after the discontinuance.

• (4) Subsections (1) to (3) above shall apply where a profession or vocation is treated under section 154 or 251(1) of this Act as permanently discontinued as they apply in the case of an actual discontinuance, but shall not apply in a case where a profession or vocation carried on by a single individual is discontinued by reason of his death.

• (5) References in this section to work in progress at the discontinuance of a profession or vocation shall be construed as references to—

• (a) any services performed in the ordinary course of the profession or vocation, 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 or vocation 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 be reasonably expected to accrue, from the carrying out of the work.

Special provisions

Treatment of farm animals etc.

139

Schedule 6 to this Act shall have effect with respect to the treatment, in computing profits or gains for the purposes of Case I of Schedule D, of animals and other living creatures kept for the purposes of farming or of any other trade.

Tied premises

140

• (1) In computing for tax purposes the profits or gains or losses of a trade carried on by a lessor of tied premises—

• (a) there shall be taken into account as a trading receipt any rent payable for the premises to him, and there shall be allowed as deduction any rent paid for the premises by him, but

• (b) no deduction shall be allowed in respect of the premises either by reference to his being entitled to a rent for the premises which is less than the rent which might have been obtained (or less than their annual value or the rent payable by him for them) or in respect of the annual value of the premises.

• (2) For the purposes of this section, premises shall be deemed to be tied premises in relation to any lessor thereof, and in relation to any trade carried on by him, if, but only if, in the course of that trade, he is concerned (whether as principal or agent) in the supply of goods sold or used on the premises, and accordingly deals with the premises or his interest therein as property employed for the purposes of that trade; and in this section " the relevant trade ", in relation to any tied premises and to any lessor thereof, means any trade carried on by him in relation to which they are tied premises.

• (3) Where part only of premises in respect of which rent Is paid by or payable to a lessor of the premises are tied premises in relation to him, the rent paid or payable for the tied premises shall for the purposes of this section be taken to be that part of the entire rent which, on a fair and just apportionment, is attributable to them.

• (4) Subject to subsection (5) below, a lessor of tied premises who is chargeable to tax for any chargeable period in respect of the profits or gains of the relevant trade shall not be liable for that period (or for the part of it during which he carries on the said trade) to any tax in respect of the premises under Schedule A.

• (5) Where, for any chargeable period or part of a chargeable period, a lessor of tied premises becomes entitled to any rent under a lease comprising the tied premises and other premises, but is by virtue of subsection (4) above relieved of liability to tax in respect of the tied premises under Schedule A, his liability in respect of the rent shall be computed in the first instance as it would be apart from this section, but his total liability (so computed) in respect thereof shall be reduced by the part which, on a fair and just apportionment, is attributable to the tied premises for the chargeable period or part thereof for which he is so relieved of liability in respect of them.

• (6) If the lessor of tied premises outside the United Kingdom is chargeable to tax for any chargeable period in respect of the profits or gains of the relevant trade, he shall not be liable for that period (or for the part of it during which he carries on the said trade) to tax under Case V of Schedule D in respect of any rent for the premises.

• (7) Where the person carrying on a trade is, in the case of any premises, entitled in equity to the interest of any lessor of those premises, then, in relation to that person, subsections (1) to (3) above shall apply as if he were the lessor of the premises, and as if any rent payable to or paid by the lessor were payable to or paid by him ; and, in relation to the lessor of the premises, subsections (4) and (5) above (or, in the case of premises outside the United Kingdom, subsection (6) above) shall apply as they would apply to the person carrying on the trade if the lessor's interest in the premises and in any other relevant land were vested in him.

• (8) In this section " lease " includes an agreement for a lease if the term to be covered by the lease has begun, and any tenancy, but does not include a mortgage or heritable security, and " lessor " shall be construed accordingly, and includes the successors in title of a lessor.

Cemeteries etc.: deduction of certain capital expenditure

141

• (1) In computing the profits or gains 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 the person 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 capital expenditure defined in subsection (2) below.

• (2) The said expenditure is capital expenditure incurred for the purposes of the trade in question by the person 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:

Provided that it 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, and only includes that fraction of other expenditure incurred before that time which is equal to the number of grave-spaces which at that time were or could have been made available in the cemetery for sale divided by that number plus the number already sold.