Income Tax (Trading and Other Income) Act 2005

Tenants occupying land for purposes of trade treated as incurring expenses

Costs of setting up SAYE option scheme or CSOP scheme

Professions and vocations

Definitions of types of vehicle

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

Purchase or sale of woodlands

Purchase or sale of woodlands

Reimbursement by defaulter in respect of certain abandonment expenditure

The additional calculation rule: special cases

Change of accounting date in third tax year

Professions and vocations

Priority between Chapters within Part 3

Liability of personal representatives if person liable dies

Provisions which must be given priority over Part 3

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

Under-used holiday accommodation: averaging elections

Reduction for accumulated or discretionary trust income: entitlement

Capital allowances and loss relief: overseas property business

The additional calculation rule: special cases

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

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

Meaning of “relevant period” in sections 325 and 326

Relevant UK earnings for pension purposes: overseas property business

Under-used holiday accommodation: averaging elections

Relevant UK earnings for pension purposes: UK property business

Under-used holiday accommodation: averaging elections

Application to businesses within the charge to corporation tax

Valuation of interest not paid in cash

Under-used holiday accommodation: letting condition not met

Priority between Chapters within Part 4

Conversion etc of bonus share capital

Loans and advances to persons who die

Application to businesses within the charge to corporation tax

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

Contents of Chapter

Payroll deduction schemes: contributions to agents' expenses

Use of home for business purposes

Meaning of “designated educational establishment”

Deduction for capital expenditure

Reimbursement by defaulter in respect of certain abandonment expenditure

Restricting deductions for finance costs related to residential property

Reduction for accumulated or discretionary trust income: calculation

Priority between Chapters within Part 4

FSCS payments representing interest

Power to obtain information

Temporary non-residents

Rights to acquire future patent rights

Income charged

Temporary non-residents

Interpretation of sections 392 to 395

Interpretation of sections 392 to 395

Income charged

Income charged

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

Market value acquisitions

Application of this Chapter to strips of government securities

Income charged

Market value acquisitions

Restriction of losses on strips by reference to original acquisition cost

Application of sections 454 to 456

Market value disposals

Strips of government securities: relief for losses

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

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

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

Non-UK resident trustees

Application of sections 454 to 456

Restricted relief qualifying policies: personal representatives and trustees with deceased settlors

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

Professions and vocations

Receipts relating to post-cessation expenditure

Excluded occasions of redemption

Securities which are not deeply discounted securities

Market value disposals

Temporary non-residents

Conversion etc of bonus share capital

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

Application of this Chapter to strips of government securities

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

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

Non-UK resident trustees

Person liable: personal representatives

Receipts and expenses

Integral features

55A

• (1) Section 33A(3) of CAA 2001 provides that no deduction is allowed in respect of certain expenditure on an integral feature of a building or structure (within the meaning of that section).

• (2) But section 33A(3) of CAA 2001 does not apply in calculating the profits of a trade on the cash basis.

Lessors under long funding finance or operating leases: avoidance etc

148FA

• (1) Sections 148A to 148F do not apply in the case of a person carrying on a trade who is or has been the lessor of any plant or machinery under a long funding lease if the following condition is met.

• (2) The condition is that any part of the expenditure incurred by the person on the acquisition of the plant or machinery for leasing under the lease—

• (a) is (apart from those sections) allowable as a deduction in calculating the profits or losses of the trade, and

• (b) is so allowable as a result of the plant or machinery forming part of the trading stock of the trade.

• (3) For the purposes of this section the cases in which expenditure incurred by a person carrying on a trade on the acquisition of any plant or machinery for leasing under a lease is allowable as such a deduction include any case where—

• (a) the person becomes entitled to the deduction at any time after the expenditure is incurred, and

• (b) the deduction arises as a result of the plant or machinery forming part of the trading stock of the trade at that time.

• (4) If—

• (a) at any time any of sections 148A to 148F has applied for determining the amounts to be taken into account in calculating the profits or losses of the trade, and

• (b) the condition in subsection (2) is met at any subsequent time,

those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.

• (5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (4).

148FB

• (1) This section applies if—

• (a) a person is the lessee of any plant or machinery under a lease (“lease A”) that is not a long funding lease,

• (b) the person enters into a lease (“lease B”) of any of that plant or machinery (as lessor), and

• (c) lease B is a long funding lease.

• (2) Sections 148A to 148F do not apply in relation to lease B.

• (3) If by virtue of section 70H of CAA 2001 (tax return by lessee treating lease as long funding lease) lease A becomes a long funding lease (and does not cease to be such a lease), treat this section as never having applied in relation to lease B.

148FC

• (1) Sections 148A to 148F do not apply in the case of a person carrying on a trade who is or has been the lessor of any plant or machinery under a long funding lease if conditions A to C are met.

• (2) Condition A is that the long funding lease forms part of any arrangement entered into by the person which includes one or more other transactions (whether the arrangement is entered into before or after or at the inception of the lease).

• (3) Condition B is that the main purpose, or one of the main purposes, of the arrangement is to secure that, over the relevant period, there would be a substantial difference between—

• (a) the total amount of the amounts under the arrangement which are, in accordance with generally accepted accounting practice, recognised in determining the profit or loss of the trade for any period or taken into account in calculating the amounts which are so recognised, and

• (b) the total amount of the amounts under the arrangement which are taken into account in calculating the profits or losses of the trade.

• (4) For the purposes of condition B “the relevant period” means the period which begins with the inception of the lease and ends with the end of the term of the lease.

• (5) Condition C is that the difference would be attributable (wholly or partly) to the application of any of sections 148A to 148F in relation to the person by reference to the plant or machinery under the lease.

• (6) The reference in this section to an amount being recognised in determining the profit or loss of a trade for a period is to an amount being recognised for accounting purposes—

• (a) in the profit and loss account or income statement relating to the trade,

• (b) in the statement of recognised gains and losses or statement of changes in equity relating to the trade, or

• (c) in any other statement of items brought into account in calculating the profits and losses of the trade for that period.

• (7) For the purposes of this section it does not matter whether the parties to any transaction which forms part of the arrangement differ from the parties to any of the other transactions.

• (8) For the purposes of this section the cases in which two or more transactions are to be taken as forming part of an arrangement include any case in which it would be reasonable to assume that one or more of them—

• (a) would not have been entered into independently of the other or others, or

• (b) if entered into independently of the other or others, would not have taken the same form or been on the same terms.

• (9) If—

• (a) at any time any of sections 148A to 148F has applied for determining the amounts to be taken into account in calculating the profits or losses of the trade, and

• (b) conditions A to C are met at any subsequent time,

those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.

• (10) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (9).

Chapter 11A — Trade profits: changes in trading stock

Introduction

172A

• (1) In this Chapter “trading stock”, in relation to a trade, means anything (whether land or other property)—

• (a) which is sold in the ordinary course of trade, or

• (b) which would be so sold if it were mature or its manufacture, preparation or construction were complete.

• (2) It does not include—

• (a) materials used in the manufacture, preparation or construction of any such thing,

• (b) any services performed in the ordinary course of the trade, or

• (c) any article produced, or any material used, in the performance of any such services.

Transfers of trading stock between trade and trader

172B

• (1) This section applies if trading stock of a person's trade is appropriated by the person for any other purpose.

• (2) In calculating the profits of the trade—

• (a) the amount which the stock appropriated would have realised if sold in the open market at the time of the appropriation is brought into account as a receipt, and

• (b) the value of anything in fact received for it is left out of account.

• (3) The receipt is treated as arising on the date of the appropriation.

172C

• (1) This section applies if something that—

• (a) belongs to a person carrying on a trade, but

• (b) is not trading stock of the trade,

becomes trading stock of the trade.

• (2) In calculating the profits of the trade—

• (a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time it became trading stock of the trade, and

• (b) the value of anything in fact given for it is left out of account.

• (3) The cost is treated as being incurred on the date it became trading stock of the trade.

Other disposals not made in the course of trade

172D

• (1) This section applies if—

• (a) trading stock of a trade is disposed of otherwise than in the course of a trade, and

• (b) section 172B does not apply.

• (2) In calculating the profits of the trade—

• (a) the amount which the stock disposed of would have realised if sold in the open market at the time of the disposal is brought into account as the receipt, and

• (b) any consideration obtained for it is left out of account.

• (3) The receipt is treated as arising on the date of the disposal.

• (4) This section is subject to section 172F.

172E

• (1) This section applies if—

• (a) trading stock of a trade has been acquired otherwise than in the course of trade, and

• (b) section 172C does not apply.

• (2) In calculating the profits of the trade—

• (a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time of the acquisition, and

• (b) the value of anything in fact given for it is left out of account.

• (3) The cost is treated as being incurred on the date of the acquisition.

• (4) This section is subject to section 172F.

Relationship with transfer pricing rules

172F

• (1) Section 172D or 172E does not apply if the relevant consideration—

• (a) falls to be adjusted for tax purposes under Part 4 of TIOPA 2010, or

• (b) falls within that Part without falling to be so adjusted.

• (1A) Subsection (1B) applies in relation to a disposal or acquisition if—

• (a) by virtue of subsection (1), section 172D or 172E does not apply, and

• (b) the market value amount is greater than the Part 4 TIOPA amount.

• (1B) An amount equal to the market value amount less the Part 4 TIOPA amount is to be brought into account in calculating the profits of the trade (in addition to the Part 4 TIOPA amount).

• (1C) In subsections (1A) and (1B)—

• “market value amount” means the amount referred to in section 172D(2)(a) or 172E(2)(a);

• “Part 4 TIOPA amount” means the amount which, following the application of Part 4 of TIOPA 2010 to the relevant consideration, is brought into account in respect of the relevant consideration in calculating the profits of the trade.

• (2) For the purposes of subsection (1)(b), the relevant consideration falls within Part 4 of TIOPA 2010 without falling to be adjusted under that Part if—

• (a) the condition in section 147(1)(a) of TIOPA 2010 is met, and

• (aa) the participation condition is met (see subsection (2B)), but

• (b) either—

• (i) one of the conditions in section 147(1)(c) and (d) of TIOPA 2010 is not met, or

• (ii) one of the exceptions mentioned in subsection (2A) applies.

• (2A) The exceptions are those in—

• (a) section 447(5) of CTA 2009 (exchange gains or losses from loan relationships),

• (b) section 694(8) of CTA 2009 (exchange gains or losses from derivative contracts),

• (c) section 213 of TIOPA 2010 (saving for provisions relating to capital allowances), and

• (d) section 214 of TIOPA 2010 (saving for provisions relating to chargeable gains).

• (2B) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (2)(aa) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.

• (3) In this section “relevant consideration” means—

• (a) in relation to section 172D, the consideration for the disposal of the stock, and

• (b) in relation to section 172E, the consideration for the acquisition of the trading stock.

Premises used both as a home and as business premises

Application of provisions about certified master versions

397A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

397B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

397C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-UK resident trustees

Person liable: UK resident trustees

Restriction of losses on strips by reference to original acquisition cost

832A

• (1) This section applies if an individual is temporarily non-resident.

• (2) Treat any of the individual's relevant foreign income within subsection (3) that is remitted to the United Kingdom in the temporary period of non-residence as remitted to the United Kingdom in the period of return.

• (3) Relevant foreign income is within this subsection if—

• (a) it is relevant foreign income for the UK part of the year of departure or an earlier tax year, and

• (b) section 832 applies to it.

• (4) Any apportionment required for the purposes of subsection (3)(a) is to be done on a just and reasonable basis.

• (5) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any relevant foreign income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result).

• (6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—

• (a) when an individual is to be regarded as “temporarily non-resident”, and

• (b) what “the temporary period of non-residence” and “the period of return” mean.

• (7) In this section, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.

832B

• (1) The only case in which deductions are allowed from the income mentioned in section 832(2) is where the income is from a trade, profession or vocation carried on outside the United Kingdom.

• (2) In that case the same deductions are allowed as are allowed under the Income Tax Acts where the trade, profession or vocation is carried on in the United Kingdom.

840A

• (1) A claim under section 840 must be made not more than 4 years after the end of the tax year for which the relief is claimed.

• (2) All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to section 840.

• (3) Those adjustments may be made at any time, despite anything to the contrary in the Income Tax Acts.

• (4) A person's personal representatives may make any claim under section 840 which the person might have made.

• (5) If a person dies—

• (a) any tax paid by the person and repayable because of a claim under section 840 is to be repaid to the personal representatives, and

• (b) the person's personal representatives are liable for any additional tax which arises because of a claim under that section.

• (6) If subsection (5)(b) applies, the additional tax—

• (a) is to be assessed on the personal representatives, and

• (b) is a debt due and payable out of the estate.

Non-UK resident trustees and foreign institutions

79A

• (1) This section deals with the application of section 79 in circumstances where there is a change in the persons carrying on the trade.

• (2) The employer is treated for the purposes of section 79 as permanently ceasing to carry on the trade unless a person carrying on the trade immediately before the change continues to carry it on after the change.

749A

No liability to income tax arises in respect of interest paid under section 826 of ICTA (interest on tax overpaid).

850A

• (1) For any period of account, if—

• (a) the calculation under section 849 in relation to a partner (“A”) produces a profit, and

• (b) A's share determined under section 850 is a loss,

A's share of the profit of the trade is neither a profit nor a loss.

• (2) For any period of account, if—

• (a) the calculation under section 849 in relation to A produces a profit,

• (b) A's share determined under section 850 is a profit, and

• (c) the comparable amount for at least one other partner is a loss,

A's share of the profit of the trade is the amount produced by the formula in subsection (3).

• (3) The formula is—

$$FP×PPPP+TCP$where—FP is the amount of the firm's profit calculated under section 849 in relation to A, PP is the amount determined under section 850 to be A's profit, andTCP is the total of the comparable amounts attributed to other partners under step 3 in subsection (4) that are profits.$

• (4) The comparable amount for each partner other than A is determined as follows.

Step 1

Take the firm's profit calculated under section 849 in relation to A.

Step 2

Determine in accordance with the firm's profit-sharing arrangements during the relevant period of account the shares of that profit that are attributable to each of the other partners.

Step 3

Each such share is the comparable amount for the partner to whom it is attributed.

• (5) In subsections (2) to (4) “partner” means any partner in the firm, whether or not chargeable to income tax.

850B

• (1) For any period of account, if—

• (a) the calculation under section 849 in relation to a partner (“A”) produces a loss, and

• (b) A's share determined under section 850 is a profit,

A's share of the loss of the trade is neither a profit nor a loss.

• (2) For any period of account, if—

• (a) the calculation under section 849 in relation to A produces a loss,

• (b) A's share determined under section 850 is a loss, and

• (c) the comparable amount for at least one other partner is a profit,

A's share of the loss of the trade is the amount produced by the formula in subsection (3).

• (3) The formula is—

$$FL×PLPL+TCL$where—FL is the amount of the firm's loss calculated under section 849 in relation to A,PL is the amount determined under section 850 to be A's loss, andTCL is the total of the comparable amounts attributed to other partners under step 3 in subsection (4) that are losses.$

• (4) The comparable amount for each partner other than A is determined as follows.

Step 1

Take the firm's loss calculated under section 849 in relation to A.

Step 2

Determine in accordance with the firm's profit-sharing arrangements during the relevant period of account the shares of that loss that are attributable to each of the other partners.

Step 3

Each such share is the comparable amount for the partner to whom it is attributed.

• (5) In subsections (2) to (4) “partner” means any partner in the firm, whether or not chargeable to income tax.

Person liable: individuals

Person liable: individuals

Special rules: qualifying policies

Subsistence expenses

57A

• (1) In calculating the profits of a trade, a deduction is allowed for any reasonable expenses incurred on food or drink for consumption by the trader at a place to which the trader travels in the course of carrying on the trade, or while travelling to a place in the course of carrying on the trade, if conditions A and B are met.

• (2) Condition A is met if—

• (a) a deduction is allowed for the expenses incurred by the trader in travelling to the place, or

• (b) where the expenses of travelling to the place are not incurred by the trader, a deduction would be allowed for them if they were.

• (3) Condition B is met if—

• (a) at the time the expenses are incurred on the food or drink, the trade is by its nature itinerant, or

• (b) the trader does not travel to the place more than occasionally in the course of carrying on the trade and either—

• (i) the travel in connection with which the expenses are incurred on the food or drink is undertaken otherwise than as part of the trader’s normal pattern of travel in the course of carrying on the trade, or

• (ii) the trader does not have such a normal pattern of travel.

50A

• (1) Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met.

• (2) Condition A is that—

• (a) the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

• (b) if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

• (3) Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

• (a) the sub-hire period consists of more than 45 consecutive days, or

• (b) if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

• (4) Condition B is not met if—

• (a) the customer is an employee of the taxpayer or of a person connected with the taxpayer, or

• (b) during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

• (5) Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

• (a) to disapply or reduce the effect of section 48, or

• (b) other avoidance of tax.

• (6) For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

• (a) the sub-hire period, and

• (b) the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

• (7) A period of consecutive days (“the main period”) is linked to—

• (a) a period of consecutive days that ends not more than 14 days before the main period begins,

• (b) a period of consecutive days that begins not more than 14 days after the main period ends, and

• (c) a period of consecutive days linked to a period in paragraph (a) or (b).

• (8) For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

• (9) In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

50B

• (1) This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

• (a) section 48 would (but for this section) apply to the expenses of two or more of those persons, or

• (b) section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons.

• (2) This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

• (3) In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following—

• (a) where there is one commercial lessee, any such expenses incurred by that lessee, and

• (b) where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

• (4) In this section—

• (a) references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

• (b) “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length.

Car ... hire: supplementary

148FD

• (1) If a person is or has been a lessor under a long funding lease of a film, sections 148A to 148F do not apply in respect of the lease.

• (2) “Film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act).

378A

• (1) This section applies where—

• (a) a dividend is paid by an offshore fund, and

• (b) the offshore fund fails to meet the qualifying investments test at any time in the relevant period.

• (2) The dividend is treated as interest for income tax purposes.

• (3) For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund's qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).

• (4) “The relevant period” means—

• (a) the relevant period of account of the offshore fund, or

• (b) if longer, the period of 12 months ending on the last day of that period.

• (5) “The relevant period of account” means—

• (a) the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and

• (b) the period of account in which the dividend is paid, in any other case.

• (6) This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.

• (7) In this section—

• “dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;

• “manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);

• “offshore fund” has the same meaning as in section 354 of TIOPA 2010 (see sections 355 to 363 of that Act);

• “qualifying investments” has the meaning given in section 494 of CTA 2009.

Meaning of “trading stock”

380A

• (1) Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act.

• (2) “Payment representing interest” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS.

• (3) Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum.

• (4) This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person.

• (5) In this section “the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).

397AA

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397BA

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Temporary non-residents

SAYE option schemes, CSOP schemes

94A

• (1) This section applies if—

• (a) a company incurs expenses in setting up a scheme within subsection (2) ... and

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) The schemes within this subsection are—

• (a) Schedule 3 SAYE option schemes within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), and

• (b) Schedule 4 CSOP schemes within the meaning of the CSOP code (see section 521(4) of ITEPA 2003).

...

• (3) A deduction for the expenses is to be made in calculating the profits of a trade carried on by the company.

• (4) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred, for the purposes of subsection (3) the deduction is to be made for the period of account in which the relevant date falls .

• (4A) In subsection (4) “the relevant date”—

• (a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and

• (b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.

• (5) But subsection (4) does not apply in calculating the profits of a trade on the cash basis.

148DA

• (1) This section is about the meaning of “starting value” in section 148D in relation to a long funding operating lease (“the section 148D lease”).

• (2) But this section does not apply if the conditions in section 148DB(2) (“starting value” where plant or machinery originally unqualifying) are met.

• (3) If the only use of the plant or machinery by the lessor has been the leasing of it under the section 148D lease as a qualifying activity, the starting value is the amount of the expenditure incurred by the lessor on the provision of the plant or machinery (“cost”).

• (4) If subsection (3) does not apply, the starting value depends on the last previous use of the plant or machinery by the lessor.

• (5) If that use was the leasing of it under another long funding operating lease as a qualifying activity, the starting value is the market value of the plant or machinery at the commencement of the term of the section 148D lease (“market value”).

• (6) If that use was the leasing of it under a long funding finance lease as a qualifying activity, the starting value is the value at which the plant or machinery is recognised in the books or other finance records of the lessor at the commencement of the term of the section 148D lease.

• (7) If that use was for the purposes of a qualifying activity other than leasing under a long funding lease, the starting value is the lower of cost and market value.

• (8) For the meaning of “qualifying activity”, see section 148J(2).

148DB

• (1) This section applies if the conditions in subsection (2) are met in relation to a long funding operating lease to which section 148D applies.

• (2) The conditions are that—

• (a) the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity,

• (b) the plant or machinery is brought into use by the lessor for the purposes of a qualifying activity on or after 1 April 2006, and

• (c) that qualifying activity is the leasing of the plant or machinery under the lease.

• (3) For the purposes of section 148D the starting value is the lower of—

• (a) first use market value, and

• (b) first use amortised market value.

• (4) “First use market value” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity.

• (5) “First use amortised value” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity on the assumptions in subsection (6).

• (6) The assumptions are that—

• (a) the cost of acquiring the plant or machinery had been written off on a straight line basis over its remaining useful economic life, and

• (b) any further capital expenditure incurred had been written off on a straight line basis over so much of its remaining economic life as remains at the time when the expenditure is incurred.

• (7) For the meaning of “qualifying activity”, “remaining useful economic life” and writing off on a straight line basis, see section 148J(2), section 148J(4) (and section 70YI of CAA 2001 as applied by that section) and section 148J(3) respectively.

148EA

• (1) This section sets out how the remaining residual value of the plant or machinery resulting from the additional expenditure (“RRV”) is determined for the purposes of section 148E(4) if section 148E has not applied in relation to any previous additional expenditure incurred by the person in relation to the leased plant or machinery.

• (2) RRV depends on whether—

• (a) the amount (“ARV”) which is expected to be the residual value of the plant or machinery at the time when the additional expenditure is incurred, exceeds

• (b) the amount (“CRV”) which at the commencement of the term of the lease is expected to be its residual value (or, if section 148DB applies, would have been expected to be that value had that value been estimated at that time).

• (3) If ARV exceeds CRV, RRV is the part of the excess that is a result of the additional expenditure.

• (4) Otherwise, RRV is nil.

• (5) For the meaning of “residual value”, see section 148J(2).

148EB

• (1) This section sets out how the remaining residual value of the plant or machinery resulting from the additional expenditure (“RRV”) is determined for the purposes of section 148E(4) if section 148E has applied in relation to previous additional expenditure incurred by the person in relation to the leased plant or machinery.

• (2) RRV depends on whether—

• (a) the amount which is expected to be the residual value of the plant or machinery at the time when the further additional expenditure is incurred (“FARV”), exceeds

• (b) the sum of the amounts in subsection (3).

• (3) Those amounts are—

• (a) the amount which at the commencement of the term of the lease is expected to be the residual value of the plant or machinery (or, if section 148DB applies, would have been expected to be that value had that value been estimated at that time), and

• (b) any amounts that were subtracted under section 148E(4) as the remaining residual value of the plant or machinery resulting from the previous additional expenditure.

• (4) If FARV exceeds the sum of the amounts in subsection (3), RRV is the portion of the excess that is a result of the further additional expenditure.

• (5) Otherwise, RRV is nil.

• (6) For the meaning of “residual value”, see section 148J(2).

154A

• (1) This section applies if—

• (a) in any tax year a person who is not ... resident in the United Kingdom carries on a trade there—

• (i) consisting of banking or insurance, or

• (ii) consisting wholly or partly of dealing in securities, and

• (b) in calculating the profits of the trade for the tax year any amount is disregarded as a result of section 714 (exemption of profits from FOTRA securities) because of a condition subject to which any 3½% War Loan 1952 Or After was issued.

• (2) Interest on money borrowed for the purposes of the trade is to be deducted in calculating the profits of the trade of that tax year only so far as it exceeds the ineligible amount.

• (3) The ineligible amount is found as follows—

• Step 1 Add together all sums borrowed for the purposes of the trade and still owing in ... the tax year.

• Step 2 If the person carrying on the trade is a company, deduct any sums carrying interest which is not deducted in calculating the profits of the trade (otherwise than because of subsection (2)).