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Income Tax (Trading and Other Income) Act 2005

Type Public General Act

Publication 2005-03-24

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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(5) In this Chapter references to production or acquisition expenditure do not include—

(a) interest (as to which, see section 29), or

(b) the incidental costs of obtaining finance (as to which, see sections 58 and 59).

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) In this Chapter “any prohibitive rule” means any provision of the Income Tax Acts which—

(a) prohibits a deduction from being made, or

(b) restricts the extent to which it is allowed,

in calculating the profits of a trade.

131

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

132

(1) In this Chapter “original master version” means—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) in relation to a sound recording, the original master audio tape or disc.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant period”

133

In this Chapter “relevant period”, in relation to a trade, means—

(a) a period of account of the trade, or

(b) if no accounts of the trade are drawn up for a period, ... a tax year.

Expenditure treated as revenue in nature

134

(1) If a person carrying on a trade incurs production or acquisition expenditure, the expenditure is treated for income tax purposes as expenditure of a revenue nature.

(2) If expenditure is treated under this section as revenue in nature, sums received by the person carrying on the trade from the disposal of the original master version—

(a) are treated for income tax purposes as receipts of a revenue nature, and

(b) are brought into account in calculating the profits of the trade of the relevant period in which they are received.

(3) For this purpose sums received from the disposal of the original master version include—

(a) sums received from the disposal of any interest or right in or over the original master version (including an interest or right created by the disposal), and

(b) insurance, compensation or similar money derived from the original master version.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rules for allocating expenditure

Films and sound recordings: production or acquisition expenditure

135

(1) This section applies for the purpose of calculating the profits of a trade of a relevant period if—

(a) the trade consists of or includes the exploitation of the original master versions of . . . sound recordings,

(b) the original master versions do not constitute trading stock of the trade (within the meaning of section 174),

(c) the person carrying on the trade incurs production or acquisition expenditure in, or before, the relevant period, and

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) A deduction is allowed for the amount of the production or acquisition expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.

(3) The person carrying on the trade must allocate to the relevant period so much of the expenditure as is just and reasonable (but see subsection (5)).

(4) In making this allocation regard must be had to the following—

(a) the amount of the expenditure which remains unallocated at the beginning of the period,

(b) the amount of the expenditure incurred in the period,

(c) the proportion which the estimated value of the original master version realised in the period (by way of income or otherwise) bears to the sum of the value so realised and the estimated remaining value at the end of the period, and

(d) the need to bring the whole of the expenditure into account over the time during which the value of the original master version is expected to be realised.

(5) The person carrying on the trade may also allocate to the relevant period a further amount, so long as the total amount allocated to the period does not exceed the value of the original master version realised in the period (by way of income or otherwise).

(6) Expenditure may not be allocated to the relevant period under this section if it is allocated—

(a) under this section to any other relevant period,

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

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: special rules for allocating expenditure

Application of provisions about certified master versions

136

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Certified master versions: preliminary expenditure

137

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Certified master versions: production or acquisition expenditure

138

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Certified master versions: limited-budget films

Certified master versions: production expenditure on limited-budget films

139

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Certified master versions: acquisition expenditure on limited-budget films

140

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

141

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When expenditure is incurred

142

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Election for sections 134 to 140 not to apply

143

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Supplementary

Meaning of “genuinely intended for theatrical release”

144

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Chapter 10 — Trade profits: certain telecommunication rights

Professions and vocations

145

The provisions of this Chapter apply to professions and vocations as they apply to trades.

Meaning of “relevant telecommunication right”

146

In this Chapter a “relevant telecommunication right” means—

(a) a licence granted under section 8 of the Wireless Telegraphy Act 2006 in accordance with regulations made under section 14 of that Act (bidding for licences),

(b) an indefeasible right to use a telecommunications cable system, or

Expenditure and receipts treated as revenue in nature

147

(1) This section applies if, in accordance with generally accepted accounting practice, an amount in respect of—

(a) expenditure on the acquisition of a relevant telecommunication right, or

(b) a receipt from the disposal of a relevant telecommunication right,

is recognised in the accounts of a trade as an item in the calculation of profit or loss.

(2) The amount is treated for income tax purposes as an item of a revenue nature.

(3) “The acquisition of a relevant telecommunication right” includes—

(a) the extension of rights attached to a relevant telecommunication right, and

(b) if a relevant telecommunication right is subject to a derivative right, the cancellation or restriction of rights attached to the derivative right.

(4) “The disposal of a relevant telecommunication right” includes—

(a) the cancellation or restriction of rights attached to a relevant telecommunication right, and

(b) the granting of a derivative right or the extension of rights attached to a derivative right.

Credits or debits arising from revaluation

148

(1) This section applies if, in accordance with generally accepted accounting practice, an amount in respect of the revaluation of a relevant telecommunication right is recognised in the accounts of a trade (whether or not as an item in the calculation of profit or loss).

(2) The amount is treated for income tax purposes as an item of a revenue nature.

(3) In calculating the profits of the trade, the amount is brought into account for the period of account in which it is recognised.

Chapter 11 — Trade profits: other specific trades

Dealers in securities etc.

Taxation of amounts taken to reserves

149

(1) This section applies for the purpose of calculating the profits of a person's trade if a profit on the sale of securities would be brought into account in calculating the profits of the trade.

(2) Profits and losses from the securities that in accordance with generally accepted accounting practice are—

(a) calculated by reference to the fair value of the securities, and

(b) recognised in the person's statement of recognised gains and losses or statement of changes in equity,

are brought into account in calculating the profits of the trade.

(3) But subsection (2) does not apply—

(a) to an amount so far as deriving from or otherwise relating to an amount brought into account under that subsection in an earlier period of account, or

(b) to an amount recognised for accounting purposes by way of correction of a fundamental error.

(4) In this section “securities” includes—

(a) shares,

(b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992,

(ba) rights of participants in schemes or funds to which TCGA 1992 applies as a result of section 103D of TCGA 1992, and

but does not include a loan relationship (within the meaning of Chapter 2 of Part 4 of FA 1996).

Conversion etc. of securities held as circulating capital

150

(1) This section applies for the purpose of calculating the profits of a trade if—

(a) a transaction falling within subsection (2) occurs in relation to securities (“the original holding”), and

(b) a profit on the sale of the securities would be brought into account in calculating the profits of the trade.

(2) A transaction falls within this subsection if—

(a) it results in a new holding being treated as the same as the original holding as a result of sections 126 to 136 of TCGA 1992 (CGT roll-over relief in cases of conversion etc.), or

(b) it is treated, as a result of section 134 of TCGA 1992 (compensation stock), as an exchange for a new holding which does not involve a disposal of the original holding,

and it does not fall within section 151(1) or 152(1) below (exchanges of gilts for gilt strips and consolidation of gilt strips).

(3) This section does not apply to securities in respect of which unrealised profits or losses, calculated by reference to the fair value of the securities at the end of the period of account, are taken into account in the period of account in which the transaction occurs.

(4) The transaction is treated as not involving a disposal of the original holding and the new holding is treated as the same asset as the original holding.

(5) But if, under the transaction, the person carrying on the trade—

(a) receives consideration in addition to the new holding, or

(b) becomes entitled to receive such consideration,

subsection (4) applies as if the references to the original holding were to the proportion of the original holding given by the following fraction.

(6) The fraction is—

$$NHNH+C$where—NH is the market value of the new holding at the time of the transaction, andC is the market value of the consideration at the time of the transaction or (if the consideration is cash) the amount of the consideration.$

(7) In determining whether subsection (2)(a) applies as a result of section 135 or 136 of TCGA 1992, the reference to capital gains tax in section 137(1) of TCGA 1992 is to be read as a reference to income tax.

(8) In this section “securities” includes—

(a) shares,

(b) loan stocks or similar securities (whether secured or unsecured) of a government, a local or other public authority (in the United Kingdom or elsewhere) or a company,

(ca) rights of participants in schemes or funds to which TCGA 1992 applies as a result of section 103D of TCGA 1992,

(d) in the case of a company with no share capital, interests in the company possessed by members of the company,

(e) quoted options to subscribe for shares which are treated as shares as a result of section 147 of TCGA 1992, and

(f) earn-out rights which are assumed to be securities as a result of section 138A(3) of TCGA 1992.

Exchanges of gilts for gilt strips

151

(1) This section applies for the purpose of calculating the profits of a trade if—

(a) the person carrying it on (“the trader”) exchanges a gilt-edged security for strips of the security, and

(b) a profit on the sale of the security would be brought into account in calculating the profits of the trade.

(2) The security is treated as having been redeemed at the time of the exchange by the payment to the trader of its market value.

(3) The trader is treated as having acquired each strip for the proportion of the market value of the security given by the following fraction.

(4) The fraction is—

$$SVTV$where—SV is the market value of one strip, andTV is the total of the market values of all the strips received in exchange for the security.$

(5) In this section references to market value are to market value at the time of the exchange.

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

(7) See also—

section 153 (meaning of “gilt-edged security” and “strip”), and

section 154 (regulations for determining market value of securities or strips).

Consolidation of gilt strips

152

(1) This section applies for the purpose of calculating the profits of a trade if—

(a) strips of a gilt-edged security are consolidated into a single security by being exchanged by the person carrying on the trade (“the trader”) for the single security, and

(b) a profit on the sale of any of the strips would be brought into account in calculating the profits of the trade.

(2) Each strip is treated as having been redeemed at the time of the exchange by payment to the trader of its market value.

(3) The trader is treated as having acquired the gilt-edged security for an amount equal to the total of the market values of the strips given in exchange.

(4) In this section references to market value are to market value at the time of the exchange.

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

(6) See also—

section 153 (meaning of “gilt-edged security” and “strip”), and

section 154 (regulations for determining market value of securities or strips).

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

153

(1) In this Act “gilt-edged security” means a security which—

(a) is a gilt-edged security for the purposes of TCGA 1992 (see Schedule 9 to that Act), or

(b) will be such a security on the making of an order under paragraph 1 of Schedule 9 to TCGA 1992, if the making of the order is anticipated in the prospectus under which the security is issued.

(2) For the purposes of sections 151 and 152 “strip”, in relation to a gilt-edged security, means a security issued under the National Loans Act 1968 (c. 13) which meets conditions A to C.

(3) Condition A is that the security is issued for the purpose of representing the right to or of securing—

(a) a payment corresponding to a payment of interest or principal remaining to be made under the gilt-edged security, or

(b) two or more payments each corresponding to a payment to be so made.

(4) Condition B is that the security is issued in conjunction with the issue of one or more other securities which, together with that security—

(a) represent the right to, or

(b) secure,

payments corresponding to every payment remaining to be made under the gilt-edged security.

(5) Condition C is that the security is not itself a security which—

(a) represents the right to, or

(b) secures,

payments corresponding to a part of every payment remaining to be made under the gilt-edged security.

Regulations for determining market value of securities or strips

154

(1) The Treasury may by regulations make provision for the purposes of sections 151 and 152 as to the manner of determining the market value at any time of a gilt-edged security (including any strip).

(2) The regulations may—

(a) make different provision for different cases, and

(b) contain such incidental, supplemental, consequential and transitional provision as the Treasury consider appropriate.

(3) The power in this section does not affect the power under section 202(5) of FA 1996 (gilt stripping).

Persons authorised for purposes of FISMA 2000

Levies and repayments under FISMA 2000

155

(1) This section applies for the purpose of calculating the profits of a trade ...

(2) A deduction is allowed for any sum—

(a) spent by the person carrying on the trade in paying a levy, or

(b) paid by that person as a result of an award of costs under costs rules,

so far as it is not otherwise allowable.

(3) A payment made to the person carrying on the trade as a result of a repayment provision is brought into account as a receipt.

(3A) For the purposes of this section “costs rules” means—

(a) rules made under section 230 of FISMA 2000, or

(b) provision relating to costs contained in standard terms fixed under paragraph 18 of Schedule 17 to FISMA 2000.

(4) For the purposes of this section “levy” means—

(a) a payment required under rules made under section 136(2) of FISMA 2000,

(b) a levy imposed under the Financial Services Compensation Scheme,

(d) a payment required under the rules referred to in paragraph 14(1) of Schedule 17 to FISMA 2000 (“scheme rules”) in accordance with paragraph 15(1) of that Schedule, or

(e) a payment required in accordance with the standard terms fixed under paragraph 18 of that Schedule (other than a sum paid as a result of an award of costs under costs rules).

(5) For the purposes of this section “repayment provision” means—

(a) any provision made by virtue of section 136(7) or 214(1)(e) of FISMA 2000, or

(b) any provision made by scheme rules for fees to be refunded in specified circumstances.

Dealers in land etc.

Purchase or sale of woodlands

156

(1) This section applies for the purpose of calculating the profits of a trade of dealing in land.

(2) If the person carrying on the trade buys woodlands in the United Kingdom in the course of the trade, the part of the cost of the woodlands which is attributable to trees or saleable underwood growing on the land is ignored.

(3) If—

(a) the woodlands are subsequently sold in the course of the trade, and

(b) any of the trees or underwood are still growing on the land at the time of the sale,

the part of the price that is equal to the amount ignored under subsection (2) for the trees or underwood is ignored.

Relief in respect of mineral royalties

157

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Lease premiums etc: reduction of receipts

158

(1) This section applies for the purpose of calculating the profits of a trade of dealing in land if a receipt of the trade falls within one of the following categories—

(a) lease premiums within section 277,

(b) sums within section 279 (sums payable instead of rent),

(d) sums within section 281 (sums payable for variation or waiver of terms of lease),

(e) consideration for the assignment of a lease within section 282 (lease granted at an undervalue), and

(f) amounts received on the sale of an estate or interest in land within section 284 (sales with right to re-conveyance) or section 285 (sale and leaseback transactions).

(2) The receipt is reduced by the relevant amount.

(3) The relevant amount is the amount which is treated as a receipt of a property business as a result of any of sections 277 to 285.

(4) But if—

(a) the person carrying on the trade makes a claim under section 301 or 302, and

(b) as a result of the claim a repayment of tax is made to that person,

the relevant amount is the amount which, for the purpose of determining the amount of the repayment of tax, is treated as brought into account as a receipt in calculating the profits of the property business.

(5) If subsection (4) applies, any adjustment of liability to tax may be made—

(a) by assessment or otherwise, and

(b) at any time at which it could be made if it related only to tax for the tax year in which the claim under section 301 or 302 is made.

Ministers of religion

159

(1) This section applies for the purpose of calculating the profits of the profession or vocation of a minister of a religious denomination.

(2) If the minister pays rent in respect of a dwelling-house and any part of the dwelling-house is used mainly and substantially for the purposes of the minister's duty, a deduction is allowed for—

(a) one-quarter of the rent, or

(b) if less, the part of the rent that, on a just and reasonable apportionment, is attributable to that part of the dwelling-house.

(3) If—

(a) an interest in premises belongs to a charity or an ecclesiastical corporation,

(b) because of that interest, the minister has a residence in the premises from which to perform the minister's duty, and

a deduction is allowed under this subsection for part of those expenses.

(4) The amount of the deduction under subsection (3) is—

$$A4-B$where—A is the amount of the expenses, andB is the amount of the expenses for which a deduction is otherwise allowable.$

Barristers and advocates

Alternative basis of calculation in early years of practice

160

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Mineral exploration and access

161

(1) This section applies for the purpose of calculating the profits of a trade if—

(a) the person carrying on the trade incurs expenditure on mineral exploration and access in an area or group of sands, and

(b) the presence of mineral deposits in commercial quantities has already been established in that area or group of sands.

(2) A deduction is allowed for the expenditure only if a deduction would have been allowed for it if the presence of mineral deposits in commercial quantities had not already been established in that area or group of sands.

(3) In this section “mineral exploration and access” has the same meaning as in Part 5 of CAA 2001 (see section 396(1) of that Act).

Persons liable to pool betting duty

Payments by persons liable to pool betting duty

162

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Intermediaries treated as making employment payments

Deduction for deemed employment payment

163

(1) This section applies for the purpose of calculating the profits of a trade, profession or vocation carried on by an intermediary who is treated as making a deemed employment payment in connection with the trade, profession or vocation.

(2) A deduction is allowed for—

(a) the amount of the deemed employment payment, and

(b) the amount of any employer's national insurance contributions paid by the intermediary in respect of it.

(3) The deduction is allowed for the period of account in which the deemed employment payment is treated as made.

(4) No deduction in respect of—

(a) the deemed employment payment, or

(b) any employer's national insurance contributions paid by the intermediary in respect of it,

may be made except in accordance with this section.

(5) In this section “deemed employment payment” and “intermediary” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003.

Special rules for partnerships

164

(1) This section applies for the purpose of calculating the profits of a trade, profession or vocation carried on by a firm that is treated as making a deemed employment payment in connection with the trade, profession or vocation.

(2) The amount of the deduction allowed under section 163 is limited to the amount that reduces the profits of the firm for the tax year to nil.

(3) The expenses of the firm in connection with the relevant engagements for any period of account are limited to the total of—

(a) 5% of the amount taken into account in step 1 of the calculation in section 54(1) of ITEPA 2003 (calculation of deemed employment payment), and

(b) the amount deductible in step 3 of that calculation.

(4) In this section “deemed employment payment” and “the relevant engagements” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003.

Waste disposal

Deduction for site preparation expenditure

165

(1) This section applies for the purpose of calculating the profits of a trade of a period of account in which waste materials are deposited on a waste disposal site if—

(a) the person carrying on the trade (“the trader”), or a predecessor, has incurred site preparation expenditure in relation to the site in the course of carrying on the trade, and

(b) at the time the trader first deposits waste materials on the site, the trader holds a waste disposal licence which is then in force.

(2) A deduction is allowed for the amount of the site preparation expenditure allocated to the period of account under section 166.

(3) For the purposes of this section “predecessor”, in relation to the trader, means a person who—

(a) has ceased to carry on the trade carried on by the trader or ceased to carry on a trade so far as relating to the site, and

(b) has transferred the whole of the site to the trader,

and it does not matter for this purpose whether or not the estate or interest in the site transferred to the trader is the same as that held by that person.

(4) For the purposes of this section and section 166, if site preparation expenditure has been incurred by a predecessor—

(a) the trade carried on by the trader is treated as the same as the trade carried on by the predecessor, and

(b) deductions are to be allowed to the trader (and not to the predecessor) as if everything done to or by the predecessor were done to or by the trader.

(5) For—

(a) the meaning of “site preparation expenditure”, “waste disposal licence” and “waste disposal site”, and

(b) a rule about pre-trading expenditure,

see section 167.

Allocation of site preparation expenditure

166

(1) The amount of site preparation expenditure allocated to a period of account for the purposes of section 165(2) is the amount given by the formula—

$$RE×WDSV+WD$where—RE means residual expenditure (see subsection (2)),WD means the volume of waste materials deposited on the waste disposal site during the period, andSV means the volume of the waste disposal site not used up for the deposit of waste materials at the end of the period.$

(2) “Residual expenditure” means the total of all site preparation expenditure incurred by the trader in relation to the waste disposal site at any time before the end of the period, less—

(a) any of that expenditure for which an allowance has been, or may be, made for income or corporation tax purposes under the enactments relating to capital allowances,

(b) any of that expenditure for which a deduction has been allowed in calculating for income or corporation tax purposes the profits of an earlier period of account, and

(c) if the trader started to carry on the trade before 6th April 1989, the excluded amount of any unrelieved old expenditure (see subsections (3) and (4)).

(3) The excluded amount of unrelieved old expenditure is calculated by multiplying the unrelieved old expenditure (see subsection (4)) by the fraction—

$$WDSV+WD$where—WD means the volume of waste materials deposited on the site before 6th April 1989, andSV means the volume of the site not used up for the deposit of waste materials immediately before that date.$

(4) “Unrelieved old expenditure” means site preparation expenditure which—

(a) was incurred by the trader in relation to the waste disposal site before 6th April 1989, and

(b) does not fall within subsection (2)(a) or (b).

Site preparation expenditure: supplementary

167

(1) For the purposes of this section and sections 165 and 166—

“site preparation expenditure”, in relation to a waste disposal site, means expenditure incurred on preparing the site for the deposit of waste materials,

“waste disposal licence” means—a disposal licence under Part 1 of the Control of Pollution Act 1974 (c. 40) or Part 2 of the Pollution Control and Local Government (Northern Ireland) Order 1978 (S.I. 1978/1049 (N.I. 19)),a waste management licence under Part 2 of the Environmental Protection Act 1990 (c. 43) or any corresponding provision for the time being in force in Northern Ireland,a permit under regulations under section 2 of the Pollution Prevention and Control Act 1999 (c. 24) or a permit or authorisation under any corresponding provision for the time being in force in Northern Ireland or Scotland ,an authorisation under the Radioactive Substances Act 1960 (c. 34) or the Radioactive Substances Act 1993 (c. 12) for the disposal of radioactive waste, ora nuclear site licence under the Nuclear Installations Act 1965 (c. 57), and

“waste disposal site” means a site used, or to be used, for the disposal of waste materials by their deposit on the site.

(2) For the purposes of sections 165 and 166, expenditure incurred for the purposes of a trade by a person about to carry on the trade is treated as if it were incurred—

(a) on the date on which the person starts to carry on the trade, and

(b) in the course of carrying it on.

Site restoration payments

168

(1) This section applies for the purpose of calculating the profits of a trade if the person carrying on the trade makes a site restoration payment in the course of carrying it on.

(2) Subject to subsection (3A), A deduction is allowed for the unrelieved amount of the payment.

(3) The deduction is allowed—

(a) (if the payment is made, whether directly or indirectly, to a connected person) for the period of account in which that part of the restoration work to which the payment relates is completed, or

(b) (in any other case) for the period of account in which the payment is made.

(3A) But no deduction is allowed if the payment arises from arrangements—

(a) to which the person carrying on the trade is a party, and

(b) the main purpose, or one of the main purposes, of which is to obtain a deduction under this section.

(4) The unrelieved amount of a site restoration payment is the amount of the payment, less—

(a) any amount of the payment that represents expenditure for which an allowance has been, or may be, made under the enactments relating to capital allowances, and

(b) any amount of the payment that represents expenditure for which a deduction has been allowed in calculating the profits of the trade of an earlier period of account.

(5) A “site restoration payment” means a payment made in connection with the restoration of a site (or part of a site) in order to comply with—

(a) a condition of a waste disposal licence (as defined in section 167(1)),

(b) a condition imposed on the grant of planning permission to use the site for the collection, treatment, conversion and final depositing of waste materials or for the carrying out of any of those activities, or

(6) For this purpose “a relevant planning obligation” means—

(a) an obligation arising under an agreement made under section 106 of the Town and Country Planning Act 1990 (c. 8) (as originally enacted) or any corresponding provision for the time being in force in Northern Ireland,

(b) an obligation arising under an agreement made under section 75 of the Town and Country Planning (Scotland) Act 1997 (c. 8),

(c) a planning obligation entered into under section 106 of the Town and Country Planning Act 1990 (as substituted by section 12 of the Planning and Compensation Act 1991 (c. 34)) or any corresponding provision for the time being in force in Northern Ireland, or

(d) a planning obligation entered into under section 299A of the Town and Country Planning Act 1990 or any corresponding provision for the time being in force in Northern Ireland.

(7) Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Cemeteries and crematoria

Cemeteries and crematoria: introduction

169

(1) This section and sections 170 to 172 apply for the purpose of calculating the profits of a period of account (“the relevant period”) of a trade which consists of or includes—

(a) the carrying on of a cemetery, or

(b) the carrying on of a crematorium and, in connection with doing so, the maintenance of memorial garden plots,

and the following provisions of this section apply for the interpretation of this section and those sections.

(2) References to the sale of land in a cemetery include the sale of a right of interment in land in a cemetery.

(3) References to the sale of land in a memorial garden include the appropriation of part of a memorial garden in return for a dedication fee or similar payment.

(4) “Ancillary capital expenditure” means capital expenditure incurred for the purposes of the trade by the person carrying on the trade (“the trader”), or a predecessor, on—

(a) any building or structure (other than a dwelling-house) which is in the cemetery or memorial garden and is likely to have little or no value when the cemetery or memorial garden is full,

(b) the purchase of an interest in, or the preparation of, any land taken up by such a building or structure, or

(c) the purchase of an interest in, or the preparation of, any other land in the cemetery or memorial garden which is not suitable or adaptable for use for interments or memorial garden plots and which is likely to have little or no value when the cemetery or memorial garden is full.

(5) “Predecessor”, in relation to the trader, means a person who carried on the trade at any time before the trader started to do so.

(6) “Preparation”, in relation to land, means levelling or draining the land or making it suitable in some other way for use as a cemetery or memorial garden.

Deduction for capital expenditure

170

(1) This section applies if, in the relevant period, an interest in land in the cemetery or memorial garden is sold with a view to the land being used—

(a) for the purpose of interments, or

(b) for memorial garden plots.

(2) A deduction is allowed for—

(a) capital expenditure incurred by the trader, or a predecessor, on the purchase of an interest in the land or on the preparation of the land, and

(b) ancillary capital expenditure allocated to the relevant period under section 171 (allocation of ancillary capital expenditure).

(3) But no expenditure is to be brought into account—

(a) under both paragraphs (a) and (b) of subsection (2), ...

(b) under both subsection (2)(a) above and section 147(2)(b) of CTA 2009 (relief for corporation tax purposes) or under both subsection (2)(b) above and section 147(2)(a) of CTA 2009,or

whether for the same or different periods of account.

(4) Any purchase price paid on a sale in connection with a change in the persons carrying on the trade is ignored in calculating the amount of the deduction.

(5) No deduction is allowed for any expenditure which is excluded by section 172 (exclusion of expenditure met by subsidies).

Allocation of ancillary capital expenditure

171

(1) The amount of ancillary capital expenditure allocated to the relevant period for the purposes of section 170(2)(b) is the amount given by the formula—

$$RE×PSRPAR+PSR$where—RE means residual expenditure (see subsection (2)),PSR means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden sold in the relevant period, andPAR means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden which are or could be made available for sale at the end of the relevant period.$

(2) “Residual expenditure” means the total of all ancillary capital expenditure incurred at any time before the end of the relevant period, less—

(a) ancillary capital expenditure incurred on buildings or structures which were destroyed before the beginning of the first sale period,

(b) the excluded amount of any remaining old expenditure (see subsection (3)),

(c) if, after the beginning of the first sale period and before the end of the relevant period, an asset representing ancillary capital expenditure was sold or destroyed, the net sale proceeds or the compensation, and

(d) any amount deducted under section 170(2)(b) above, or under section 147(2)(b) of CTA 2009, for a period of account ending before the relevant period.

(3) The excluded amount of remaining old expenditure is calculated by multiplying the remaining old expenditure by the fraction—

$$PSBPAB+PSB$where—PSB means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden sold before the beginning of the basis period for the tax year 1954-55, andPAB means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden which were or could have been made available for sale immediately before the beginning of the basis period for that tax year.$

(4) In this section—

“compensation”, in relation to the destruction of an asset, means—insurance money or other compensation received by the trader, or a predecessor, in respect of the destruction, andmoney received for the remains of the asset by the trader or predecessor,

“the first sale period” means—the period of account in which an interest in land in the cemetery or memorial garden was first sold for the purposes of the trade with a view to the land being used for the purpose of interments or for memorial garden plots, orif later, the basis period for the tax year 1954-55, and

“remaining old expenditure” means ancillary capital expenditure which—was incurred before the beginning of the basis period for the tax year 1954-55, anddoes not fall within subsection (2)(a).

Exclusion of expenditure met by subsidies

172

(1) Expenditure is excluded for the purposes of section 170 so far as it has been, or is to be, met (directly or indirectly) by—

(a) the Crown,

(b) a government or local or other public authority (whether in the United Kingdom or elsewhere), or

(2) This is subject to the following exceptions.

(3) Expenditure is not excluded for the purposes of section 170 if it is met (directly or indirectly) by a grant—

(a) made under Northern Ireland legislation, and

(b) declared by the Treasury by an order under section 534 of CAA 2001 to correspond to a grant under Part 2 of the Industrial Development Act 1982 (c. 52).

(4) Expenditure is not excluded for the purposes of section 170 if it is met (directly or indirectly) by—

(a) insurance money, or

(b) other compensation money,

payable in respect of an asset which has been destroyed, demolished or put out of use.

(5) Expenditure is not excluded for the purposes of section 170 if—

(a) it has been, or is to be, met (directly or indirectly) by a person other than the Crown or a government or local or other public authority, and

(b) no deduction is allowed for the expenditure in calculating for income or corporation tax purposes the profits of a trade carried on by that person.

Chapter 12 — Trade profits: valuation of stock and work in progress on cessation of trade

Valuation of trading stock

Valuation of trading stock on cessation

173

(1) If a person permanently ceases to carry on a trade, in calculating the profits of the trade—

(a) trading stock belonging to the trade at the time of the cessation must be valued, and

(b) the value must be determined in accordance with sections 175 to 178 (bases of valuation).

(2) But no valuation of the stock is required under this Chapter if section 147(3) or (5) of TIOPA 2010 (provision not at arm's length) has effect in relation to any provision which—

(a) is made or imposed in relation to the stock, and

(b) has effect in connection with the cessation.

(2A) Subsection (2B) applies if—

(a) by virtue of subsection (2), no valuation of the stock under this Chapter is required, and

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

(2B) An amount equal to the market value of the stock 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).

(2C) In subsections (2A) and (2B)—

“market value”, in relation to stock, is the value the stock would have been determined to have if it had been valued in accordance with sections 175 to 178, and

“Part 4 TIOPA amount” is the amount which, following the application of Part 4 of TIOPA 2010 in relation to the provision referred to in subsection (2), is brought into account in respect of that provision in calculating the profits of the trade.

(3) If there is a change in the persons carrying on a trade, no valuation of the stock is required under this Chapter so long as a person carrying on the trade immediately before the change continues to carry it on after the change.

(4) If an individual carries on a trade alone, no valuation of the stock is required under this Chapter if the cessation is because of the individual's death.

Meaning of “trading stock”

174

(1) In this Chapter “trading stock” means—

(a) any property (whether land or other property) which is sold in the ordinary course of the trade or would be so sold if it were mature or its manufacture, preparation or construction were complete, or

(b) materials used in the manufacture, preparation or construction of any property mentioned in paragraph (a).

(2) In this Chapter “trading stock” includes also any services performed in the ordinary course of the trade—

(a) the performance of which is wholly or partly completed at the time of the cessation, and

(b) for which it would be reasonable to expect that a charge would be made if there were no cessation and, in the case of partly completed services, their performance were fully completed,

and any article produced, and any material used, in the performance of any such services.

(3) In this Chapter references to the sale or transfer of trading stock include the sale or transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the performance of any such services.

Basis of valuation of trading stock

175

(1) The value of trading stock belonging to the trade at the time of the cessation is determined as follows.

(2) If the stock is sold to a person who—

(a) carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom, and

(b) is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade , profession or vocation for income or corporation tax purposes,

the value is determined in accordance with section 176 (sale to unconnected person), 177 (sale to connected person) or 178 (election by connected persons).

(3) But if section 127 (preventing abuse of the herd basis rules) applies—

(a) the value is not determined in accordance with any of those sections, and

(b) the value is instead taken to be that given by section 127 (the price which the animals transferred would have fetched if sold in the open market at the time of the sale).

(4) In any other case, the value is taken to be the amount which the stock would have realised if sold in the open market at the time of the cessation.

Sale basis of valuation: sale to unconnected person

176

(1) The value of trading stock is determined in accordance with this section if—

(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes, and

(b) the buyer is not connected with the seller.

(2) The value is taken to be the amount in fact realised on the sale.

(3) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.

Sale basis of valuation: sale to connected person

177

(1) The value of trading stock is determined in accordance with this section if—

(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,

(b) the buyer is connected with the seller, and

(2) The value is taken to be the amount which would have been realised if the sale had been between independent persons dealing at arm's length.

Sale basis of valuation: election by connected persons

178

(1) The value of trading stock is determined in accordance with this section if—

(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,

(b) the buyer is connected with the seller, and

(2) The parties to the sale may make an election under this section if the value of the stock determined under section 177 exceeds both—

(a) its acquisition value, and

(b) the amount in fact realised on the sale.

(3) If an election is made, the value is taken to be—

(a) its acquisition value, or,

(b) if greater, the amount in fact realised on the sale.

(4) An election under this section must be made by both parties on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.

(5) The “acquisition value” of trading stock means the amount which would have been deductible as representing its acquisition value, in calculating the profits of the trade, on the following assumptions—

(a) that the stock had been sold in the course of the trade, immediately before the cessation, for a price equal to the value of the stock determined under section 177, and

(b) that the period for which those profits were to be calculated began immediately before the sale.

(6) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.

Connected persons

179

For the purposes of sections 175 to 178 two persons are connected with each other if any of the following tests is met—

(a) they are connected with each other within the meaning of section 993 of ITA 2007 ,

(b) one of them is a firm and the other has a right to a share of the assets or income of the firm,

(d) both of them are firms and some other person has a right to a share of the assets or income of both of them, or

(e) both of them are bodies corporate, or one of them is a firm and the other is a body corporate, and in either case some other person has control over both of them.

Cost to buyer of stock valued on sale basis of valuation

180

(1) This section applies for the purpose of calculating the profits of the trade, profession or vocation carried on by the buyer of trading stock.

(2) If the value of the stock is determined in accordance with—

(a) section 175(3) or sections 176 to 178 (sale basis of valuation), or

(b) section 164(3) or sections 165 to 167 of CTA 2009 (corresponding corporation tax rules),

the cost of the stock to the buyer is taken to be the value as so determined.

181

(1) In sections 175 to 178 (except in section 178(5)) references to a sale include a transfer for valuable consideration.

(2) In relation to a transfer which is not a sale—

“amount realised on the sale” means the value of the consideration given for the transfer,

“buyer” means the person to whom the transfer is made, and

“seller” means the person who makes the transfer.

Valuation of work in progress

Valuation of work in progress on cessation

182

(1) If—

(a) a person permanently ceases to carry on a profession or vocation, and

(b) the work in progress is valued in calculating the profits of the profession or vocation,

the value must be determined in accordance with section 184 (basis of valuation of work in progress) or 185 (election for valuation at cost).

(2) If there is a change in the persons carrying on a profession, subsection (1) does not apply so long as a person carrying on the profession immediately before the change continues to carry it on after the change.

(3) If an individual carries on a profession alone or a vocation, subsection (1) does not apply if the cessation is because of the individual's death.

Meaning of “work in progress”

183

(1) In this Chapter “work in progress” means services performed in the ordinary course of the profession or vocation—

(a) the performance of which is wholly or partly completed at the time of the cessation, and

(b) for which it would be reasonable to expect that a charge would be made if there were no cessation and, in the case of partly completed services, their performance were fully completed,

and includes any article produced, and any material used, in the performance of any such services.

(2) In this Chapter references to the transfer of work in progress include the transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the performance of any such services.

Basis of valuation of work in progress

184

(1) If the work in progress is transferred for money or other valuable consideration to a person who—

(a) carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom, and

(b) is entitled to deduct the cost of the work as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,

the value of the work is taken to be the amount paid or other consideration given for the transfer.

(2) In any other case, the value of the work is taken to be the amount which would have been paid for a transfer of the work at the time of the cessation as between independent parties dealing at arm's length.

(3) These rules are subject to any election under section 185 (election for valuation at cost).

Election for valuation at cost

185

(1) The person who was carrying on the profession or vocation immediately before the cessation may elect that—

(a) the value of work in progress brought into account in calculating the profits of the period immediately before the cessation is to be the actual cost of the work, and

(b) the amount by which any sums received for the transfer of the work exceed the actual cost of the work is to be treated as a post-cessation receipt (see Chapter 18).

(2) An election under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.

Supplementary

Determination of questions by Commissioners

186

(1) Any question arising under—

(a) section 175(3) or sections 176 to 178 (sale basis of valuation of trading stock), or

(b) section 184(1) (valuation of work in progress transferred for valuable consideration),

must be determined ... in the same way as an appeal.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 13 — Deductions from profits: unremittable amounts

Professions and vocations

187

The provisions of this Chapter apply to professions and vocations as they apply to trades.

Application of Chapter

188

(1) This Chapter applies if—

(a) an amount received by, or owed to, a person carrying on a trade (“the trader”) is brought into account as a receipt in calculating the profits of the trade,

(b) the amount is paid or owed in a territory outside the United Kingdom, and

(2) An amount received is unremittable if it cannot be transferred to the United Kingdom merely because of foreign exchange restrictions.

(3) An amount owed is unremittable if it cannot be paid in the United Kingdom and—

(a) it temporarily cannot be paid in the territory in which it is owed merely because of foreign exchange restrictions, or

(b) it can be paid in that territory but, if it were paid there, the amount paid would not be transferable to the United Kingdom merely because of foreign exchange restrictions.

(4) “Foreign exchange restrictions” are restrictions imposed by any of the following—

(a) the laws of the territory where the amount is paid or owed,

(b) executive action of its government, and

Relief for unremittable amounts

189

(1) If—

(a) the trader has profits from the trade in a period of account, and

(b) an unremittable amount has been brought into account as a receipt for that period,

a deduction of the amount is allowed from those profits (but see subsection (5)).

(2) If the trader has profits from the trade in a period of account and the total of—

(a) any unremittable amounts brought into account as receipts for that period, and

(b) any amount carried forward under this subsection or subsection (3) from the previous period of account,

exceeds the amount of those profits, the excess may be carried forward to the next period of account.

(3) If the trader does not have profits from the trade in a period of account and an unremittable amount has been brought into account as a receipt for that period, the total of—

(a) any unremittable amounts brought into account as receipts for that period, and

(b) any amount carried forward under this subsection or subsection (2) from the previous period of account,

may be carried forward to the next period of account.

(4) If an amount is carried forward under this section to a period of account in which the trader has profits from the trade, a deduction of the amount is allowed from those profits (but see subsection (5)).

(5) The total amount deducted under this section from the profits from a trade in a period of account must not exceed the amount of the profits.

Restrictions on relief

190

(1) No deduction is allowed under section 189 in relation to an amount so far as—

(a) it is used to finance expenditure or investment outside the United Kingdom, or

(b) it is applied outside the United Kingdom in another way.

(2) No deduction is allowed under section 189 in relation to an amount owed so far as a deduction is allowed in respect of it under section 35 (bad and doubtful debts).

(3) No deduction is allowed under section 189 in relation to an amount owed so far as a payment under a contract of insurance has been received in relation to it.

(4) No deduction is allowed under section 189 in relation to an amount brought into account in calculating profits if relief under section 842 (unremittable income) may be claimed in relation to that amount.

Withdrawal of relief

191

(1) This section applies if—

(a) some or all of an unremittable amount has been deducted from profits under section 189, and

(b) any of the following events occurs.

(2) The events are that—

(a) the amount or part of it ceases to be unremittable,

(b) the amount or part of it is used to finance expenditure or investment outside the United Kingdom,

(d) the amount or part of it is exchanged for, or discharged by, an amount that is not unremittable,

(e) a deduction is allowed in respect of the amount or part of it under section 35 (bad and doubtful debts), and

(f) if the amount is an amount owed, a payment under a contract of insurance is received in relation to the amount or part of it.

(3) The amount or the part of it in question is brought into account as a receipt in calculating the profits of the trade for the period of account in which the event occurs, but only so far as—

(a) it has been deducted from profits under section 189, and

(b) it has not already been brought into account as a receipt in calculating the profits of the trade as a result of this section.

(4) If the event is the receipt of a payment under a contract of insurance, the amount brought into account as a receipt must not exceed the amount of the payment.

Chapter 14 — Disposal and acquisition of know-how

Meaning of “know-how” etc.

192

(1) In this Chapter “know-how” means any industrial information or techniques likely to assist in—

(a) manufacturing or processing goods or materials,

(b) working a source of mineral deposits (including searching for, discovering or testing mineral deposits or obtaining access to them), or

(2) For this purpose—

“mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and for this purpose geothermal energy is treated as a natural deposit, and

“source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.

(3) For the purposes of this Chapter any consideration received for giving, or wholly or partly fulfilling, an undertaking which—

(a) is given in connection with a disposal of know-how, and

(b) restricts, or is designed to restrict, any person's activities in any way,

is treated as consideration received for the disposal of the know-how.

(4) It does not matter whether or not the undertaking is legally enforceable.

(5) For the purposes of this Chapter references to a sale of know-how include an exchange of know-how and any provision of this Chapter referring to a sale has effect with the necessary modifications.

(6) Those modifications include, in particular, reading references to the proceeds of sale and to the price as including the consideration for the exchange.

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

193

(1) This section applies if—

(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade,

(b) the person continues to carry on the trade after the disposal, and

(c) neither section 194 (disposal of know-how as part of disposal of all or part of a trade) nor section 195 (seller controlled by buyer etc.) applies.

(2) The amount or value of the consideration is treated for all purposes as a trading receipt, except so far as it is brought into account under section 462 of CAA 2001 (disposal values).

(3) If the know-how is sold together with other property, the net proceeds of the sale of the know-how are treated as being so much of the net proceeds of the sale of all the property as, on a just and reasonable apportionment, is attributable to the know-how.

(4) For this purpose all property sold as a result of one bargain is treated as sold together even though—

(a) separate prices are, or purport to be, agreed for separate items of that property, or

(b) there are, or purport to be, separate sales of separate items of that property.

(5) Any question about the way in which a sum is to be apportioned under this section must be determined in accordance with section 563(2) to (6) of CAA 2001 (procedure for determining certain questions affecting two or more persons) if it materially affects two or more taxpayers.

(6) For this purpose a question materially affects two or more taxpayers if at the time when the question falls to be determined it appears that the determination is material to the liability to tax (for whatever period) of two or more persons.

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

194

(1) This section applies if —

(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b) the know-how is disposed of as part of the disposal of all or part of the trade.

(2) If the person disposing of the know-how is within the charge to income tax, the consideration is treated for income tax purposes as a capital receipt for goodwill.

(3) If the person acquiring the know-how—

(a) is within the charge to income tax, and

(b) provided the consideration,

the consideration is treated for income tax purposes as a capital payment for goodwill.

(4) But the consideration is not treated for income tax purposes as a capital payment for goodwill if, before the acquisition, the trade was carried on wholly outside the United Kingdom.

(5) If the person disposing of the know-how is within the charge to income tax—

(a) that person, and

(b) the person acquiring the know-how (whether or not within the charge to income tax),

may jointly elect for this section not to apply (but see section 195).

(6) The election must be made within two years of the disposal.

(7) If—

(a) an election is made under section 178 of CTA 2009 (corresponding corporation tax provision), and

(b) the person making the acquisition mentioned in that section is within the charge to income tax,

the persons making the election under that section are treated as also making an election under this section (even though the person disposing of the know-how is not within the charge to income tax).

Seller controlled by buyer etc.

195

(1) This section applies if a disposal of know-how is by way of sale and—

(a) the seller is a body of persons over which the buyer has control,

(b) the buyer is a body of persons over which the seller has control, or

(2) In such a case—

(a) section 193 does not apply, and

(b) no election may be made under section 194.

(3) For the purposes of this section “body of persons” includes a firm.

Chapter 15 — Basis periods

Introduction

Professions and vocations

196

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Accounting date

Meaning of “accounting date”

197

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The normal rules

General rule

198

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First tax year

199

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Second tax year

200

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Tax year in which there is no accounting date

201

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Final tax year

202

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Apportionment of profits

Apportionment etc. of profits to basis periods

203

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Overlap profits and losses

Meaning of “overlap period” and “overlap profit”

204

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Deduction for overlap profit in final tax year

205

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Restriction on bringing losses into account twice

206

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

207

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Rules where first accounting date shortly before end of tax year

When the late accounting date rules apply

208

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Rule if there is an accounting date

209

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Rules if there is no accounting date

210

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Slight variations in accounting date

Treating middle date as accounting date

211

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Consequence of treating middle date as accounting date

212

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Circumstances in which middle date not treated as accounting date

213

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Special rules if accounting date changes

When a change of accounting date occurs

214

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Change of accounting date in third tax year

215

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Change of accounting date in later tax year

216

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Conditions for basis period to end with new accounting date

217

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

Commercial reasons for change of accounting date

218

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

The year after an ineffective change of accounting date

219

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

Deduction for overlap profit on change of accounting date

220

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

Chapter 16 — Averaging profits of farmers and creative artists

Claim for averaging of fluctuating profits

221

(1) This Chapter enables an individual (a “taxpayer”) to make a claim (an “averaging claim”) if—

(a) the taxpayer is, or has been, carrying on a qualifying trade, profession or vocation (alone or in partnership), and

(b) the taxpayer's profits from it (“the relevant profits”) fluctuate from one tax year to the next.

(2) For the purposes of section 222 (two-year averaging) a trade, profession or vocation is a “qualifying trade, profession or vocation” if—

(a) it is farming or market gardening in the United Kingdom,

(b) it is the intensive rearing in the United Kingdom of livestock or fish on a commercial basis for the production of food for human consumption, or

(2A) For the purposes of section 222A (five-year averaging), a trade, profession or vocation is a “qualifying trade, profession or vocation” if it falls within subsection (2)(a) or (b).

(3) For the purpose of subsection (2) “creative works” means—

(a) literary, dramatic, musical or artistic works, or

(b) designs,

created by the taxpayer personally or, if the qualifying trade, profession or vocation is carried on in partnership, by one or more of the partners personally.

(4) For the purposes of this Chapter references to the relevant profits of a tax year are to profits before making any deduction for a loss made in any tax year.

(5) If the taxpayer makes a loss in the qualifying trade, profession or vocation in a tax year, the relevant profits of the tax year for the purposes of this Chapter are nil.

(6) For the purposes of this Chapter references to the relevant profits of a tax year are to profits after any adjustment made under Chapter 16ZA (compensation for compulsory slaughter of animals).

Circumstances in which claim may be made

222

(1) An averaging claim may be made under this section in relation to two consecutive tax years in which a taxpayer is or has been carrying on the qualifying trade, profession or vocation if—

(a) the relevant profits of one of the tax years are less than 75% of the relevant profits of the other tax year, or

(b) the relevant profits of one (but not both) of the tax years are nil.

(2) The earlier of the two years to which an averaging claim under this section relates may be a tax year in relation to which an averaging claim under this section or section 222A has already been made.

(3) An averaging claim may not be made under this section in relation to a tax year if an averaging claim has already been made under this section or section 222A in relation to a later tax year in respect of the trade, profession or vocation.

(4) An averaging claim may not be made under this section in relation to the tax year in which—

(a) the taxpayer starts, or permanently ceases, to carry on the trade, profession or vocation, or

(b) in the case of a trade, profession or vocation within section 221(2)(c), it begins or ceases to be a qualifying trade, profession or vocation.

(5) An averaging claim under this section must be made on or before the first anniversary of the normal self-assessment filing date for the second of the tax years to which the claim relates.

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Income Tax (Trading and Other Income) Act 2005

Meaning of “film” and related expressions

131

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

132

Meaning of “relevant period”

133

Expenditure treated as revenue in nature

Expenditure treated as revenue in nature

134

Rules for allocating expenditure

Films and sound recordings: production or acquisition expenditure

135

Certified master versions: special rules for allocating expenditure

Application of provisions about certified master versions

136

Certified master versions: preliminary expenditure

137

Certified master versions: production or acquisition expenditure

138

Certified master versions: limited-budget films

Certified master versions: production expenditure on limited-budget films

139

Certified master versions: acquisition expenditure on limited-budget films

140

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

141

When expenditure is incurred

142

Election for sections 134 to 140 not to apply

Election for sections 134 to 140 not to apply

143

Supplementary

Meaning of “genuinely intended for theatrical release”

144

Chapter 10 — Trade profits: certain telecommunication rights

Professions and vocations

145

Meaning of “relevant telecommunication right”

146

Expenditure and receipts treated as revenue in nature

147

Credits or debits arising from revaluation

148

Chapter 11 — Trade profits: other specific trades

Dealers in securities etc.

Taxation of amounts taken to reserves

149

Conversion etc. of securities held as circulating capital

150

Exchanges of gilts for gilt strips

151

Consolidation of gilt strips

152

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

153

Regulations for determining market value of securities or strips

154

Persons authorised for purposes of FISMA 2000

Levies and repayments under FISMA 2000

155

Dealers in land etc.

Purchase or sale of woodlands

156

Relief in respect of mineral royalties

157

Lease premiums etc: reduction of receipts

158

Ministers of religion

Ministers of religion

159

Barristers and advocates

Alternative basis of calculation in early years of practice

160

Mineral exploration and access

Mineral exploration and access

161

Persons liable to pool betting duty

Payments by persons liable to pool betting duty

162