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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

articles Not indexed

Reform history JSON API

(10) For the purposes of subsection (9) if an individual holds any shares in a company jointly or in common with one or more other persons, he or she is to be treated as sole holder of so many of them as is proportionate to the value of his or her share (and as able to exercise voting rights by virtue of that holding).

404A

(1) For the purposes of this Chapter, a distribution made to an individual in respect of share capital in a winding up of a non-UK resident company is a dividend of the company if—

(a) Conditions A to D are met, and

(b) the distribution is not excluded (see subsection (7)).

(2) Condition A is that, immediately before the winding up, the individual has at least a 5% interest in the company.

(3) Condition B is that the company—

(a) is a close company when it is wound up, or

(b) was a close company at any time in the period of two years ending with the start of the winding up.

(4) Condition C is that, at any time within the period of two years beginning with the date on which the distribution is made—

(a) the individual carries on a trade or activity which is the same as, or similar to, that carried on by the company or an effective 51% subsidiary of the company,

(b) the individual is a partner in a partnership which carries on such a trade or activity,

(c) the individual, or a person connected with him or her, is a participator in a company in which he or she has at least a 5% interest and which at that time—

(i) carries on such a trade or activity, or

(ii) is connected with a company which carries on such a trade or activity, or

(d) the individual is involved with the carrying on of such a trade or activity by a person connected with the individual.

(5) Condition D is that it is reasonable to assume, having regard to all the circumstances, that—

(a) the main purpose or one of the main purposes of the winding up is the avoidance or reduction of a charge to income tax, or

(b) the winding up forms part of arrangements the main purpose or one of the main purposes of which is the avoidance or reduction of a charge to income tax.

(6) The circumstances referred to in subsection (5) include in particular the fact that Condition C is met.

(7) A distribution to an individual is excluded if or to the extent that—

(a) the amount of the distribution does not exceed the amount that would result in no gain accruing for the purposes of capital gains tax, or

(b) the distribution is a distribution of irredeemable shares.

(8) In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;

“close company” includes a company which would be a close company if it were a UK resident company;

“effective 51% subsidiary” has the meaning given by section 170(7) of TCGA 1992;

“participator” has the meaning given by section 454 of CTA 2010.

(9) For the purposes of this section, a person has at least a 5% interest in a company if—

(a) at least 5% of the ordinary share capital of the company is held by the individual, and

(b) at least 5% of the voting rights in the company are exercisable by the individual by virtue of that holding.

(10) For the purposes of subsection (9) if an individual holds any shares in a company jointly or in common with one or more other persons, he or she is to be treated as sole holder of so many of them as is proportionate to the value of his or her share (and as able to exercise voting rights by virtue of that holding).

577A

(1) References in section 577 to income which is from a source in the United Kingdom include income arising where—

(a) a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident, and

(b) the payment is made in connection with a trade carried on by that person through a permanent establishment in the United Kingdom.

(2) Subsection (3) applies where a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident in connection with a trade carried on by that person only in part through a permanent establishment in the United Kingdom.

(3) The payment referred to in subsection (2) is to be regarded for the purposes of subsection (1)(b) as made in connection with a trade carried on through a permanent establishment in the United Kingdom to such extent as is just and reasonable, having regard to all the circumstances.

(4) In determining for the purposes of section 577 whether income arising is from a source in the United Kingdom, no regard is to be had to arrangements the main purpose of which, or one of the main purposes of which, is to avoid the effect of the rule in subsection (1).

(5) In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“intellectual property” has the same meaning as in section 579;

“permanent establishment”—in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, andin relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.

694A

(1) In section 694(1) “income of an individual from investments under a plan” includes—

(a) income (of any person) from administration-period investments under a plan, and

(b) income (of any person) from the estate of a deceased person (“D”) where the whole or any part of the income of D's personal representatives is income from administration-period investments under a plan.

(2) For the purposes of sections 694(3)(a) and (4) and 695(1) “individual”, in relation to investments that are administration-period investments, includes—

(a) the personal representatives of the deceased individual concerned, and

(b) any other person on whose directions plan managers agree to act in relation to the investments.

(3) In sections 699 and 701 “investor” includes a person entitled to an exemption given by investment plan regulations by virtue of subsection (1) of this section.

(4) Investments are “administration-period investments” if—

(a) an individual dies, and

(b) immediately before the individual's death—

(i) the investments were held under a plan,

(ii) the individual was entitled to the income from the investments, and

(iii) as a result of investment plan regulations, the individual's income from investments under the plan was exempt from income tax (either wholly or to an extent specified in the regulations).

(5) Investments are also “administration-period investments” if (directly or indirectly) they represent investments that are administration-period investments as a result of subsection (4).

(6) Investment plan regulations may provide that investments are administration-period investments as a result of subsection (4) or (5) only at times specified in, or ascertained in accordance with, the regulations.

(7) Provision under subsection (6) may (in particular) be framed by reference to the completion of the administration of a deceased individual's estate.

(8) In the application of subsection (7) in relation to Scotland, the reference to the completion of the administration is to be read in accordance with section 653(2).

Determinations

Deductible amount: splitting of trading allowance

775A

No liability to income tax arises in respect of a payment of, or in respect of, a government bonus under section 1 or 2 of the Savings (Government Contributions) Act 2017.

Worker's services provided to public sector through intermediary

164B

(1) This section applies for the purposes of calculating the trading profits of a person where—

(a) the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),

(b) a deemed direct payment is treated as made under subsection (3) of that section, and

(c) the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.

(2) The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.

(3) In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).

Trading allowance

22A

(1) The rules for calculating the profits of a trade, profession or vocation carried on by an individual are subject to Chapter 1 of Part 6A (trading allowance).

(2) That Chapter gives relief on relevant income and, where relief is given, disallows most deductions under this Part (see, in particular, sections 783AC, 783AF and 783AI).

Trading income provided through third parties

23A

(1) Section 23E (tax treatment of relevant benefits) applies if Conditions A to E are met.

(2) Condition A is that a person (“T”) is or has been carrying on a trade (the “relevant trade”) alone or in partnership.

(3) Condition B is that—

(a) there is an arrangement (“the arrangement”) in connection with the relevant trade to which T is a party or which otherwise (wholly or partly) covers or relates to T, and

(b) it is reasonable to suppose that, in essence—

(i) the arrangement, or

(ii) the arrangement so far as it covers or relates to T,

is (wholly or partly) a means of providing, or is otherwise concerned with the provision of, relevant benefits.

(4) Condition C is that—

(a) a relevant benefit arises to T, or a person who is or has been connected with T, in pursuance of the arrangement, or

(b) a relevant benefit arises to any other person in pursuance of the arrangement and any of the enjoyment conditions (see section 23F) is met in relation to the relevant benefit.

(5) Condition D is that it is reasonable to suppose that the relevant benefit (directly or indirectly) represents, or has arisen or derives from, or is otherwise connected with, the whole or part of a qualifying third party payment.

(6) Condition E is that it is reasonable to suppose that a tax advantage would be obtained by T, or a person who is or has been connected with T, as a result of the arrangement.

(7) For the purposes of subsection (3) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

(8) In this section and sections 23B to 23H, “this group of sections” means this section and those sections.

(9) The provisions of this group of sections apply to professions and vocations as they apply to trades.

(10) See Schedule 12 to F(No.2)A 2017 for provision about the application of this group of sections in relation to loans and quasi-loans that are outstanding on 5 April 2019.

23B

(1) The following provisions apply for the purposes of this group of sections.

(2) “Relevant benefit” means any payment (including a payment by way of a loan), a transfer of money's worth, or any other benefit.

(3) The assumption of a liability of T by another person is to be treated as the provision of a relevant benefit to T.

(4) The assumption, by a person other than T, of a liability of a person (“C”) who is or has been connected with T, is to be treated as the provision of a relevant benefit to C.

(5) “Loan” includes—

(a) any form of credit;

(b) a payment that is purported to be made by way of a loan.

23C

(1) The following provisions apply for the purposes of this group of sections.

(2) A payment is a “third party payment” if it is made (by T or another person) to—

(a) T acting as trustee, or

(b) any person other than T.

(3) A third party payment is a “qualifying third party payment” if the deduction condition or the trade connection condition is met in relation to the payment.

(4) The “deduction condition” is met in relation to a payment if—

(a) a deduction for the payment is made in calculating the profits of the relevant trade, or

(b) where the relevant trade is or has been carried on in partnership, a deduction for the payment is made in calculating the amount on which T is liable to income tax in respect of the profits of the trade.

(5) The “trade connection condition” is met in relation to a payment if it is reasonable to suppose that in essence—

(a) the payment is by way of consideration for goods or services provided in the course of the relevant trade, or

(b) there is some other connection (direct or indirect) between the payment and the provision of goods or services in the course of the relevant trade.

(6) For the purposes of subsection (5) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

23D

(1) The following provisions apply for the purposes of this group of sections.

(2) “Arrangement” includes any agreement, understanding, scheme, settlement, trust, transaction or series of transactions (whether or not legally enforceable).

(3) A “tax advantage” includes—

(a) relief or increased relief from tax,

(b) repayment or increased repayment of tax,

(d) avoidance of a possible assessment to tax,

(e) deferral of a payment of tax or advancement of a repayment of tax, and

(f) avoidance of an obligation to deduct or account for tax.

(4) Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of this group of sections as if subsection (4) of that section 993 were omitted.

23E

(1) Where this section applies (see section 23A), the relevant benefit amount is to be treated for income tax purposes as profits of the relevant trade for—

(a) the tax year in which the relevant benefit arises, or

(b) if T has ceased to carry on the relevant trade in a tax year (the “earlier tax year”) before the tax year referred to in paragraph (a), the earlier tax year.

(2) For the purposes of this section, “the relevant benefit amount” means—

(a) if the relevant benefit is a payment otherwise than by way of a loan, an amount equal to the amount of the payment,

(b) if the relevant benefit is a payment by way of loan, an amount equal to the principal amount lent, or

(3) For the purposes of subsection (2)(c), the value of a relevant benefit is—

(a) its market value at the time it arises, or

(b) if higher, the cost of providing it.

(4) In subsection (3) “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

23F

(1) For the purposes of section 23A(4), the enjoyment conditions are—

(a) that the relevant benefit, or part of it, is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of T;

(b) that the arising of the relevant benefit operates to increase the value to T of any assets—

(i) which T holds, or

(ii) which are held for the benefit of T;

(c) that T receives, or is entitled to receive, at any time any benefit provided or to be provided out of, or deriving or to be derived from, the relevant benefit (or part of it);

(d) where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T may become entitled to the beneficial enjoyment of the sum or part of the sum if one or more powers are exercised or successively exercised (and for these purposes it does not matter who may exercise the powers or whether they are exercisable with or without the consent of another person);

(e) where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T is able in any manner to control directly or indirectly the application of the sum or part of the sum.

(2) Where an enjoyment condition is met in relation to part only of a relevant benefit, that part is to be treated as a separate benefit for the purposes of section 23A(4).

(3) In subsection (1) references to T include references to a person who is or has been connected with T.

(4) In determining whether any of the enjoyment conditions is met in relation to a relevant benefit, regard must be had to the substantial result and effect of all the relevant circumstances.

23G

(1) In determining whether section 23E applies in relation to a relevant benefit, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that section 23E does not apply in relation to the whole, or any part, of—

(a) the relevant benefit, or

(b) the relevant benefit and one or more other relevant benefits (whether or not all arising to the same person).

(2) Where arrangements are disregarded under subsection (1), and a relevant benefit (or part of it)—

(a) would, if the arrangements were not disregarded, arise before 6 April 2017, but

(b) would, when the arrangements are disregarded, arise on or after that date,

the relevant benefit (or part) is to be regarded for the purposes of this group of sections as arising on the date on which it would arise apart from the arrangements.

23H

(1) This section applies where—

(a) income tax is charged on an individual by virtue of the application of section 23E in relation to a relevant benefit amount, and

(b) at any time, a tax (whether income tax or another tax) is charged on the individual or another person otherwise than by virtue of the application of section 23E in relation to the relevant benefit concerned.

(2) In order to avoid a double charge to tax, the individual may make a claim for one or more consequential adjustments to be made in respect of the tax charged as mentioned in subsection (1)(b).

(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) The value of any consequential adjustments must not exceed the lesser of—

(a) the income tax charged on the individual as mentioned in subsection (1)(a), and

(b) the tax charged as mentioned in subsection (1)(b).

(5) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

96B

(1) This section has effect for the purposes of section 96A.

(2) Any question as to whether or to what extent expenditure is brought into account in calculating the profits of a trade is to be determined on such basis as is just and reasonable in all the circumstances.

(3) A person carrying on a trade “enters the cash basis” for a tax year if—

(a) the cash basis applies in relation to the trade for the tax year, and

(b) the cash basis did not apply in relation to the trade for the previous tax year.

(4) Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the trade on the cash basis for that tax year.

(5) Expenditure is “brought into account under CAA 2001” in calculating the profits of a trade if and to the extent that—

(a) a capital allowance made under Part 2, 2A, 5, 6, 7 or 8 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see, for example, section 247 of that Act), or

(b) qualifying expenditure (within the meaning of Part 2, 7 or 8 of CAA 2001) is allocated to a pool for the trade and is set-off against different disposal receipts.

(6) An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a) the amount would have been unrelieved qualifying expenditure carried forward in the pool for the trade, but

(b) the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(7) For the purposes of subsection (6), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(8) In this section and in section 96A—

“disposal value” means—in section 96A(3K)(c)—a disposal value for the purposes of Part 2, 4A, 5, 6, 7 8 or 10 of CAA 2001 (for example, in relation to Part 2 of that Act, see (in particular) section 61 of that Act), orproceeds from a balancing event for the purposes of Part 3 or 3A of that Act (see sections 316 and 360O of that Act), andin subsection (6), a disposal value for the purposes of—Part 2 of that Act (see, in particular, section 61 of that Act),Part 7 of that Act (see section 462 of that Act), orPart 8 of that Act (see sections 476 and 477 of that Act);

“market value amount” means the amount that would be regarded as normal and reasonable—in the market conditions then prevailing, andbetween persons dealing with each other at arm's length in the open market;

“pool” means—the main pool or a class pool to which qualifying expenditure is allocated under Part 2 of CAA 2001 (see section 54 of that Act),a pool to which qualifying expenditure is allocated under Part 7 of that Act (see section 456 of that Act), ora pool to which qualifying expenditure is allocated under Part 8 of that Act (see section 470 of that Act);

“provision” includes creation, construction or acquisition;

“qualifying expenditure” means—qualifying expenditure within the meaning of Part 2 of CAA 2001 (see section 11(4) of that Act for the general rule),qualifying expenditure within the meaning of Part 5 of that Act (see section 395 of that Act),qualifying expenditure within the meaning of Part 6 of that Act (see section 439 of that Act),qualifying expenditure within the meaning of Part 7 of that Act (see section 454 of that Act), orqualifying trade expenditure within the meaning of Part 8 of that Act (see section 468 of that Act);

“unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of—Part 2 of CAA 2001 (see section 59(1) and (2) of that Act),Part 7 of that Act (see section 461 of that Act), orPart 8 of that Act (see section 475 of that Act).

204A

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

227B

(1) Subsection (2) applies if—

(a) an individual carries on a trade in a tax year, and

(b) the profits or losses of the trade for the tax year are treated as nil under section 783AF (trade profits: full relief under Chapter 1 of Part 6A) by virtue of the fact that the conditions in section 783AE(2) are met.

(2) For the purposes of determining if this Chapter applies, the cash basis is to be treated as not applying in relation to the trade for the tax year.

227C

(1) This section applies if, as a result of the operation of section 227B, the basis on which profits of a trade are calculated is treated as changed as mentioned in section 227A(1).

(2) This Chapter applies as if—

(a) in sections 232(1) and 233(1), for “the first period of account for which the new basis is adopted” there were substituted “ the first tax year for which the profits or losses of the trade are not treated as nil under section 783AF ”, and

(b) sections 235, 236, 237, 239A and 239B were omitted.

(3) If there is no tax year after the change of basis for which the profits or losses of the trade are not treated as nil under section 783AF, this Chapter does not apply.

240CA

(1) This section applies if a person carrying on a mineral extraction trade enters the cash basis for a tax year (“the current tax year”).

(2) But this section does not apply if section 240D applies.

(3) In calculating the profits of the trade for the current tax year, a deduction is allowed for any amount of expenditure—

(a) which would, apart from section 419A(1) of CAA 2001, have been unrelieved qualifying expenditure for the current tax year, and

(b) for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year.

(4) In this section—

“mineral extraction trade” has the meaning given in section 394 of CAA 2001;

“unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 5 of CAA 2001 (see section 419 of that Act).

Basis of calculation of profits

271A

(1) The profits of a property business for a tax year must be calculated in accordance with GAAP if condition A, B, C, D or E is met.

(2) Condition A is that the business is carried on at any time in the tax year by—

(a) a company,

(b) a limited liability partnership,

(d) the trustees of a trust.

(3) For the purposes of subsection (2) a firm is a “corporate firm” if a partner in the firm is not an individual.

(4) Condition B is that the cash basis receipts for the tax year exceed £150,000.

(5) In subsection (4) “the cash basis receipts for the tax year” means the total of the amounts that would be brought into account as receipts in calculating the profits of the property business for the tax year on the cash basis (see section 271D).

(6) If the property business is carried on for only part of the tax year, the sum given in subsection (4) is proportionately reduced.

(7) Condition C is that—

(a) the property business is carried on by an individual (“P”),

(b) a share of joint property income is brought into account in calculating the profits of the business for the tax year,

(c) a share of that joint property income is brought into account in calculating the profits for the tax year of a property business carried on by another individual (“Q's property business”), and

(d) the profits of Q's property business for the tax year are calculated in accordance with GAAP.

(8) In subsection (7) “joint property income” means income to which P and Q are treated for income tax purposes as beneficially entitled in equal shares by virtue of section 836 of ITA 2007.

(9) Condition D is that—

(a) an allowance under Part 3A of CAA 2001 (business premises renovation allowances) is made at any time in calculating the profits of the property business, and

(b) if the profits of the business were to be calculated in accordance with GAAP for the tax year, there would be a day in the tax year on which the occurrence of a balancing event (within the meaning of that Part) would give rise to a balancing adjustment for the tax year (see section 360M of that Act).

(10) Condition E is that an election under this subsection made by the person who is or has been carrying on the property business has effect in relation to the business for the tax year.

(11) An election under subsection (10) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

(12) The Treasury may by regulations—

(a) amend subsection (2);

(b) amend subsection (4) so as to substitute another sum for the sum for the time being specified in that subsection.

(13) A statutory instrument containing regulations under subsection (12) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(14) Subsection (13) does not apply if the regulations omit one or more paragraphs of subsection (2) and make no other provision.

271B

(1) In this Part, references to calculating the profits of a property business in accordance with GAAP are to calculating the profits in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(2) A requirement under this Part to calculate profits in accordance with GAAP does not—

(a) require a person to comply with the requirements of the Companies Act 2006 or subordinate legislation made under that Act except as to the basis of calculation, or

(b) impose any requirements as to audit or disclosure.

(3) See section 272 (application of trading income rules: GAAP) which applies only where profits are calculated in accordance with GAAP.

271C

The profits of a property business for a tax year must be calculated on the cash basis if none of conditions A, B, C, D or E in section 271A is met.

271D

(1) In this Part, references to calculating the profits of a property business on the cash basis are to calculating the profits in accordance with subsections (2) and (3).

(2) In calculating the profits, receipts of the business are brought into account at the time they are received, and expenses of the business are brought into account at the time they are paid.

(3) Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(4) For provision about the application of Chapter 4 (profits of property businesses: lease premiums etc) in relation to profits calculated on the cash basis, see section 276A.

(5) For provision about the application of Chapter 5 (rules about deductions and receipts) in relation to profits calculated on the cash basis, see section 307A.

(6) The following provisions apply only where profits are calculated on the cash basis—

(a) section 272ZA (application of trading income rules: cash basis), and

(b) Chapter 7A (cash basis: adjustments for capital allowances).

271E

(1) The profits of a property business are calculated in the same way as the profits of a trade.

(2) But this is subject to—

(a) section 272, which limits the rule in subsection (1) in relation to a property business whose profits are calculated in accordance with GAAP, and

(b) section 272ZA, which limits that rule in relation to a property business whose profits are calculated on the cash basis.

272ZA

(1) In relation to a property business whose profits are calculated on the cash basis, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following—

In Chapter 3 (basic rules)—	In Chapter 3 (basic rules)—
section 26	losses calculated on same basis as profits
section 28A	money's worth
section 29	interest
In Chapter 4 (rules restricting deductions)—	In Chapter 4 (rules restricting deductions)—
section 34	expenses not wholly and exclusively for trade and unconnected losses
sections 38 to 42 and 44	employee benefit contributions
sections 45 to 47	business entertainment and gifts
section 52	exclusion of double relief for interest
section 53	social security contributions
section 54	penalties , interest and VAT surcharges and interest
section 55	crime-related payments
section 55A	expenditure on integral features
In Chapter 5 (rules allowing deductions)—	In Chapter 5 (rules allowing deductions)—
section 57	pre-trading expenses
sections 58 and 59	incidental costs of obtaining finance
section 69	payments for restrictive undertakings
sections 70 and 71	seconded employees
section 72	payroll deduction schemes: contributions to agents' expenses
sections 73 to 75	counselling and retraining expenses
sections 76 to 80	redundancy payments etc
section 81	personal security expenses
sections 82 to 86	contributions to local enterprise organisations or urban regeneration companies
sections 86A and 86B	contributions to flood and coastal erosion risk management projects
sections 87 and 88	scientific research
sections 89 and 90	expenses connected with patents, designs and trade marks
section 91	payments to Export Credits Guarantee Department
*In Chapter 5A (deductions allowable at a fixed rate)—*	*In Chapter 5A (deductions allowable at a fixed rate)—*
section 94C	exclusion of provisions of Chapter 5A for firms with partner who is not an individual
sections 94D to 94G	expenditure on vehicles
In Chapter 6 (receipts)—	In Chapter 6 (receipts)—
section 96	capital receipts
section 97	debts incurred and later released
section 104	distribution of assets of mutual concerns
section 105(1) and (2)(b) and (c)	industrial development grants
section 106	sums recovered under insurance policies etc
In Chapter 6A (amounts not reflecting commercial transactions)—	In Chapter 6A (amounts not reflecting commercial transactions)—
section 106C	amounts not reflecting commercial transactions
section 106D	capital receipts
section 106E	gifts to charities etc
In Chapter 7 (gifts to charities etc)—	In Chapter 7 (gifts to charities etc)—
section 109	receipt by donor or connected person of benefit attributable to certain gifts

(2) In those provisions, the expression “this Part” is to be read as a reference to those provisions as applied by subsection (1) and to the other provisions of Part 3.

(3) In section 106D, the reference to subsection (4) or (5) of section 96A is to be read as a reference to subsection (2), (3) or (5) of section 307F (deemed capital receipts under, or after leaving, cash basis).

Calculation of profits: other general rules

276A

The following provisions of this Chapter do not apply in calculating the profits of a property business on the cash basis—

(a) sections 291 to 294 (tenants under taxed leases: deductions), and

(b) sections 296 and 298 (ICTA modifications).

Cash basis: application of Chapter

307A

(1) The following provisions of this Chapter apply only where the profits of a property business are calculated on the cash basis—

(a) section 307B (cash basis: capital expenditure),

(b) section 307C (cash basis: deduction for costs of loans), and

(2) Sections 307E and 307F make provision about capital receipts in certain cases where the profits of a property business are calculated on the cash basis or have previously been calculated on the cash basis.

Property businesses using cash basis

307B

(1) This section applies in relation to the calculation of the profits of a property business on the cash basis.

(2) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the acquisition or disposal of a business or part of a business.

(3) No deduction is allowed for an item of a capital nature incurred on, or in connection with, education or training.

(4) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of land.

(5) But subsection (4) does not prevent a deduction being made for expenditure that—

(a) is incurred on the provision of a depreciating asset which, in being provided, is installed or otherwise fixed to qualifying land (see subsection (8)) so as to become, in law, part of the land, but

(b) is not incurred on, or in connection with, the provision of—

(i) a building,

(ii) a wall, floor, ceiling, door, gate, shutter or window or stairs,

(iii) a waste disposal system,

(iv) a sewerage or drainage system, or

(v) a shaft or other structure in which a lift, hoist, escalator or moving walkway may be installed.

(6) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of an asset for use in ... residential property (see subsection (8)). But see section 311A (replacement domestic items relief).

(7) If an asset is provided partly for use in ... residential property and partly for other purposes, such apportionment of the expenditure incurred on, or in connection with, the provision, alteration or disposal of the asset is to be made for the purposes of subsection (6) as is just and reasonable.

(8) In relation to the calculation of profits for a tax year—

(a) “residential property” means land consisting of a dwelling-house or part of a dwelling-house in relation to which a UK property business or an overseas property business is carried on in the tax year, and

(b) “qualifying land” means land not falling within paragraph (a).

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of—

(a) any asset that is not a depreciating asset (see subsections (11) and (12)),

(b) any asset not acquired or created for use on a continuing basis in the property business,

(d) a non-qualifying intangible asset (see subsections (13) to (16)), or

(e) a financial asset (see subsection (17)).

(11) An asset is a “depreciating” asset if, on the date the item of a capital nature is incurred, it is reasonable to expect that before the end of 20 years beginning with that date—

(a) the useful life of the asset will end, or

(b) the asset will decline in value by 90% or more.

(12) The useful life of an asset ends when it could no longer be of use to any person for any purpose as an asset of a business.

(13) “Intangible asset” means anything that is capable of being an intangible asset within the meaning of FRS 105 and, in particular, includes—

(a) an internally-generated intangible asset, and

(b) intellectual property.

(14) An intangible asset is “non-qualifying” unless, by virtue of having a fixed maximum duration, it must cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(15) An intangible asset is “non-qualifying” if it consists of a right, whether conditional or not, to obtain an intangible asset without a fixed maximum duration by virtue of which that asset must, assuming the right is exercised at the last possible time, cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(16) Where—

(a) the person carrying on the property business (“P”) has an intangible asset, and

(b) P grants a licence or any other right in respect of that asset to another person,

any intangible asset that consists of a licence or other right granted to P in respect of the intangible asset mentioned in paragraph (a) is “non-qualifying”.

(17) A “financial asset” means any right under or in connection with—

(a) a financial instrument, or

(b) an arrangement that is capable of producing a return that is economically equivalent to a return produced under any financial instrument.

(18) A reference to acquisition, provision, alteration or disposal includes potential acquisition, provision, alteration or (as the case may be) disposal.

(19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20) In this section—

“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“building” includes any fixed structure;

“car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act);

“financial instrument” has the same meaning as in FRS 105;

“FRS 105” means Financial Reporting Standard 105 (the Financial Reporting Standard applicable to the Micro-entities Regime), issued by the Financial Reporting Council in July 2015;

“intellectual property” means—any patent, trade mark, registered design, copyright or design right, plant breeders' rights or rights under section 7 of the Plant Varieties Act 1997,any right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a),any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value, orany licence or other right in respect of anything within paragraph (a), (b) or (c);

“provision” includes creation, construction or acquisition.

307C

(1) Section 307D applies in calculating the profits of a property business for a tax year if conditions A to D are met.

(2) Condition A is that the profits of the business are calculated on the cash basis for the tax year.

(3) Condition B is that a deduction for costs of a loan is allowed in calculating the profits of the business for the tax year or, ignoring section 272A (restricting deductions for finance costs related to residential property) and section 307D (cash basis: modification of deduction for costs of loans), would be so allowed. In this section such a loan is referred to as a “relevant loan”.

(4) Condition C is that an amount of the principal of one or more relevant loans is outstanding at the end time (and a relevant loan in respect of which such an amount is outstanding at the end time is referred to in this section as an “outstanding relevant loan”).

(5) Condition D is that—

$$L > V$where—L is the total outstanding amount of relevant loans (see subsections (6) and (7)), andV is the sum of the values of all relevant properties (see subsections (8) to (10)).$

(6) The “total outstanding amount of relevant loans”—

(a) if there is only one outstanding relevant loan, is the outstanding business amount of that loan, and

(b) if there are two or more outstanding relevant loans, is found by calculating the outstanding business amount of each such loan and adding those amounts together.

(7) The “outstanding business amount” of a relevant loan is given by—

$$X Y × A$where—A is the amount of the principal of the loan which is outstanding at the end time,X is the amount of the deduction for costs of the loan that would be allowed, apart from sections 272A and 307D, in calculating the profits of the business for the tax year, andY is the amount of the deduction for costs of the loan that would be allowed, apart from the wholly and exclusively rule and sections 272A and 307D, in calculating the profits of the business for the tax year.$

(8) A property is a “relevant property” if—

(a) it is involved in the property business at the end time, or

(b) although it is not involved in the business at the end time—

(i) it was last involved in the business at an earlier time in the tax year, and

(ii) the person carrying on the business holds the property throughout the period beginning with that earlier time and ending with the end time.

(9) The “value” of a relevant property is the total of—

(a) the market value of the property at the time that it is first involved in the property business, and

(b) such amount of any expenditure of a capital nature incurred by the person carrying on the business in respect of the property as is not brought into account in calculating the profits of the business for the tax year or any previous tax year.

(10) A property is “involved in the property business” if it is a property whose exploitation forms the whole or part of the business.

(11) The “end time” is—

(a) the time immediately before the end of the tax year, or

(b) if in the tax year the person carrying on the business permanently ceases to carry it on, the time immediately before the person permanently ceases to carry on the business.

(12) “Costs”, in relation to a loan, means—

(a) interest on the loan,

(b) an amount in connection with the loan that, for the person receiving or entitled to the amount, is a return in relation to the loan which is economically equivalent to interest, or

(13) Section 58(2) to (4) (meaning of “incidental costs of obtaining finance”) apply for the purposes of subsection (12)(c).

(14) In this section—

“market value”, in relation to a property, means the price which the property might reasonably be expected to fetch—in the market conditions then prevailing, andbetween persons dealing with each other at arm's length in the open market;

“property” means an estate, interest or right in or over land;

“the wholly and exclusively rule” means the rule in section 34 (expenses not wholly and exclusively for trade and unconnected losses), as applied by section 272ZA (application of trading income rules: cash basis).

307D

(1) Where section 307C provides that this section applies in calculating the profits of a property business for a tax year, the amount which is allowed as a deduction for costs of a loan in calculating the profits for the tax year is the non-adjusted deduction multiplied by the relevant fraction. This is subject to section 272A (restricting deductions for finance costs related to residential property).

(2) “The non-adjusted deduction” means the deduction for costs of the loan that would be allowed, apart from section 272A and this section, in calculating the profits of the business for the tax year.

(3) “The relevant fraction” means—

$$V L$where V and L have the same meaning as in section 307C.$

(4) For the meaning of “costs of a loan” see section 307C.

Property businesses that use, or have used, cash basis

307E

(1) This section applies in relation to a property business carried on by a person in two cases—

(a) Case 1 (see subsections (2) to (4)), and

(b) Case 2 (see subsections (5) to (8)).

(2) Case 1 is a case in which conditions A and B are met.

(3) Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset in a tax year for which the profits of the property business are calculated on the cash basis (see section 271D).

For the meaning of “disposal proceeds” and “capital refund” see subsections (9) and (10).

(4) Condition B is that—

(a) an amount of capital expenditure (see subsection (11)) relating to the asset has been brought into account in calculating the profits of the property business on the cash basis, or

(b) an amount of relevant capital expenditure (see subsection (17)) relating to the asset has been brought into account in calculating the profits of the property business in accordance with GAAP (see section 271B)—

(i) by means of a deduction allowed under section 58 or 59 (incidental costs of obtaining finance) (as applied by section 272) or section 311A (replacement domestic items relief), or

(ii) under CAA 2001 (see subsection (20)).

(5) Case 2 is a case in which—

(a) condition C is met, and

(b) condition D or E is met.

(6) Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset in a tax year—

(a) for which the profits of the property business are calculated in accordance with GAAP, and

(b) which is after a tax year for which the profits of the business had been calculated on the cash basis.

(7) Condition D is that an amount of capital expenditure relating to the asset—

(a) has been paid in a tax year for which the profits of the property business were calculated on the cash basis,

(b) has been brought into account in calculating the profits of the business on the cash basis, and

(c) on the assumption that the profits had not been calculated on the cash basis at the time the expenditure was paid, would not have been qualifying expenditure.

(8) Condition E is that—

(a) an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the property business for a tax year in accordance with GAAP by means of a deduction allowed under section 58 or 59 (as applied by section 272) or section 311A, and

(b) that tax year is before the tax year for which the person last entered the cash basis.

(9) “Disposal proceeds” means—

(a) any proceeds arising from the disposal of an asset or any part of it,

(b) any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or

See also section 307F for circumstances in which a person is to be regarded as disposing of an asset.

(10) “Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.

(11) “Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—

(a) the provision, alteration or disposal of an asset, or

(b) the potential provision, alteration or disposal of an asset.

(12) The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the property business.

(13) In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the property business (whether or not on the cash basis), the amount brought into account under subsection (12) is proportionately reduced. The reference in this subsection to expenditure brought into account includes a reference to expenditure brought into account under CAA 2001 (see subsection (20)).

(14) Subsection (12) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—

(a) has already been brought into account as a receipt in calculating the profits of the property business under this section,

(b) is brought into account as a receipt in calculating the profits of the business under any other provision of this Part (except section 334D(4) (assets not fully paid for)), or

The reference to any other provision of this Part in paragraph (b) includes a reference to any provision applied by section 272 or 272ZA.

(15) If part of the amount which would otherwise be brought into account under subsection (12) has already been or is brought into account as mentioned in subsection (14), subsection (12) applies in relation to the remainder of that amount.

(16) For the purposes of this section, any question as to whether or to what extent expenditure is brought into account in calculating the profits of a property business is to be determined on such basis as is just and reasonable in all the circumstances.

(17) In subsection (4)(b) “relevant capital expenditure” means capital expenditure which—

(a) has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and

(b) is cash basis deductible in relation to that tax year.

(18) For the purposes of this section, a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—

(a) on the cash basis for the tax year, and

(b) in accordance with GAAP for the previous tax year.

(19) Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the property business on the cash basis for that tax year.

(20) For the purposes of this section, expenditure is “brought into account under CAA 2001” in calculating the profits of a property business if and to the extent that—

(a) a capital allowance made under Part 2 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see sections 248 and 250 of that Act), or

(b) qualifying expenditure (within the meaning of Part 2 of CAA 2001) is allocated to a pool for a relevant qualifying activity and is set-off against different disposal receipts.

(21) An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a) the amount would have been unrelieved qualifying expenditure carried forward in the pool for the relevant qualifying activity, but

(b) the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(22) For the purposes of subsections (20) and (21), an activity is a “relevant qualifying activity” if—

(a) it is a qualifying activity mentioned in section 15(1)(b) or (d) of CAA 2001 (property business activities), and

(b) the property business consists of or includes that qualifying activity.

(23) For the purposes of subsection (21), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(24) In this section—

“disposal value” means—in subsection (14)(c)—a disposal value for the purposes of Part 2 of CAA 2001 (see, in particular, section 61 of that Act), orproceeds from a balancing event for the purposes of Part 3A of that Act (see section 360O of that Act), andin subsection (21), a disposal value for the purposes of Part 2 of that Act;

“pool” means the main pool or a class pool to which qualifying expenditure is allocated under Part 2 of CAA 2001 (see section 54 of that Act);

“provision” includes creation, construction or acquisition;

“qualifying expenditure” means qualifying expenditure within the meaning of Part 2 of CAA 2001 (see section 11(4) of that Act for the general rule);

“unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 2 of CAA 2001 (see section 59(1) and (2) of that Act).

307F

(1) This section makes provision supplementary to section 307E.

(2) If—

(a) at any time a person ceases to use an asset or any part of it for the purposes of a property business (other than in the circumstances mentioned in subsection (5)), but

(b) the person does not dispose of the asset (or that part) at that time,

the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that time for an amount equal to the market value amount.

(3) If at any time there is a material increase in the person's non-business use of an asset or any part of it, the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that time for an amount equal to the relevant proportion of the market value amount.

(4) For the purposes of subsection (3)—

(a) there is an increase in a person's non-business use of an asset (or part of an asset) if—

(i) the proportion of the person's use of the asset (or that part) that is for the purposes of the property business decreases, and

(ii) the proportion of the person's use of the asset (or that part) that is for other purposes (the “non-business use”) increases;

(b) “the relevant proportion” is the difference between—

(i) the proportion of the person's use of the asset (or part of the asset) that is non-business use, and

(ii) the proportion of the person's use of the asset (or that part) that was non-business use before the increase mentioned in subsection (3).

(5) If—

(a) the property business in respect of which capital expenditure relating to an asset has been brought into account as mentioned in section 307E is an overseas property business, and

(b) there is a move overseas,

the person is to be regarded for the purposes of section 307E as disposing of the asset at the time of the move overseas for an amount equal to the market value amount.

(6) For the purposes of subsection (5) there is a “move overseas” if—

(a) the person ceases to be UK resident, or

(b) the tax year is, as respects the person, a split year, and the overseas part of the tax year is the later part.

(7) The move overseas occurs—

(a) in a case falling within subsection (6)(a), on the last day of the tax year for which the person is UK resident, or

(b) in a case falling within subsection (6)(b), on the last day of the UK part of the tax year.

(8) In this section—

“capital expenditure” has the same meaning as in section 307E,

“market value amount” means the amount that would be regarded as normal and reasonable—in the market conditions then prevailing, andbetween persons dealing with each other at arm's length in the open market.

Property allowance

307G

(1) The rules for calculating the profits of an individual's property business are subject to Chapter 2 of Part 6A (property allowance).

(2) That Chapter gives relief on relevant property income and, where relief is given, disallows all deductions under this Part which relate to that income (see, in particular, sections 783BC, 783BF and 783BH).

329A

This Chapter applies if—

(a) the profits of a property business are calculated—

(i) on the cash basis for a tax year (see section 271D), and

(ii) in accordance with GAAP (see section 271B) for the following tax year, or

(b) the profits of a property business are calculated—

(i) in accordance with GAAP for a tax year, and

(ii) on the cash basis for the following tax year.

Spreading of adjustment income on leaving cash basis

334A

Sections 239A (spreading on leaving cash basis) and 239B (election to accelerate charge under section 239A) apply for the purposes of this Chapter as they apply for the purposes of Chapter 17 of Part 2, but as if—

(a) for section 239A(1) there were substituted—

(1) This section applies if the profits of a property business are calculated— (a) on the cash basis for a tax year (see section 271D), and (b) in accordance with GAAP (see section 271B) for the following tax year.

, and

(b) any reference to section 239A or 239B were to the section concerned as applied by this section.

CHAPTER 7A — Cash basis: adjustments for capital allowances

334B

For the purposes of this Chapter, a person carrying on a property business enters the cash basis for a tax year if the profits of the business are calculated—

(a) on the cash basis for the tax year (see section 271D), and

(b) in accordance with GAAP (see section 271B) for the previous tax year.

334C

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year (“the current tax year”), and

(b) the person would, apart from section 59(4A) of CAA 2001, have unrelieved qualifying expenditure relating to the property business to carry forward from the chargeable period which is the previous tax year.

(2) But this section does not apply if section 334D applies.

(3) In calculating the profits of the property business for the current tax year, a deduction is allowed for any cash basis deductible amount of the expenditure relating to the property business.

(4) A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year.

(5) Any cash basis deductible amount of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances.

(6) In this section—

“unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 2 of CAA 2001 (see section 59(1) and (2) of that Act).

334D

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year (“the current tax year”),

(b) at any time before the end of the chargeable period which is the previous tax year the person has incurred relevant expenditure, and

(2) “Relevant expenditure” means expenditure on plant or machinery—

(a) for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year, and

(b) in respect of which the person has obtained capital allowances.

(3) If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the property business for the current tax year.

(4) If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the property business for the current tax year.

(5) Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, is to be determined on such basis as is just and reasonable in all the circumstances.

(6) If the amount of capital allowances given in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.

334E

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year,

(b) the person is the successor for the purposes of section 266 of CAA 2001, and

(c) as a result of an election under that section, relevant plant or machinery is treated as sold by the predecessor to the successor at any time during the tax year.

(2) The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor.

(3) Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the property business for the tax year.

(4) In this section—

“the predecessor” has the same meaning as in section 266 of CAA 2001, and

“relevant plant or machinery” has the same meaning as in section 267 of that Act.

507A

(1) An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 507 on the ground that the gain arising from it is wholly disproportionate.

(2) For the purposes of this section an interested person in relation to a calculation under section 507 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(3) Applications under subsection (1) must be—

(a) made in writing, and

(b) received by an officer of Revenue and Customs within—

(i) the four tax years following the tax year in which the gain arose, or

(ii) such longer period as the officer may agree.

(4) In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a) the economic gain on the rights surrendered or assigned,

(b) the amount of the premiums paid under the policy or contract,

(5) If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 507 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6) Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 507 are to be regarded as references to a recalculation under this section.

(7) Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8) If two or more persons are interested persons in relation to a calculation under section 507—

(a) an application under subsection (1) may be made only by all the interested persons jointly, and

(b) subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9) Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10) No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11) In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

“tax advantage” has the meaning given by section 1139 of CTA 2010.

512A

(1) An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 511 on the ground that the gain arising from it is wholly disproportionate.

(2) For the purposes of this section an interested person in relation to a calculation under section 511 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter—

(a) if the gain were not recalculated, or

(b) if all rights under the policy or contract had been surrendered immediately after the surrender or assignment of rights which gave rise to the calculation.

(3) Applications under subsection (1) must be—

(a) made in writing, and

(b) received by an officer of Revenue and Customs within—

(i) the four tax years following the tax year in which the gain arose, or

(ii) such longer period as the officer may agree.

(4) In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a) the economic gain on the rights surrendered or assigned,

(b) the amount of the premiums paid under the policy or contract,

(5) If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 511 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6) Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 511 are to be regarded as references to a recalculation under this section.

(7) Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8) If two or more persons are interested persons in relation to a calculation under section 511—

(a) an application under subsection (1) may be made only by all the interested persons jointly, and

(b) subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9) Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10) No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11) In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

“tax advantage” has the meaning given by section 1139 of CTA 2010.

Exception for certain loans or repayments of loans

628A

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

628B

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

628C

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

630A

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

Excess profit allocation to non-individual partners

Condition C

PART 6A — Income charged under this Act: trading and property allowances

CHAPTER 1 — Trading allowance

Introduction

783A

(1) This Chapter gives relief to an individual on—

(a) the income of a relevant trade (see section 783AA), and

(b) miscellaneous income (see section 783AB).

(2) If the individual qualifies for full relief (see section 783AE), the individual's relevant income (see section 783AC) is not charged to income tax (see sections 783AF and 783AG).

(3) If the individual qualifies for partial relief (see section 783AH), the individual's relevant income is calculated by alternative methods (see sections 783AI to 783AK).

(4) Any provision of this Chapter which gives relief is subject to sections 783AN to 783AQ, which specify circumstances in which relief under this Chapter is not given.

Basic definitions

783AA

(1) For the purposes of this Chapter, a trade carried on by an individual is a “relevant trade” of the individual for a tax year if—

(a) the individual carries on the trade otherwise than in partnership, and

(b) the trade is not a rent-a-room trade in relation to the individual for the tax year.

(2) For the purposes of subsection (1)(b) a trade is a “rent-a-room trade” in relation to an individual for a tax year if—

(a) the individual qualifies for rent-a-room relief for the tax year, and

(b) the individual has rent-a-room receipts for the tax year which would, apart from Chapter 1 of Part 7 (rent-a-room relief), be brought into account in calculating the profits of the trade.

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