Income Tax (Trading and Other Income) Act 2005
This Act imposes charges to income tax under—
Part 2 (trading income),
Part 3 (property income),
Part 4 (savings and investment income), and
Part 5 (certain miscellaneous income).
Those charges to tax have effect for the purposes of section 1(1) of ICTA (the general charge to income tax).
Exemptions from those charges are dealt with in Part 6 (exempt income) but any Part 6 exemptions which are most obviously relevant to particular types of income are also mentioned in the provisions about those types of income.
What is or is not mentioned in those provisions does not limit the effect of Part 6.
This Act also contains—
provision about rent-a-room relief and foster-care relief (see Part 7),
special rules for foreign income (see Part 8),
special rules for partnerships (see Part 9), and
certain calculation rules and general provisions (see Part 10).
For abbreviations and defined expressions used in this Act, see section 885 and Schedule 4.
This Act contains some rules establishing an order of priority in respect of certain amounts which would otherwise—
fall within a charge to income tax under two or more Chapters or Parts of this Act, or
fall within a charge to income tax under a Chapter or Part of this Act and ITEPA 2003.
See, in particular— section 4 (provisions which must be given priority over Part 2), section 261 (provisions which must be given priority over Part 3), section 262 (priority between Chapters within Part 3), section 366 (provisions which must be given priority over Part 4), section 367 (priority between Chapters within Part 4), section 575 (provisions which must be given priority over Part 5), and section 576 (priority between Chapters within Part 5).
But the rules in those sections need to be read with other rules of law (whether in this Act or otherwise) about the scope of particular provisions or the order of priority to be given to them.
Section 171(2) of FA 1993 (profits of Lloyd’s underwriters charged only under Chapter 2 of Part 2 of this Act) is one example of another rule of law.
This Part imposes charges to income tax under—
Chapter 2 (the profits of a trade, profession or vocation which meet the territorial conditions mentioned in section 6),
Chapter 17 (amounts treated as adjustment income under section 228), and
Chapter 18 (post-cessation receipts that are chargeable under this Part).
Part 6 deals with exemptions from the charges under this Part.
See, in particular, the exemptions under sections 777 (VAT repayment supplements) and 778 (incentives to use electronic communications).
The charges under this Part apply to non-UK residents as well as UK residents but this is subject to sections 6(2) and (3) and 243(3) and (4) (charges on non-UK residents only on UK income).
The rest of this Part contains rules relevant to the charges to tax under this Part.
This section needs to be read with the relevant priority rules (see sections 2 and 4).
Any receipt or other credit item, so far as it falls within— is dealt with under Part 3.
Chapter 2 of this Part (receipts of trade, profession or vocation), and
Chapter 3 of Part 3 so far as it relates to a UK property business,
Any receipt or other credit item, so far as it falls within— is dealt with under the relevant Part of ITEPA 2003.
this Part, and
Part 2, 9 or 10 of ITEPA 2003 (employment income, pension income or social security income),
Income tax is charged on the profits of a trade, profession or vocation.
Profits of a trade arising to a UK resident are chargeable to tax under this Chapter wherever the trade is carried on.
Profits of a trade arising to a non-UK resident are chargeable to tax under this Chapter only if they arise—
from a trade carried on wholly in the United Kingdom, or
in the case of a trade carried on partly in the United Kingdom and partly elsewhere, from the part of the trade carried on in the United Kingdom.
This section applies to professions and vocations as it applies to trades.
Tax is charged under this Chapter on the full amount of the profits of the tax year.
For this purpose the profits of a tax year are the profits of the basis period for the tax year.
For the rules identifying the basis period for a tax year, see Chapter 15.
This section is subject to Part 8 (foreign income: special rules).
And, for the purposes of section 830 (meaning of “relevant foreign income”), the profits of a trade, profession or vocation arise from a source outside the United Kingdom only if the trade, profession or vocation is carried on wholly outside the United Kingdom.
The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.
Farming or market gardening in the United Kingdom is treated for income tax purposes as the carrying on of a trade or part of a trade (whether or not the land is managed on a commercial basis and with a view to the realisation of profits).
All farming in the United Kingdom carried on by a person, other than farming carried on as part of another trade, is treated for income tax purposes as one trade.
In the case of farming carried on by a firm, this rule is explained by section 859(1).
The commercial occupation of land in the United Kingdom is treated for income tax purposes as the carrying on of a trade or part of a trade.
For this purpose the occupation of land is commercial if the land is managed—
on a commercial basis, and
with a view to the realisation of profits.
This section does not apply—
to farming or market gardening (which is dealt with by section 9),
if the land is being prepared for forestry purposes, or
if the land comprises woodlands (which is dealt with by section 11).
The commercial occupation of woodlands in the United Kingdom is not a trade or part of a trade for any income tax purpose.
For this purpose the occupation of woodlands is commercial if the woodlands are managed—
on a commercial basis, and
with a view to the realisation of profits.
See also sections 267 and 768 (which, when read with this section, secure that profits or losses from the commercial occupation of woodlands in the United Kingdom are ignored for income tax purposes).
Profits or losses arising out of land in the case of a concern to which this section applies are calculated as if the concern were a trade.
Any profits arising out of the land are charged to income tax as if the concern were a trade carried on in the United Kingdom. But this does not impose a charge to tax on a non-UK resident in the case of a concern outside the United Kingdom.
Any losses arising out of the land are treated for the purposes of Chapter 1 of Part 10 of ICTA (loss relief) as losses of a trade carried on in the United Kingdom.
The concerns to which this section applies are—
mines and quarries (including gravel pits, sand pits and brickfields),
ironworks, gasworks, salt springs or works, alum mines or works, waterworks and streams of water,
canals, inland navigation, docks and drains or levels,
rights of fishing,
rights of markets and fairs, tolls, bridges and ferries,
railways and other kinds of way, and
a concern of the same kind as one specified in paragraph (b), (c), (d) or (e).
This section does not apply to a concern if section 10 (commercial occupation of land other than woodlands) applies to the occupation of the land out of which the profits or losses arise.
This section applies if an entertainer, sportsman or sportswoman of a prescribed description (a “performer”)—
is non-UK resident in a tax year, and
performs a relevant activity in the United Kingdom in the tax year.
If a payment or transfer connected with the relevant activity is made, the performer is treated for income tax purposes as performing the relevant activity in the course of a trade, profession or vocation carried on in the United Kingdom.
It does not matter whether the payment or transfer is made to the performer or anyone else.
Subsection (2) does not apply—
so far as the performer would otherwise be performing the relevant activity in the course of a trade, profession or vocation carried on in the United Kingdom, or
if the relevant activity is performed in the course of an employment or office.
If a payment or transfer connected with the relevant activity is made to — the payment or transfer is treated for income tax purposes as made instead to the performer in the course of a trade, profession or vocation carried on in the United Kingdom.
a person other than the performer, and
that person is of a prescribed description,
Subsection (5) does not apply in such circumstances as may be prescribed.
If— the tax is charged as if the payments or transfers were received in the course of a separate trade, profession or vocation (distinct from any other trade, profession or vocation carried on by the performer).
income tax is chargeable on profits arising from payments or transfers (made to any person), and
the payments or transfers are connected with the relevant activity,
In this section and section 14— and a payment or transfer is connected with a relevant activity if it has a connection of the prescribed kind with that activity.
“payment” means a payment from which income tax is to be deducted under section 555(2) of ICTA,
“prescribed” means prescribed by regulations,
“regulations” means regulations made by the Treasury,
“relevant activity” means an activity of a prescribed description, and
“transfer” means a transfer in respect of which income tax is to be accounted for under section 555(3) of ICTA,
Regulations may provide—
for the deduction, in calculating any profits of the performer arising from the payment or transfer, of expenses incurred by other persons in relation to the payment or transfer,
that any liability to income tax (whether of the performer or anyone else) which would, apart from section 13(5), arise in relation to the payment or transfer is not to arise (or is to arise so far as prescribed).
Regulations may provide—
for the apportionment of profits between different trades, professions or vocations of the performer,
for the apportionment between different tax years of the profits arising from relevant activities of the performer,
for losses made in any trade, profession or vocation of the performer to be deducted from or set off against the profits of another trade, profession or vocation of the performer,
that prescribed provisions of the Income Tax Acts about losses, or about expenses, are not to apply (or are to apply with prescribed modifications) in prescribed circumstances relating to the performer.
References in this section to a trade, profession or vocation of the performer include references to the separate one referred to in section 13(7) as well as to any other carried on by the performer.
Regulations may—
make provision generally for giving effect to section 13, and
make different provision for different cases or descriptions of cases.
This section applies if—
a person performs the duties of employment as a diver or diving supervisor in the United Kingdom or in any area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964 (c. 29),
the duties consist wholly or mainly of seabed diving activities, and
any employment income from the employment would otherwise be chargeable to tax under Part 2 of ITEPA 2003.
The performance of the duties of employment is instead treated for income tax purposes as the carrying on of a trade in the United Kingdom.
For the purposes of this section the following are seabed diving activities—
taking part as a diver in diving operations concerned with the exploration or exploitation of the seabed, its subsoil and their natural resources, and
acting as a diving supervisor in relation to any such diving operations.
If a person carries on any oil-related activities as part of a trade, those activities are treated for income tax purposes as a separate trade, distinct from all other activities carried on by the person as part of the trade.
For this purpose the following are oil-related activities—
oil extraction activities, and
any activities consisting of the acquisition, enjoyment or exploitation of oil rights.
“Oil extraction activities” and “oil rights” have the meaning given by section 502(1) of ICTA.
This section applies if—
an individual carries on a trade wholly or partly outside the United Kingdom otherwise than in partnership, and
the individual becomes or ceases to be UK resident.
The individual is treated for income tax purposes—
as permanently ceasing to carry on the trade at the time of the change of residence, and
so far as the individual continues to carry on the trade, as starting to carry on a new trade immediately afterwards.
But subsection (2) does not prevent a loss made before the change of residence from being set off under section 385 of ICTA against profits arising after the change.
This section applies to professions and vocations as it applies to trades.
In the case of a trade carried on by a firm, see sections 852(6) and (7) and 854(5).
This section applies if a company starts or ceases to be within the charge to income tax under this Chapter in respect of a trade.
The company is treated for the purposes of this Part—
as starting to carry on the trade when it starts to be within the charge, or
as permanently ceasing to carry on the trade when it ceases to be within the charge.
This section applies if —
in the course of carrying on a trade a person (“the trader”) supplies, or is concerned in the supply of, goods sold or used on premises occupied by another person,
the trader has an estate or interest in the premises,
the estate or interest is dealt with as property employed for the purposes of the trade, and
receipts and expenses in connection with the premises would otherwise be brought into account in calculating the profits of a property business of the trader.
Both the receipts and expenses are instead brought into account in calculating the profits of the trade.
Any apportionment of receipts or expenses that is necessary because— is to be made on a just and reasonable basis.
the receipts or expenses do not relate only to the premises, or
the above conditions are met only in relation to part of the premises,
This section applies if—
a person (“the trader”) carries on material activities connected with the operation of a caravan site,
the activities are, or are part of, a trade, and
receipts from, and expenses of, lettings of caravans or pitches for caravans on the site would otherwise be brought into account in calculating the profits of a property business of the trader.
The trader may instead bring both the receipts and expenses into account in calculating the profits of the trade.
But if the conditions in subsection (1)(a) and (b) are met for only part of a tax year, subsection (2) applies only to the receipts and expenses that would otherwise be brought into account in calculating the profits of the property business for that part of the tax year.
In this section—
“caravan site” means—
in England and Wales, any of the bodies mentioned in section 71(1),
land which is used in conjunction with land on which a caravan is so stationed, and
This section applies if—
a person (“the trader”) carrying on a trade obtains receipts from a letting of business accommodation that is temporarily surplus to requirements (see subsections (3) and (4)),
the accommodation is not held as trading stock,
the receipts are in respect of part of a building of which another part is used to carry on the trade,
the receipts are relatively small, and
the receipts, and the expenses of the letting, would otherwise be brought into account in calculating the profits of a property business of the trader.
The trader may instead bring both the receipts and expenses into account in calculating the profits of the trade.
Accommodation is temporarily surplus to requirements only if—
it has been used within the last 3 years to carry on the trade or acquired within the last 3 years,
the trader intends to use it to carry on the trade at a later date, and
the letting is for a term of not more than 3 years.
If accommodation is temporarily surplus to requirements at the beginning of a period of account, it continues to be temporarily surplus to requirements until the end of that period.
If under this section any of the receipts from and expenses of a letting are brought into account in calculating the profits of the trade, all subsequent receipts from and expenses of the letting must be dealt with in the same way (but only so long as this section continues to apply).
In this section “letting” includes a licence to occupy.
This section applies to professions and vocations as it applies to trades.
This section applies if—
a person (“the trader”) carries on a trade on some or all of the land to which a wayleave relates,
rent is receivable, or expenses are incurred, by the trader in respect of the wayleave, and
apart from any rent or expenses in respect of a wayleave, no other receipts or expenses in respect of any of the land are brought into account in calculating the profits of any property business of the trader.
If— the trader may instead bring both the rent and expenses into account in calculating the profits of the trade.
the trader would otherwise be liable to tax under Chapter 9 of Part 3 in respect of the rent for the wayleave (rent receivable for UK electric-line wayleaves), or
expenses would otherwise be brought into account in calculating the profits charged under that Chapter,
If— the trader may instead bring both the rent and expenses into account in calculating the profits of the trade.
rent for the wayleave would otherwise be brought into account in calculating the profits of a property business of the trader, or
expenses incurred by the trader in respect of the wayleave would otherwise be so brought into account,
In this section “rent” includes—
a receipt mentioned in section 266(3), and
any other receipt in the nature of rent.
In this section “wayleave” means an easement, servitude or right in or over land which is enjoyed in connection with—
an electric, telegraph or telephone wire or cable,
a pipe for the conveyance of any thing, or
any apparatus used in connection with such a pipe.
The reference to the enjoyment of an easement, servitude or right in connection with an electric, telegraph or telephone wire or cable includes (in particular) its enjoyment in connection with—
a pole or pylon supporting such a wire or cable, or
apparatus used in connection with such a wire or cable.
This section applies to professions and vocations as it applies to trades.
The rules for calculating the profits of a trade carried on by an individual are subject to Chapter 1 of Part 7 (rent-a-room relief).
That Chapter provides relief on income from the use of furnished accommodation in the individual’s only or main residence (see, in particular, sections 792 and 796).
The rules for calculating the profits of a trade, profession or vocation carried on by an individual are subject to Chapter 2 of Part 7 (foster-care relief).
That Chapter provides relief on income from the provision by the individual of foster care (see, in particular, sections 813, 816, 822 and 823).
Apart from section 30 (animals kept for trade purposes), the provisions of this Chapter apply to professions and vocations as they apply to trades.
The profits of a trade must be calculated in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes.
This does not—
require a person to comply with the requirements of the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) except as to the basis of calculation, or
impose any requirements as to audit or disclosure.
This section is subject to section 160 (barristers and advocates in early years of practice).
This section does not affect provisions of the Income Tax Acts relating to the calculation of the profits of Lloyd’s underwriters.
The same rules apply for income tax purposes in calculating losses of a trade as apply in calculating profits.
This is subject to any express provision to the contrary.
In the Income Tax Acts, in the context of the calculation of the profits of a trade, references to receipts and expenses are to any items brought into account as credits or debits in calculating the profits.
There is no implication that an amount has been actually received or paid.
This section is subject to any express provision to the contrary.
The rules for calculating the profits of a trade need to be read with—
the provisions of CAA 2001 which treat charges as receipts of a trade, and
the provisions of CAA 2001 which treat allowances as expenses of a trade.
For the purpose of calculating the profits of a trade, interest is an item of a revenue nature, whatever the nature of the loan.
Animals or other living creatures kept for the purposes of a trade are treated as trading stock if they are not kept wholly or mainly—
for the work they do in connection with the carrying on of the trade,
for public exhibition, or
for racing or other competitive purposes.
But they are not treated as trading stock if they are part of a herd in relation to which a herd basis election has effect (see Chapter 8).
This section applies to shares in animals or other living creatures as it applies to the creatures themselves.
This section does not apply to professions or vocations.
Any relevant permissive rule in this Part—
has priority over any relevant prohibitive rule in this Part, but
is subject to sections 48 (car or motor cycle hire) and 55 (crime-related payments).
In this section “any relevant permissive rule in this Part” means any provision of— which allows a deduction in calculating the profits of a trade.
Chapter 5 (apart from sections 60 to 67),
Chapter 11, or
Chapter 13,
In this section “any relevant prohibitive rule in this Part”, in relation to any deduction, means any provision of this Part (apart from sections 48 and 55) which might otherwise be read as—
prohibiting the deduction, or
restricting the amount of the deduction.
The provisions of this Chapter apply to professions and vocations as they apply to trades.
In calculating the profits of a trade, no deduction is allowed for items of a capital nature.
In calculating the profits of a trade, no deduction is allowed for—
expenses not incurred wholly and exclusively for the purposes of the trade, or
losses not connected with or arising out of the trade.
If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.
In calculating the profits of a trade, no deduction is allowed for a debt owed to the person carrying on the trade, except so far as—
the debt is bad,
the debt is estimated to be bad, or
the debt is released wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement.
If the debtor is bankrupt or insolvent, the whole of the debt is estimated to be bad for the purposes of subsection (1)(b), except so far as any amount may reasonably be expected to be received on the debt.
This section applies if, in calculating the profits of a trade of a period of account—
an amount is charged in the accounts for the period in respect of employees' remuneration, and
a deduction for the remuneration would otherwise be allowable for the period.
No deduction is allowed for the remuneration for the period of account unless it is paid before the end of the period of 9 months immediately following the end of the period of account.
If the remuneration is paid after the end of that 9 month period, a deduction for it is allowed for the period of account in which it is paid.
For the purposes of section 36 an amount charged in the accounts in respect of employees' remuneration includes an amount for which provision is made in the accounts with a view to its becoming employees' remuneration.
For the purposes of section 36 it does not matter whether an amount is charged for—
particular employments, or
employments generally.
If the profits of the trade are calculated before the end of the 9 month period mentioned in section 36(2)—
it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but
if the remuneration is subsequently paid before the end of that period, nothing in this subsection prevents the calculation being revised and any tax return being amended accordingly.
For the purposes of this section and section 36 remuneration is paid when it—
is treated as received by an employee for the purposes of ITEPA 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or
would be so treated if it were not exempt income.
In this section and section 36—
“remuneration” means an amount which is or is treated as earnings for the purposes of ITEPA 2003.
in Northern Ireland, any of the bodies mentioned in section 71(3), and
This section applies if, in calculating the profits of a person’s trade of a period—
the profits of the trade of the period are required to be calculated for income tax purposes, and
a deduction would otherwise be allowable for the period for any employee benefit contributions made or to be made by the person (“the employer”) (but see subsection (4)).
No deduction is allowed for the contributions for the period except so far as—
qualifying benefits are provided, or qualifying expenses are paid, out of the contributions during the period or within 9 months from the end of it, or
if the making of the contributions is itself the provision of qualifying benefits, the contributions are made during the period or within 9 months from the end of it.
An amount disallowed under subsection (2) is allowed as a deduction for a subsequent period so far as—
qualifying benefits are provided out of the contributions before the end of the subsequent period, or
if the making of the contributions is itself the provision of qualifying benefits, the contributions are made before the end of the subsequent period.
This section does not apply to any deduction that is allowable for— For the purposes of paragraph (c) “qualifying overseas pension scheme” and “relevant migrant member” have the same meaning as in Schedule 33 to FA 2004 (see paragraphs 4 to 6 of that Schedule).
anything given as consideration for goods or services provided in the course of a trade or profession,
contributions under a registered pension scheme or under a superannuation fund to which section 615(3) of ICTA applies,
contributions under a qualifying overseas pension scheme in respect of an individual who is a relevant migrant member of the pension scheme in relation to the contributions, or
contributions under an accident benefit scheme.
See also— section 39 (making of “employee benefit contributions”), section 40 (provision of qualifying benefits), section 41 (timing and amount of certain qualifying benefits), section 42 (provision or payment out of employee benefit contributions), section 43 (profits calculated before end of 9 month period), and section 44 (interpretation of sections 38 to 44).
For the purposes of section 38 the employer makes an “employee benefit contribution” if—
the employer pays money or transfers an asset to another person (“the third party”), and
the third party is entitled or required, under the terms of an employee benefit scheme, to hold or use the money or asset for or in connection with the provision of benefits to, or in respect of, present or former employees of the employer.
For this purpose “employee benefit scheme” means a trust, scheme or other arrangement for the benefit of persons who are, or include, present or former employees of the employer.
For the purposes of section 38 qualifying benefits are provided if there is— which meets condition A, B, C or D.
a payment of money, or
a transfer of assets,
Condition A is that the payment or transfer gives rise both to an employment income tax charge and to an NIC charge.
Condition B is that the payment or transfer would give rise to both charges if—
the duties of the employment in respect of which the payment or transfer was made were performed in the United Kingdom, and
the person in respect of whose employment the payment or transfer was made met at all relevant times the conditions as to residence or presence in Great Britain or Northern Ireland prescribed under section 1(6) of the Contributions and Benefits Act.
Condition C is that the payment or transfer is made in connection with the termination of the recipient’s employment with the employer.
Condition D is that the payment or transfer is made under an employer-financed retirement benefits scheme.
None of the conditions is met if the payment or transfer is by way of loan.
In this section—
“the third party” is to be read in accordance with section 39(1).
“accident benefit scheme” means an employee benefit scheme under which benefits may be provided only by reason of a person’s disablement, or death, caused by an accident occurring during the person’s service as an employee of the employer,
section 157 of the Employment Rights Act 1996, or
the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7),
“NIC charge” means a liability to pay national insurance contributions under section 6 (Class 1 contributions), section 10 (Class 1A contributions) or section 10A (Class 1B contributions) of the Contributions and Benefits Act.
If the provision of a qualifying benefit— the benefit is provided for the purposes of section 38 when the money is treated as received for the purposes of Chapter 4 of Part 2 of ITEPA 2003 (applying the rules in section 18 of that Act (receipt of money earnings)).
takes the form of a payment of money, and
is not made under an employer-financed retirement benefits scheme,
If the provision of a qualifying benefit takes the form of a transfer of an asset, the amount provided for the purposes of section 38 is the total of—
the amount (if any) spent on the asset by the third party, and
in a case where the asset was transferred to the third party by the employer, the amount of the deduction that would be allowable as mentioned in subsection (1) of that section in respect of the transfer.
But if the amount given by subsection (2) is more than the amount that— the deduction allowable under section 38(2) or (3) is limited to that lower amount.
is charged to tax under ITEPA 2003 in respect of the transfer, or
would be so charged if condition B in section 40 were met,
For the purposes of section 38(2)(a)— by the third party after the receipt by the third party of employee benefit contributions are treated as being provided or paid out of the contributions.
any qualifying benefits provided, or
any qualifying expenses paid,
This operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 38(2)(a).
For the purposes of section 38(3)(a) any qualifying benefits provided by the third party after the receipt by the third party of employee benefit contributions are treated as being provided out of the contributions.
This operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 38(2)(a) or (3)(a).
For the purposes of this section no account is taken of any other amount received or paid by the third party.
This section applies if the profits of the trade are calculated before the end of the 9 month period mentioned in section 38(2).
It must be assumed, in making the calculation, that any benefits, expenses or contributions which are not provided, paid or made when the calculation is made will not be provided, paid or made before the end of that period.
But if the benefits, expenses or contributions are subsequently provided, paid or made before the end of that period, nothing in this section prevents the calculation being revised and any tax return being amended accordingly.
In this section and sections 38 to 43—
“employee benefit contribution” is to be read in accordance with section 39(1),
“employee benefit scheme” has the meaning given by section 39(2),
“taxed receipt” (see section 287(4)), and
“employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see section 393A of that Act),
A reference in this section and sections 38 to 43 to a person’s employee includes the holder of an office under that person, and “employment” is to be read accordingly.
The general rule is that no deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade.
A deduction for expenses which are incurred— is prohibited by the general rule if (and only if) the sums are paid, or put at the employee’s disposal, exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift.
in paying sums to or on behalf of an employee of the person carrying on the trade (“the trader”), or
in putting sums at the disposal of an employee of the trader,
The general rule is subject to exceptions— for entertainment (see section 46), and for gifts (see section 47).
For the purposes of this section and those two sections—
“employee”, in relation to a company, includes a director of the company and a person engaged in the management of the company,
“entertainment” includes hospitality of any kind, and
the expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift.
The prohibition in section 45 on deducting expenses incurred in providing entertainment does not apply in either of cases A and B.
Case A is where—
the entertainment is of a kind which it is the trader’s trade to provide, and
the entertainment is provided in the ordinary course of the trade either for payment or free of charge in order to advertise to the public generally.
Case B is where the entertainment is provided for employees of the trader unless—
the entertainment is also provided for others, and
the provision of the entertainment for the employees is incidental to its provision for the others.
The prohibition in section 45 on deducting expenses incurred in providing gifts does not apply in any of cases A, B, C and D.
Case A is where—
the gift is of an item which it is the trader’s trade to provide, and
the item is given away in the ordinary course of the trade in order to advertise to the public generally.
Case B is where the gift incorporates a conspicuous advertisement for the trader unless— The Treasury may by order amend the sum for the time being specified in paragraph (b) so as to increase it.
the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or
the cost of the gift to the trader, together with any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) given to the same person in the same basis period, exceeds £50.
Case C is where gifts are provided for employees of the trader unless—
gifts are also provided for others, and
the provision of the gifts for the employees is incidental to the provision of gifts for the others.
Case D is where the gift is given to—
a charity,
the Historic Buildings and Monuments Commission for England, or
the Trustees of the National Heritage Memorial Fund.
This section applies if, in calculating the profits of a trade, a deduction is allowed for expenses incurred on the hiring of a car or motor cycle—
which is not a qualifying hire car or motor cycle (see section 49(2)), and
the retail price of which when new exceeds £12,000.
The amount of the deduction which would otherwise be allowable is reduced by multiplying the amount by the fraction— where RP is the retail price of the car or motor cycle when new.
Subsection (4) applies if the deduction is reduced as a result of subsection (2) and subsequently—
there is a rebate (however described) of the hire charges, or
a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency arrangement.
The amount that, as a result of the rebate or release— is reduced by multiplying it by the fraction in subsection (2).
is brought into account as a receipt of the trade under section 97 (debts incurred and later released), or
is treated as a post-cessation receipt under section 249 (debts released after cessation),
The power under section 74(4) of CAA 2001 to increase or further increase the sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power to increase or further increase the sum of money specified in subsection (1)(b) or (2).
In section 48 “car or motor cycle” means a mechanically propelled road vehicle other than one—
of a construction primarily suited for the conveyance of goods or burden of any description, or
of a type not commonly used as a private vehicle and unsuitable for such use.
In section 48 “a qualifying hire car or motor cycle” means a car or motor cycle which—
is hired under a hire-purchase agreement (see subsection (3)) under which there is no option to purchase,
is hired under a hire-purchase agreement under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1% of the retail price of the car when new, or
is a qualifying hire car for the purposes of Part 2 of CAA 2001 (under section 82 of CAA 2001).
For this purpose “hire-purchase agreement” means an agreement under which— but does not include a conditional sale agreement (see subsection (5)).
goods are bailed or (in Scotland) hired in return for periodical payments by the person to whom they are bailed or hired, and
the property in the goods will pass to that person if the terms of the agreement are complied with and one or more of the following events occurs,
The events are—
the exercise of an option to purchase by that person,
the doing of any other specified act by any party to the agreement, and
the happening of any other specified event.
A “conditional sale agreement” means an agreement for the sale of goods under which—
the purchase price or part of it is payable by instalments, and
the goods are to remain the property of the seller (even though they are to be in the possession of the buyer) until specified conditions as to the payment of instalments or otherwise are met.
In this section and section 48 “new” means unused and not second-hand.
Section 48 does not apply to expenses incurred on the hiring of—
a car with low CO2 emissions, or
an electrically-propelled car.
For this purpose—
This section does not apply to expenses incurred on the hiring of any such car—
under a contract entered into after 31st March 2008, or
for a period of hire which begins after that date.
In calculating the profits of a trade, no deduction is allowed for royalties or other sums paid for the use of patents.
In calculating the profits of a trade, no deduction is allowed—
for any tax year for the interest paid on a debt or liability in respect of which relief is given under section 353 of ICTA (see subsection (5) below), or
for any relevant tax year for other interest on the same debt or liability.
A tax year is a relevant one if the interest in respect of which the relief is given could, but for the relief, have been brought into account in calculating the profits of a trade of the tax year.
For the purposes of subsection (1)(b) all interest which— is treated as interest on the same debt.
is capable of being brought into account in calculating the profits of a trade, and
is payable by any person on money advanced to the person on current account,
It does not matter if the money is advanced—
on one or more accounts, or
by the same or separate banks or other persons.
For the purposes of this section relief under section 353 of ICTA is to be treated as given only when the claim for the relief can no longer be varied (whether on appeal or otherwise).
For a rule excluding relief under section 353 of ICTA if interest on a debt or liability is brought into account in calculating the profits of a trade, see section 368(3) of ICTA.
In calculating the profits of a trade, no deduction is allowed for any contribution paid by any person under—
Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4), or
Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7).
But this prohibition does not apply to an employer’s contribution.
For this purpose “an employer’s contribution” means— within the meaning of Part 1 of the Social Security Contributions and Benefits Act 1992 or of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
a secondary Class 1 contribution,
a Class 1A contribution, or
a Class 1B contribution,
In calculating the profits of a trade, no deduction is allowed for any penalty or interest mentioned in the first column of the following table.
This is the table— Penalty or interest Description of tax, levy or duty Interest under any provision of Part 9 of TMA 1970 Income tax, capital gains tax and corporation tax Interest required to be paid by regulations made under section 71 of FA 2004 (construction industry) Penalty under any of sections 60 to 70 of VATA 1994 Value added tax Interest under section 74 of VATA 1994 Penalty under any of sections 8 to 11 of FA 1994 Excise duties Penalty under any of paragraphs 12 to 19 of Schedule 7 to FA 1994 Insurance premium tax Interest under paragraph 21 of that Schedule Penalty under any provision of Part 5 of Schedule 5 to FA 1996 Landfill tax Interest under paragraph 26 or 27 of that Schedule Penalty under any provision of Schedule 6 to FA 2000 Climate change levy Interest under any of paragraphs 70, 81 to 85 and 109 of that Schedule Penalty under any provision of Part 2 of FA 2001 Aggregates levy Interest under any of paragraphs 5 to 9 of Schedule 5 to, paragraph 6 of Schedule 8 to and paragraph 5 of Schedule 10 to FA 2001 Penalty under section 25 or 26 of FA 2003 Customs, export and import duties Penalty under any provision of Part 4 of FA 2003 Stamp duty land tax Interest under any provision of that Part
In calculating the profits of a trade, no deduction is allowed for any surcharge under section 59 of VATA 1994.
In calculating the profits of a trade, no deduction is allowed for expenses incurred—
in making a payment if the making of the payment constitutes a criminal offence, or
in making a payment outside the United Kingdom if the making of a corresponding payment in any part of the United Kingdom would constitute a criminal offence in that part.
In calculating the profits of a trade, no deduction is allowed for expenses incurred in making a payment induced by a demand which constitutes—
the offence of blackmail under section 21 of the Theft Act 1968 (c. 60) (England and Wales),
the offence of extortion (Scotland), or
the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland).
Apart from sections 87 to 90 (scientific research and expenses connected with patents, designs and trade marks), the provisions of this Chapter apply to professions and vocations as they apply to trades.
This section applies if a person incurs expenses for the purposes of a trade before (but not more than 7 years before) the date on which the person starts to carry on the trade (“the start date”).
If, in calculating the profits of the trade— the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).
no deduction would otherwise be allowed for the expenses, but
a deduction would be allowed for them if they were incurred on the start date,
In calculating the profits of a trade, a deduction is allowed for incidental costs of obtaining finance by means of— if the interest on the loan or stock is deductible in calculating the profits of the trade.
a loan, or
the issue of loan stock,
“Incidental costs of obtaining finance” means expenses—
which are incurred on fees, commissions, advertising, printing and other incidental matters, and
which are incurred wholly and exclusively for the purpose of obtaining the finance, providing security for it or repaying it.
Expenses incurred wholly and exclusively for the purpose of— are incidental costs of obtaining the finance even if it is not in fact obtained.
obtaining finance, or
providing security for it,
But the following are not incidental costs of obtaining finance—
sums paid because of losses resulting from movements in the rate of exchange between different currencies,
sums paid for the purpose of protecting against such losses,
the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
stamp duty.
This section needs to be read with section 59 (which provides for restrictions in relation to convertible loans and loan stock etc.).
No deduction is allowed under section 58 in respect of a loan or loan stock if—
it carries the right of conversion into, or to the acquisition of, shares or other securities, and
the right is exercisable before the end of the period of 3 years from the date when the loan was obtained or the stock issued (“the 3 year period”).
“Other securities” does not include a loan or loan stock—
the interest on which is deductible in calculating the profits of the person’s trade, and
which does not carry such a right as is mentioned in subsection (1).
But the restriction imposed by subsection (1) does not apply if the right is not, or is not wholly, exercised before the end of the 3 year period.
In such a case any incidental costs of obtaining finance incurred before the end of the 3 year period are treated as incurred immediately after the end of it.
If the right is exercised within the 3 year period as to part of the loan or loan stock, only the following incidental costs of obtaining finance are treated as incurred.
The costs are those corresponding to the proportion of the loan or loan stock in respect of which the right is not exercised within that period.
Sections 61 to 67 apply if land used in connection with a trade is subject to a taxed lease.
Section 61 (tenants occupying land for purposes of trade treated as incurring expenses) applies in calculating the profits of a trade carried on by the tenant under the taxed lease for the purpose of making deductions for the expenses of the trade.
But any deduction for an expense under section 61 is subject to the application of any provision of Chapter 4 of this Part.
In this section and sections 61 to 67 the following expressions have the same meaning as in Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.)—
“receipt period” (see section 288(6)),
“unreduced amount” (see section 290(2)).
Section 290(3) and (4) (unreduced amount of taxed receipt under section 277 as a result of section 278) applies for the purposes of sections 61 to 65.
In sections 64 to 67 references to a reduction under section 288 by reference to a taxed receipt have the same meaning as in Chapter 4 of Part 3 (see section 290(6)).
In the application of sections 64 to 67 to Scotland—
references to a lease being granted out of a taxed lease are to the grant of a sublease of land subject to the taxed lease, and
references to the lease so granted are to be read as references to the sublease.
The tenant under the taxed lease is treated as incurring an expense of a revenue nature in respect of the land subject to the taxed lease for each qualifying day.
If there is more than one taxed receipt, this section applies separately in relation to each of them.
A day is a “qualifying day”, in relation to a taxed receipt, if it is a day—
that falls within the receipt period of the taxed receipt, and
on which the tenant occupies the whole or part of the land subject to the taxed lease for the purposes of carrying on a trade.
If on the qualifying day the tenant occupies the whole of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula— A is the unreduced amount of the taxed receipt, and TRP is the number of days in the receipt period of the taxed receipt.
If on the qualifying day the tenant occupies part of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula— where— F is the fraction of the land that is so occupied calculated on a just and reasonable basis, and A and TRP have the same meaning as in subsection (4).
This section is subject to section 62 (limit on deductions if tenant entitled to mineral extraction allowance).
This section applies if the tenant under the taxed lease has become entitled, in respect of expenditure on the acquisition of an interest in the land subject to the taxed lease, to an allowance for a tax year under Part 5 of CAA 2001 (mineral extraction allowances) in respect of expenditure falling within section 403 of that Act (qualifying expenditure on acquiring a mineral asset).
If the allowance is in respect of the whole of the expenditure, no deduction is allowed for expenses under section 61 for a qualifying day falling within that or a later tax year.
If the allowance is in respect of only part of the expenditure (“the allowable part”) the amount of the deduction for expenses under section 61 for a qualifying day falling within that or a later tax year is calculated by multiplying the amount that, apart from this section, would be the amount of the deduction for the qualifying day by— where— WE is the whole of the expenditure, and AP is the allowable part of the expenditure.
This section applies if the tenant under the taxed lease—
does not occupy the land subject to the taxed lease, or a part of it, but
deals with the tenant’s interest in the land, or the part of it, as property employed for the purposes of carrying on a trade.
Section 61 applies as if the land or the part of it were occupied by the tenant for the purposes of the trade.
But the tenant is not treated as incurring an expense in respect of the land for a qualifying day as a result of this section so far as the tenant is treated as incurring an expense under section 292 (tenants under taxed leases treated as incurring expenses) in respect of the land for the day in calculating the profits of the tenant’s property business.
This section is subject to sections 64 and 65 (restrictions on section 61 expenses where the additional calculation rule is relevant).
This section applies if— In this section and sections 65 and 67 such a receipt is referred to as a “lease premium receipt”.
a lease has been granted out of the taxed lease, and
in calculating the amount of a receipt of a property business under Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.) in respect of the lease, there is a reduction under section 288 (the additional calculation rule) by reference to the taxed receipt.
Subsections (3) to (5) provide for the application of section 61 as a result of section 63 for a qualifying day that falls within the receipt period of the lease premium receipt.
The tenant under the taxed lease is treated as incurring an expense under section 61 as a result of section 63 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.
If the condition in subsection (3) is met, the amount of that expense for the qualifying day by reference to the taxed receipt is equal to that excess.
If the qualifying day falls within the receipt period of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.
In this section—
the “daily amount” of the taxed receipt is given by the formula— where— A is the unreduced amount of the taxed receipt, and TRP is the number of days in the receipt period of the taxed receipt, and
Section 65 explains how this section operates if the lease does not extend to the whole of the premises subject to the taxed lease.
This section applies if—
the conditions in section 64(1)(a) and (b) are met, and
the lease granted out of the taxed lease does not extend to the whole of the premises subject to the taxed lease.
Subsections (3) to (5) apply for a qualifying day that falls within the receipt period of the lease premium receipt.
Sections 61, 63 and 64 apply separately in relation to the part of the premises subject to the lease and to the remainder of the premises.
If— sections 61, 63 and 64 apply separately in relation to each part of the premises subject to a lease to which such a lease premium receipt relates and to the remainder of the premises.
more than one lease that does not extend to the whole of the premises subject to the taxed lease has been granted out of the taxed lease, and
the qualifying day falls within the receipt period of two or more lease premium receipts that relate to different leases,
Where sections 61, 63 and 64 apply in relation to a part of the premises, A becomes the amount calculated by multiplying the unreduced amount of the taxed receipt by the fraction of the premises constituted by the part.
This fraction is calculated on a just and reasonable basis.
Section 296 (corporation tax receipts treated as taxed receipts) applies for the purposes of sections 60 to 67.
This section provides for the application of section 61 as a result of section 63 if—
a lease has been granted out of the taxed lease,
in calculating the amount of a corporation tax receipt in respect of the lease, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
the amount chargeable on the superior interest is the taxed receipt for the purposes of section 61.
Sections 61 and 63 to 65 apply as follows—
the corporation tax receipt is treated as if it were a lease premium receipt for the purposes of sections 64 and 65,
references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the corporation tax receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
for the purposes of those sections the receipt period of the corporation tax receipt is—
in the case of a corporation tax receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
in the case of a corporation tax receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
There is a corporation tax receipt in respect of a lease if—
there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) in respect of the lease for an accounting period ending after 5th April 2005, or
there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
References to a reduction under section 37(2) or (3) of ICTA in a corporation tax receipt by reference to the amount chargeable on the superior interest are to the difference between— so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.
the amount of the corporation tax receipt before the operation of section 37(2) or (3) of ICTA, and
the amount of the corporation tax receipt after the operation of that subsection,
This section applies if—
expenses are incurred on replacing or altering any tool used for the purposes of a trade, and
a deduction for the expenses would not otherwise be allowable in calculating the profits of the trade because (and only because) they are items of a capital nature.
In calculating the profits of the trade, a deduction is allowed for the expenses.
In this section “tool” means any implement, utensil or article.
In calculating the profits of a trade, a deduction is allowed for a payment—
which is treated as earnings of an employee by virtue of section 225 of ITEPA 2003 (payments for restrictive undertakings), and
which is made, or treated as made for the purposes of section 226 of that Act (valuable consideration given for restrictive undertakings), by the person carrying on the trade.
The deduction is allowed for the period of account in which the payment—
is made, or
is treated as made for the purposes of section 226 of ITEPA 2003.
This section applies if a person carrying on a trade (“the employer”) makes the services of a person employed for the purposes of the trade available to— on a basis that is stated and intended to be temporary.
a charity, or
an educational establishment,
In calculating the profits of the trade, a deduction is allowed for expenses of the employer that are attributable to the employee’s employment during the period of the secondment.
In this section—
A body in England and Wales is an educational establishment for the purposes of section 70 if it is—
a local education authority,
an educational institution maintained or otherwise supported by a local education authority,
an independent school within the meaning of the Education Act 1996 (c. 56) registered under section 161 of the Education Act 2002 (c. 32), or
an institution within the further education sector, or the higher education sector, within the meaning of the Further and Higher Education Act 1992 (c. 13).
A body in Scotland is an educational establishment for the purposes of section 70 if it is—
an education authority within the meaning of the Education (Scotland) Act 1980 (c. 44),
an educational establishment within the meaning of the Education (Scotland) Act 1980 managed by an education authority within the meaning of that Act,
a public or grant-aided school within the meaning of the Education (Scotland) Act 1980,
an independent school within the meaning of the Education (Scotland) Act 1980,
a central institution within the meaning of the Education (Scotland) Act 1980,
an institution within the higher education sector within the meaning of section 56(2) of the Further and Higher Education (Scotland) Act 1992 (c. 37), or
a college of further education within the meaning of section 36(1) of the Further and Higher Education (Scotland) Act 1992.
A body in Northern Ireland is an educational establishment for the purposes of section 70 if it is—
an education or library board within the meaning of the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)),
a college of education or a controlled, maintained, grant-maintained integrated, controlled integrated, voluntary or independent school within the meaning of the Education and Libraries (Northern Ireland) Order 1986, or
an institution of further education within the meaning of the Further Education (Northern Ireland) Order 1997 (S.I. 1997/1772 (N.I. 15)).
This section applies if—
a person carrying on a trade (“the employer”) is liable to make payments to an individual,
income tax falls to be deducted from those payments as a result of PAYE regulations, and
the employer withholds sums from those payments in accordance with an approved scheme and pays the sums to an approved agent.
In calculating the profits of the employer’s trade, a deduction is allowed for expenses incurred by the employer in making a payment to the agent for expenses which— by the agent in connection with the agent’s functions under the scheme.
have been incurred, or
are to be incurred,
In this section “approved agent” and “approved scheme” have the same meaning as in section 714 of ITEPA 2003.
In calculating the profits of a trade, a deduction is allowed for counselling expenses if—
the person carrying on the trade (“the employer”) incurs the expenses,
the expenses are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
the relevant conditions are met.
In this section “counselling expenses” means expenses incurred—
in the provision of services to the employee in connection with the cessation of the office or employment,
in the payment or reimbursement of fees for such provision, or
in the payment or reimbursement of travelling expenses in connection with such provision.
In this section “the relevant conditions” means—
conditions A to D for the purposes of section 310 of ITEPA 2003 (employment income exemptions: counselling and other outplacement services), and
in the case of travel expenses, condition E for those purposes.
In calculating the profits of a trade, a deduction is allowed for retraining course expenses if—
the person carrying on the trade (“the employer”) incurs the expenses,
they are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
the relevant conditions are met.
In this section—
This section applies if—
an employer’s liability to tax for a tax year is determined on the assumption that a deduction for expenditure is allowed under section 74, and
the deduction would not otherwise have been allowed.
If, subsequently— an assessment of an amount or further amount of tax due as a result of the condition not being met may be made under section 29(1) of TMA 1970.
the condition in section 311(4)(a) of ITEPA 2003 is not met because of the employee’s failure to begin the course within the period of one year after ceasing to be employed, or
the condition in section 311(4)(b) of ITEPA 2003 is not met because of the employee’s continued employment or re-employment,
Such an assessment must be made before the end of the period of 6 years immediately following the end of the tax year in which the failure to meet the condition occurred.
If subsection (2) applies, the employer must give the Inland Revenue a notice containing particulars of— within 60 days of coming to know of it.
the employee’s failure to begin the course,
the employee’s continued employment, or
the employee’s re-employment,
If the Inland Revenue have reason to believe that the employer has failed to give such a notice, they may by notice require the employer to provide such information as they may reasonably require for the purposes of this section about—
the failure to begin the course,
the continued employment, or
the re-employment.
A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided.
Sections 77 to 79 apply if—
a person (“the employer”) makes a redundancy payment or an approved contractual payment to another person (“the employee”), and
the payment is in respect of the employee’s employment wholly in the employer’s trade or partly in the employer’s trade and partly in one or more other capacities.
For the purposes of this section and sections 77 to 80 “redundancy payment” means a redundancy payment payable under—
Part 11 of the Employment Rights Act 1996 (c. 18), or
Part 12 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
For the purposes of this section and those sections—
This section applies if—
the payment is in respect of the employee’s employment wholly in the employer’s trade, and
no deduction would otherwise be allowable for the payment.
In calculating the profits of the trade, a deduction is allowed under this section for the payment.
The deduction under this section for an approved contractual payment must not exceed the amount which would have been due to the employee if a redundancy payment had been payable.
If the payment is made after the employer has permanently ceased to carry on the trade, it is treated as made on the last day on which the employer carried on the trade.
If there is a change in the persons carrying on the trade, subsection (4) does not apply so long as a person carrying on the trade immediately before the change continues to carry it on after the change.
The deduction under this section is allowed for the period of account in which the payment is made (or treated under subsection (4) as made).
This section applies if the payment is in respect of the employee’s employment with the employer—
partly in the employer’s trade, and
partly in one or more other capacities.
The amount of the redundancy payment, or the amount which would have been due if a redundancy payment had been payable, is to be apportioned on a just and reasonable basis between—
the employment in the trade, and
the employment in the other capacities.
The part of the payment apportioned to the employment in the trade is treated as a payment in respect of the employee’s employment wholly in the trade for the purposes of section 77.
This section applies if the employer permanently ceases to carry on a trade or part of a trade and makes a payment to the employee in addition to—
the redundancy payment, or
if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
If there is a change in the persons carrying on the trade, this section does not apply so long as a person carrying on the trade immediately before the change continues to carry it on after the change.
If, in calculating the profits of the trade— a deduction is allowed under this section for the additional payment.
no deduction would otherwise be allowable for the additional payment, but
a deduction would be allowable for it if the employer had not permanently ceased to carry on the trade or the part of the trade,
The deduction under this section is limited to 3 times the amount of—
the redundancy payment, or
if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
If the payment is made after the employer has permanently ceased to carry on the trade or the part of the trade, it is treated as made on the last day on which the employer carried on the trade or the part of the trade.
The deduction under this section is allowed for the period of account in which the payment is made (or treated under subsection (5) as made).
This section applies if, in respect of a redundancy payment or an approved contractual payment payable by an employer—
the Secretary of State makes a payment under section 167 of the Employment Rights Act 1996 (c. 18), or
the Department for Employment and Learning makes a payment under Article 202 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
So far as the employer reimburses the Secretary of State or Department for the payment, sections 77 to 79 apply as if the payment were— made by the employer.
a redundancy payment, or
an approved contractual payment,
This section applies if—
an individual (“the trader”) carries on a trade (alone or in a partnership of individuals),
there is a special threat to the personal physical security of the trader which arises wholly or mainly because of the particular trade,
a service or asset which improves personal security is used by or provided for the trader to meet the threat,
the person incurring expenses in connection with that use or provision does so with the sole object of meeting the threat, and
a deduction for the expenses would not otherwise be allowable in calculating the profits of the trade because (and only because) they were not incurred wholly and exclusively for the purposes of the trade.
In calculating the profits of the trade, a deduction is allowed for the expenses—
in the case of a service, if the benefit resulting to the trader consists wholly or mainly of an improvement of the trader’s personal physical security, and
in the case of an asset, if the person incurring the expenses intends the asset to be used to improve personal physical security (whether solely or partly).
If the person incurring the expenses intends the asset to be used solely to improve personal physical security, any use of the asset which is incidental to improving personal physical security is ignored.
If the person incurring the expenses intends the asset to be used partly to improve personal physical security, a deduction is allowed only for the proportion of the expenses which is attributable to the intended use to improve personal physical security.
The fact that a service or asset improves the personal physical security of a member of the trader’s family or household (as well as that of the trader) does not prevent a deduction from being allowed.
In determining whether or not this section applies in relation to an asset, it does not matter if—
the asset becomes fixed to land, or
the trader is or becomes entitled to the property in the asset or (if the asset is a fixture) to any estate or interest in the land concerned.
In this section—