Office of Public Sector Information

816 Alternative calculation of profits: trading income

(1) This section applies if the individual’s foster-care receipts for the tax year are the receipts of a trade.

(2) The profits of the trade for the tax year are—

(a) the individual’s total foster-care receipts for the tax year, less

(b) the individual’s limit for the tax year.

817 Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

(1) This section applies if the individual has foster-care receipts for the tax year which are chargeable to income tax under Chapter 8 of Part 5 (income not otherwise charged).

(2) The amount charged for the tax year arising from all the arrangements from which the receipts are derived is—

(a) the individual’s total foster-care receipts for the tax year, less

(b) the individual’s limit for the year.

818 Election for alternative methodof calculating profits

(1) An individual may elect for the alternative method of calculating profits given in sections 816 and 817 to apply if—

(a) the individual qualifies for foster-care relief for a tax year,

(b) the individual’s total foster-care receipts for the tax year exceed the individual’s limit for the tax year, and

(c) sections 822 and 823 do not apply (accounting date for trade not 5th April).

(2) An election under this section—

(a) must specify the tax year for which it is made, and

(b) has effect for that year (unless withdrawn by notice given by the individual).

(3) An election or notice of withdrawal under this section must be made or given to the Inland Revenue on or before—

(a) the first anniversary of the normal self-assessment filing date for the tax year for which the election is made, or

(b) such later date as the Inland Revenue may, in a particular case, allow.

819 Adjustment of assessment

(1) This section applies if—

(a) an individual does not make an election under section 818 for a tax year on or before the date for making the election, and

(b) an adjustment is made after that date to the profits from the individual’s provision of foster care on which the individual is liable to tax for the tax year.

(2) The individual may make an election under this section to apply the alternative method of calculating profits given in sections 816 and 817 for the tax year.

(3) The election—

(a) must specify that tax year, and

(b) has effect for that tax year (unless withdrawn by notice given by the individual).

(4) An election or notice of withdrawal under this section must be made or given to the Inland Revenue on or before—

(a) the first anniversary of the normal self-assessment filing date for the tax year in which the adjustment is made, or

(b) such later date as the Inland Revenue may, in a particular case, allow.

Periods of account not ending on 5th April

820 Periods of account not ending on 5th April

Sections 822 and 823 (which deal with the period of account of a trade not ending on 5th April) apply if—

(a) an individual qualifies for foster-care relief for a tax year,

(b) the individual’s foster-care receipts for the tax year are the receipts of a trade, and

(c) the period of account in which those receipts accrue does not end on 5th April in the tax year.

821 Meaning of “relevant limit”

(1) For the purposes of sections 822 and 823 the “relevant limit” for a period of account in which the individual’s foster-care receipts accrue is found by adding—

(a) the fixed amount for the tax year in which that period ends or (as the case may be) the individual’s share of the fixed amount for that year (found in accordance with sections 808 to 810), and

(b) for each of the tax years in which the period of account falls, each amount per child for the individual for each part of the period of account falling in that tax year.

(2) For this purpose an individual’s amount per child for a part of the period of account is each amount that would be the individual’s amount per child under section 811 for the tax year in which the part falls if that part were the income period for that year.

822 Full relief

(1) This section applies if the individual’s total foster-care receipts for the period of account do not exceed the individual’s relevant limit for the period.

(2) The profits or losses of the trade for the tax year are treated as nil.

823 Alternative method of calculating profits

(1) This section applies if—

(a) the individual’s total foster-care receipts for the period of account exceed the individual’s relevant limit for the period, and

(b) the individual makes an election under this section.

(2) The profits of the trade for the tax year are—

(a) the individual’s total foster-care receipts for the period of account, less

(b) the individual’s relevant limit for the period.

(3) Sections 818(2) and (3) and 819 (adjustment of assessment) apply for the purposes of an election under this section as they apply for the purposes of an election under those sections.

Capital allowances for foster carers carrying on trade

824 Capital allowances: introduction

(1) In this group of sections (that is, this section and sections 825 to 827) an individual is a “relevant individual” if in a tax year—

(a) the full foster-care relief in section 813 or 822 (trading income), or

(b) the alternative method of calculating profits under section 816 or 823 (trading income),

applies to the individual for the tax year.

(2) In this group of sections a period is a “relevant chargeable period” of a relevant individual if—

(a) it is a chargeable period of the individual, and

(b) it corresponds to the income period for the individual’s foster-care receipts in the tax year for which the individual is a relevant individual.

(3) Expressions—

(a) which are used in CAA 2001 and in this group of sections, but

(b) which are not otherwise defined in this Chapter,

have the same meaning in this group of sections as in CAA 2001.

825 Carried forward unrelieved qualifying expenditure

(1) This section applies if—

(a) there is available qualifying expenditure in a relevant pool for a relevant chargeable period of a relevant individual,

(b) the expenditure is unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59 of CAA 2001, and

(c) the previous chargeable period was not a relevant chargeable period.

(2) “Relevant pool” means a pool containing expenditure incurred on the provision of plant or machinery wholly or partly for the provision of foster care by the relevant individual.

(3) CAA 2001 applies in relation to the relevant individual’s available qualifying expenditure in the pool for the relevant chargeable period as if—

(a) a disposal event occurred immediately after the beginning of the period,

(b) disposal receipts fall to be brought into account in the pool for the period because of that event, and

(c) the total of the receipts equals the amount of the unrelieved qualifying expenditure carried forward.

(4) Section 13 of CAA 2001 (use for qualifying activity of plant or machinery provided for other purposes) applies as if, on the first day of the first subsequent chargeable period which is not a relevant chargeable period—

(a) the relevant individual brings into use for the provision of foster care such of the plant or machinery on which the unrelieved qualifying expenditure was incurred as the individual still owns on that day, and

(b) the individual owns the plant or machinery as a result of incurring capital expenditure on its provision for other purposes.

826 Excluded capital expenditure

Capital expenditure (“excluded capital expenditure”) does not constitute qualifying expenditure for the purposes of CAA 2001 if it is—

(a) incurred by a relevant individual in a relevant chargeable period, and

(b) incurred on the provision of plant or machinery wholly or partly for the provision of foster care by the individual.

827 Excluded capital expenditure: subsequent treatment of asset

If a relevant individual incurs excluded capital expenditure in a relevant chargeable period, section 13 of CAA 2001 applies as if, on the first day of the first subsequent chargeable period which is not a relevant chargeable period—

(a) the individual brings into use for the provision of foster care such of the plant or machinery on which the expenditure was incurred as the individual still owns on that day, and

(b) the individual owns the plant or machinery as a result of incurring capital expenditure on its provision for other purposes.

Overlap profit

828 Overlap profit

(1) This section applies if the profits or losses of a trade for a tax year are calculated in accordance with section 813, 816, 822 or 823.

(2) Nothing in this Chapter is to be read—

(a) as preventing a deduction for overlap profit under section 205 or 220 in calculating the profits or losses of the trade for the tax year, or

(b) as preventing overlap profit from arising by reference to profits of the trade calculated for the tax year in accordance with section 816 or 823 (alternative calculation of profits).

(3) “Overlap profit” has the same meaning in this section as it has in Chapter 15 of Part 2 (see section 204).