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PART 2 continued CHAPTER 5 continued
(1) This section applies if—
(a) the payment is in respect of the employee’s employment wholly in the employer’s trade, and
(b) no deduction would otherwise be allowable for the payment.
(2) In calculating the profits of the trade, a deduction is allowed under this section for the payment.
(3) 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.
(4) 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.
(5) 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.
(6) 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).
(1) This section applies if the payment is in respect of the employee’s employment with the employer—
(a) partly in the employer’s trade, and
(b) partly in one or more other capacities.
(2) 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—
(a) the employment in the trade, and
(b) the employment in the other capacities.
(3) 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.
(1) 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—
(a) the redundancy payment, or
(b) if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
(2) 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.
(3) If, in calculating the profits of the trade—
(a) no deduction would otherwise be allowable for the additional payment, but
(b) 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,
a deduction is allowed under this section for the additional payment.
(4) The deduction under this section is limited to 3 times the amount of—
(a) the redundancy payment, or
(b) if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
(5) 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.
(6) 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).
(1) This section applies if, in respect of a redundancy payment or an approved contractual payment payable by an employer—
(a) the Secretary of State makes a payment under section 167 of the Employment Rights Act 1996 (c. 18), or
(b) 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)).
(2) 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—
(a) a redundancy payment, or
(b) an approved contractual payment,
made by the employer.
(1) This section applies if—
(a) an individual (“the trader”) carries on a trade (alone or in a partnership of individuals),
(b) there is a special threat to the personal physical security of the trader which arises wholly or mainly because of the particular trade,
(c) a service or asset which improves personal security is used by or provided for the trader to meet the threat,
(d) the person incurring expenses in connection with that use or provision does so with the sole object of meeting the threat, and
(e) 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.
(2) In calculating the profits of the trade, a deduction is allowed for the expenses—
(a) 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
(b) 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).
(3) 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.
(4) 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.
(5) 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.
(6) In determining whether or not this section applies in relation to an asset, it does not matter if—
(a) the asset becomes fixed to land, or
(b) 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.
(7) In this section—
“asset” includes equipment and a structure (such as a wall), but does not include a car, ship or aircraft or a dwelling or grounds appurtenant to a dwelling, and
“service” does not include a dwelling or grounds appurtenant to a dwelling.
(1) This section applies if a person carrying on a trade (“the contributor”) incurs expenses in making a contribution (whether in cash or in kind)—
(a) to a local enterprise organisation (see section 83), or
(b) to an urban regeneration company (see section 86),
and a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
(2) In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
(3) But if, in connection with the making of the contribution, the contributor or a connected person—
(a) receives a disqualifying benefit of any kind, or
(b) is entitled to receive such a benefit,
the amount of the deduction is restricted to the amount of the expenses less the value of the benefit.
(4) For this purpose it does not matter whether a person receives, or is entitled to receive, the benefit —
(a) from the organisation or company concerned, or
(b) from anyone else.
(5) Subsection (6) applies if—
(a) a deduction has been made under this section, and
(b) the contributor or a connected person receives a disqualifying benefit that is in any way attributable to the contribution.
(6) An amount equal to the value of the benefit (so far as not brought into account in determining the amount of the deduction)—
(a) is brought into account in calculating the profits of the trade, as a receipt arising on the date on which the benefit is received, or
(b) if the contributor has permanently ceased to carry on the trade before that date, is treated as a post-cessation receipt (see Chapter 18).
(7) In this section “disqualifying benefit” means a benefit the expenses of obtaining which, if incurred by the contributor directly in a transaction at arm’s length, would not be allowable as a deduction in calculating the profits of the trade.
(1) For the purposes of section 82 “local enterprise organisation” means—
(a) a local enterprise agency,
(b) a training and enterprise council,
(c) a Scottish local enterprise company, or
(d) a business link organisation.
(2) “Local enterprise agency” means a body for the time being approved as a local enterprise agency for the purposes of section 82 by the relevant national authority, that is to say by—
(a) the Secretary of State (in relation to England or Northern Ireland),
(b) the Scottish Ministers (in relation to Scotland), or
(c) the National Assembly for Wales (in relation to Wales).
For further provision about approvals by the relevant national authority, see sections 84 and 85.
(3) “Training and enterprise council” means a body with which the Secretary of State has an agreement under which the body is to carry out the functions of a training and enterprise council.
(4) “Scottish local enterprise company” means a company with which—
(a) Scottish Enterprise, or
(b) Highlands and Islands Enterprise,
has an agreement under which the company is to carry out the functions of a local enterprise company.
(5) “Business link organisation” means a person authorised by or on behalf of the Secretary of State to use a trade mark designated by the Secretary of State for the purposes of this subsection.
(1) The relevant national authority may approve a body as a local enterprise agency for the purposes of section 82 only if conditions A and B are met.
(2) But if those conditions are met, the body may be approved—
(a) whatever its status or structure, and
(b) even if it is not described as a local enterprise agency.
(3) Condition A is that the relevant national authority is satisfied—
(a) that the body’s sole aim is the promotion or encouragement of local enterprise, or
(b) that one of the body’s main aims is the promotion or encouragement of local enterprise and that it has or is about to have a separate fund for the sole purpose of pursuing that aim.
(4) For this purpose “local enterprise” means industrial and commercial activity or enterprise in a particular area in the United Kingdom, with particular reference to encouraging the formation and development of small businesses.
(5) Condition B is that the body is precluded from paying or transferring any of its income or profit directly or indirectly—
(a) to any of its members, or
(b) to any person charged with the control and direction of its affairs.
(6) The payment of—
(a) reasonable remuneration for goods, labour or power supplied or for services provided,
(b) reasonable interest on money lent, or
(c) reasonable rent for premises,
does not count as a payment or transfer of income or profit for the purposes of subsection (5).
(1) This section applies for the purposes of section 84.
(2) The relevant national authority may give a body approval that is conditional on its compliance with such requirements as to—
(a) accounts,
(b) provision of information, and
(c) other matters,
as the relevant national authority considers appropriate
(3) If the relevant national authority approves a body on the basis that it has or is about to have a separate fund (see section 84(3)(b))—
(a) the approval must specify the fund, and
(b) section 82 applies only to a contribution to the body made wholly to or for the purposes of the fund.
(4) The relevant national authority must withdraw the approval of a body as a local enterprise agency if—
(a) condition A or B in section 84 is no longer met, or
(b) the body is failing to comply with a requirement imposed as a condition of its approval.
(5) The relevant national authority must give notice of withdrawal to the body concerned, specifying the date from which the withdrawal takes effect (which may be earlier than the date on which the notice is given).
(1) For the purposes of section 82 “urban regeneration company” means any body of persons which the Treasury by order designates as an urban regeneration company for the purposes of that section.
(2) A body may be so designated only if—
(a) its sole or main function is to co-ordinate the regeneration of a specific urban area in the United Kingdom,
(b) it is expected to seek to perform that function by creating a plan for the development of that area and trying to secure that the plan is carried into effect, and
(c) in co-ordinating the regeneration of that area, it is expected to work together with some or all local or other public authorities which exercise functions in relation to the whole or part of that area.
(3) An order under this section may be framed so as to take effect on a date earlier than the making of the order, but not earlier than three months before the date on which the order is made.
(1) If a person carrying on a trade incurs expenses of a revenue nature on research and development—
(a) related to the trade, and
(b) directly undertaken by or on behalf of the person,
a deduction is allowed for the expenses in calculating the profits of the trade.
(2) For this purpose expenses incurred on research and development—
(a) do not include expenses incurred in the acquisition of rights in, or arising out of, research and development, but
(b) subject to that, include all expenses incurred in carrying out, or providing facilities for carrying out, research and development.
(3) The reference in this section to research and development related to a trade includes—
(a) research and development which may lead to or facilitate an extension of the trade, and
(b) research and development of a medical nature which has a special relation to the welfare of workers employed in the trade.
(4) The same expenses may not be brought into account under this section in relation to more than one trade.
(5) In this section “research and development” has the meaning given by section 837A of ICTA and includes oil and gas exploration and appraisal.
(6) This section does not apply to professions or vocations.
(1) If a person carrying on a trade—
(a) pays any sum to an approved scientific research association which has as its object scientific research related to the class of trade to which the trade belongs, or
(b) pays any sum to be used for such scientific research to an approved university, college research institute or other similar institution,
a deduction is allowed for the sum in calculating the profits of the trade.
(2) The deduction is allowed for the period of account in which the payment is made.
(3) “Scientific research” means any activities in the fields of natural or applied science for the extension of knowledge.
(4) For the purposes of this section—
(a) a scientific research association, or
(b) a university, college research institute or other similar institution,
is approved if it is for the time being approved for the purposes of this section by the Secretary of State.
(5) The references in this section to scientific research related to a class of trade include—
(a) scientific research which may lead to or facilitate an extension of trades of the class, and
(b) scientific research of a medical nature which has a special relation to the welfare of workers employed in trades of the class.
(6) If a question arises as to—
(a) whether, or
(b) what extent,
any activities constitute or constituted scientific research, the Inland Revenue must refer the question for decision to the Secretary of State, whose decision is final.
(7) The same expenses may not be brought into account under this section in relation to more than one trade.
(8) This section does not apply to professions or vocations.
(1) In calculating the profits of a trade, a deduction is allowed for expenses incurred—
(a) in obtaining for the purposes of the trade the grant of a patent or the extension of a patent’s term, or
(b) in connection with a rejected or abandoned application for a patent made for the purposes of the trade.
(2) This section does not apply to professions or vocations.
(1) In calculating the profits of a trade, a deduction is allowed for expenses incurred in obtaining for the purposes of the trade—
(a) the registration of a design or trade mark,
(b) the extension of a period for which the right in a registered design subsists, or
(c) the renewal of registration of a trade mark.
(2) This section does not apply to professions or vocations.
In calculating the profits of a trade, a deduction is allowed for a sum payable by the person carrying on the trade to the Export Credits Guarantee Department—
(a) under an agreement entered into as a result of arrangements made under section 2 of the Export and Investment Guarantees Act 1991 (c. 67) (insurance in connection with overseas investment), or
(b) with a view to entering into such an agreement.
(1) This section applies if—
(a) an individual (“the trader”) carries on a foreign trade (alone or in partnership),
(b) the trader is absent from the United Kingdom wholly and exclusively for the purpose of carrying on the foreign trade or the foreign trade and one or more other trades (whether or not foreign trades),
(c) qualifying expenses are incurred in connection with the foreign trade, and
(d) a deduction for the expenses would not otherwise be allowable in calculating the profits of the foreign trade because (and only because) they were not incurred wholly and exclusively for the purposes of the foreign trade.
(2) In calculating any profits of the foreign trade which are not charged in accordance with section 832 (relevant foreign income charged on the remittance basis), a deduction is allowed for the expenses.
(3) Any of the following expenses are qualifying expenses incurred in connection with the foreign trade—
(a) expenses incurred by the trader in travelling between a place in the United Kingdom and a place where the foreign trade is carried on,
(b) expenses incurred by the trader on board and lodging at a place where the foreign trade is carried on,
(c) if the trader’s absence from the United Kingdom is for a continuous period of 60 days or more, family expenses (as defined in section 94), and
(d) if the trader also carries on another trade outside the United Kingdom (whether or not a foreign trade), expenses incurred by the trader in travelling between a place where the foreign trade is carried on and a place outside the United Kingdom where the other trade is carried on.
(4) In this section and section 93 “foreign trade” means a trade carried on wholly outside the United Kingdom.
(1) Expenses within section 92(3)(a), (b) or (c) are allocated to the foreign trade.
(2) If—
(a) the expenses are within section 92(3)(a) or (b), and
(b) the trader carries on more than one foreign trade at the place in question outside the United Kingdom,
those expenses are allocated between the foreign trades on a just and reasonable basis.
(3) If—
(a) the expenses are within section 92(3)(c), and
(b) the trader’s absence is for the purpose of carrying on more than one foreign trade,
those expenses are allocated between the foreign trades on a just and reasonable basis.
(4) Expenses within section 92(3)(d) are allocated—
(a) to the trade carried on at the trader’s place of destination, if that trade is a foreign trade, and
(b) in any other case, to the foreign trade carried on at the trader’s place of departure.
(5) If the trader carries on more than one foreign trade at—
(a) the place of destination (in a case falling within subsection (4)(a)), or
(b) the place of departure (in a case falling within subsection (4)(b)),
the expenses are allocated between the foreign trades on a just and reasonable basis.
(1) In section 92(3)(c) “family expenses” means expenses of a journey made by the trader’s spouse or child if the journey—
(a) is between a place in the United Kingdom and a place outside the United Kingdom where any of the trades is carried on, and
(b) is made in order to accompany the trader at the beginning of the period of absence or to visit the trader during that period or to return after a journey made for either purpose.
(2) But no more than two outward and two return journeys made by the same person in a tax year fall within subsection (1).
(3) In this section “child” includes a stepchild but does not include a person who is aged 18 or over at the start of the outward journey.
Apart from section 105 (industrial development grants), the provisions of this Chapter apply to professions and vocations as they apply to trades.
(1) Items of a capital nature must not be brought into account as receipts in calculating the profits of a trade.
(2) But this does not apply to items which, as a result of any provision of this Part, are brought into account as receipts in calculating the profits of the trade.
(1) This section applies if—
(a) in calculating the profits of a trade, a deduction is allowed for the expense giving rise to a debt owed by the person carrying on the trade,
(b) all or part of the debt is released, and
(c) the release is not part of a statutory insolvency arrangement.
(2) The amount released—
(a) is brought into account as a receipt in calculating the profits of the trade, and
(b) is treated as arising on the date of the release.
(1) This section applies if —
(a) a person (“the transferor”) permanently ceased to carry on a trade at any time,
(b) at that time the transferor transferred to another person (“the transferee”) the right to receive sums arising from the carrying on of the trade, and
(c) the transferee subsequently carries on the transferor’s trade.
(2) Sums—
(a) which the transferee receives as a result of the transfer, and
(b) which are not brought into account in calculating the profits of the transferor’s trade for income or corporation tax purposes for any period before the cessation,
are brought into account in calculating the profits of the transferee’s trade in the period of account in which they are received.
(3) Any sums mentioned in subsection (1)(b) which are received after the transferor has permanently ceased to carry on the trade are not post-cessation receipts (see Chapter 18).
(1) For the purposes of sections 101 and 102 a payment or other benefit is a reverse premium—
(a) if conditions A to C are met, and
(b) it is not excluded by section 100.
(2) Condition A is that a person (“the recipient”) receives the payment or other benefit by way of inducement in connection with a transaction being entered into by—
(a) the recipient, or
(b) a person connected with the recipient.
(3) Condition B is that the transaction (the “property transaction”) is one under which—
(a) the recipient, or
(b) the person connected with the recipient,
becomes entitled to an estate, interest or right in or over land.
(4) Condition C is that the payment or other benefit is paid or provided by—
(a) the person (“the grantor”) by whom the estate, interest or right is granted or was granted at an earlier time,
(b) a person connected with the grantor, or
(c) a nominee of, or a person acting on the directions of, the grantor or a person connected with the grantor.
Income Tax (Trading and Other Income) Act 2005