Office of Public Sector Information
PART 2 continued CHAPTER 9 continued
(1) This section applies to determine when expenditure is treated as incurred for the purposes of sections 139 and 140.
(2) The general rule is that an amount of expenditure is treated as incurred as soon as there is an unconditional obligation to pay it.
(3) The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date.
(4) There are the following exceptions to the general rule.
(5) If under an agreement—
(a) the expenditure is on the provision of an original master version,
(b) an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event,
(c) the giving of the certificate, or other event, occurs within the period of one month after the end of a relevant period, and
(d) at or before the end of the relevant period, the original master version has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay,
the expenditure is treated as incurred immediately before the end of the relevant period.
(6) If under an agreement an amount of expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is treated as incurred on that date.
(7) If under an agreement—
(a) there is an unconditional obligation to pay an amount of expenditure on a date earlier than accords with normal commercial usage, and
(b) the sole or main benefit which might (as a result) have been expected to be obtained is that the amount would be treated, under the general rule, as incurred at an earlier time,
the amount is treated as incurred on the date on or before which it is required to be paid.
(1) A person carrying on a trade which consists of or includes the exploitation of original master versions of films may elect for sections 134 to 140 not to apply in relation to expenditure if—
(a) the person incurs expenditure on the production or acquisition of an original master version of a film,
(b) the original master version is a certified master version,
(c) its value is expected to be realisable over a period of not less than two years, and
(d) the film is genuinely intended for theatrical release.
(2) The election must relate to all expenditure—
(a) incurred, or
(b) to be incurred,
on the production or acquisition of the original master version in question.
(3) The election is irrevocable.
(4) The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which ends the relevant period in which the original master version of the film is completed.
(5) For this purpose a film is completed—
(a) at the time given by section 131(5), or
(b) if the expenditure is acquisition expenditure and the acquisition takes place after that time, at the time of the acquisition.
(6) No election may be made in relation to expenditure on the production or acquisition of an original master version of a film if any of that expenditure has been allocated—
(a) under any of sections 137 to 140 above, or
(b) under section 41 or 42 of F(No.2)A 1992.
(1) This section determines for the purposes of this Chapter whether films are genuinely intended for theatrical release.
(2) The relevant intention is the intention at the time the film is completed of the person then entitled to determine how the film is to be exploited.
(3) “Theatrical release” means exhibition to the paying public at the commercial cinema.
(4) A film is not regarded as genuinely intended for theatrical release unless it is intended that a significant proportion of the earnings from the film should be obtained by exhibition to the paying public at the commercial cinema.
The provisions of this Chapter apply to professions and vocations as they apply to trades.
In this Chapter a “relevant telecommunication right” means—
(a) a licence granted under section 1 of the Wireless Telegraphy Act 1949 (c. 54) in accordance with regulations made under section 3 of the Wireless Telegraphy Act 1998 (c. 6) (bidding for licences),
(b) an indefeasible right to use a telecommunications cable system, or
(c) a right derived (directly or indirectly) from such a licence or indefeasible right.
(1) This section applies if, in accordance with generally accepted accounting practice, an amount in respect of—
(a) expenditure on the acquisition of a relevant telecommunication right, or
(b) a receipt from the disposal of a relevant telecommunication right,
is recognised in the accounts of a trade as an item in the calculation of profit or loss.
(2) The amount is treated for income tax purposes as an item of a revenue nature.
(3) “The acquisition of a relevant telecommunication right” includes—
(a) the extension of rights attached to a relevant telecommunication right, and
(b) if a relevant telecommunication right is subject to a derivative right, the cancellation or restriction of rights attached to the derivative right.
(4) “The disposal of a relevant telecommunication right” includes—
(a) the cancellation or restriction of rights attached to a relevant telecommunication right, and
(b) the granting of a derivative right or the extension of rights attached to a derivative right.
(1) This section applies if, in accordance with generally accepted accounting practice, an amount in respect of the revaluation of a relevant telecommunication right is recognised in the accounts of a trade (whether or not as an item in the calculation of profit or loss).
(2) The amount is treated for income tax purposes as an item of a revenue nature.
(3) In calculating the profits of the trade, the amount is brought into account for the period of account in which it is recognised.
(1) This section applies for the purpose of calculating the profits of a person’s trade if a profit on the sale of securities would be brought into account in calculating the profits of the trade.
(2) Profits and losses from the securities that in accordance with generally accepted accounting practice are—
(a) calculated by reference to the fair value of the securities, and
(b) recognised in the person’s statement of recognised gains and losses or statement of changes in equity,
are brought into account in calculating the profits of the trade.
(3) But subsection (2) does not apply—
(a) to an amount so far as deriving from or otherwise relating to an amount brought into account under that subsection in an earlier period of account, or
(b) to an amount recognised for accounting purposes by way of correction of a fundamental error.
(4) In this section “securities” includes—
(a) shares,
(b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992, and
(c) in the case of a company with no share capital, interests in the company possessed by members of the company,
but does not include a loan relationship (within the meaning of Chapter 2 of Part 4 of FA 1996).
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) a transaction falling within subsection (2) occurs in relation to securities (“the original holding”), and
(b) a profit on the sale of the securities would be brought into account in calculating the profits of the trade.
(2) A transaction falls within this subsection if—
(a) it results in a new holding being treated as the same as the original holding as a result of sections 126 to 136 of TCGA 1992 (CGT roll-over relief in cases of conversion etc.), or
(b) it is treated, as a result of section 134 of TCGA 1992 (compensation stock), as an exchange for a new holding which does not involve a disposal of the original holding,
and it does not fall within section 151(1) or 152(1) below (exchanges of gilts for gilt strips and consolidation of gilt strips).
(3) This section does not apply to securities in respect of which unrealised profits or losses, calculated by reference to the fair value of the securities at the end of the period of account, are taken into account in the period of account in which the transaction occurs.
(4) The transaction is treated as not involving a disposal of the original holding and the new holding is treated as the same asset as the original holding.
(5) But if, under the transaction, the person carrying on the trade—
(a) receives consideration in addition to the new holding, or
(b) becomes entitled to receive such consideration,
subsection (4) applies as if the references to the original holding were to the proportion of the original holding given by the following fraction.
(6) The fraction is—
where—
NH is the market value of the new holding at the time of the transaction, and
C is the market value of the consideration at the time of the transaction or (if the consideration is cash) the amount of the consideration.
(7) In determining whether subsection (2)(a) applies as a result of section 135 or 136 of TCGA 1992, the reference to capital gains tax in section 137(1) of TCGA 1992 is to be read as a reference to income tax.
(8) In this section “securities” includes—
(a) shares,
(b) loan stocks or similar securities (whether secured or unsecured) of a government, a local or other public authority (in the United Kingdom or elsewhere) or a company,
(c) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992,
(d) in the case of a company with no share capital, interests in the company possessed by members of the company,
(e) quoted options to subscribe for shares which are treated as shares as a result of section 147 of TCGA 1992, and
(f) earn-out rights which are assumed to be securities as a result of section 138A(3) of TCGA 1992.
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) the person carrying it on (“the trader”) exchanges a gilt-edged security for strips of the security, and
(b) a profit on the sale of the security would be brought into account in calculating the profits of the trade.
(2) The security is treated as having been redeemed at the time of the exchange by the payment to the trader of its market value.
(3) The trader is treated as having acquired each strip for the proportion of the market value of the security given by the following fraction.
(4) The fraction is—
where—
SV is the market value of one strip, and
TV is the total of the market values of all the strips received in exchange for the security.
(5) In this section references to market value are to market value at the time of the exchange.
(6) This section applies to professions and vocations as it applies to trades.
(7) See also—
section 153 (meaning of “gilt-edged security” and “strip”), and
section 154 (regulations for determining market value of securities or strips).
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) strips of a gilt-edged security are consolidated into a single security by being exchanged by the person carrying on the trade (“the trader”) for the single security, and
(b) a profit on the sale of any of the strips would be brought into account in calculating the profits of the trade.
(2) Each strip is treated as having been redeemed at the time of the exchange by payment to the trader of its market value.
(3) The trader is treated as having acquired the gilt-edged security for an amount equal to the total of the market values of the strips given in exchange.
(4) In this section references to market value are to market value at the time of the exchange.
(5) This section applies to professions and vocations as it applies to trades.
(6) See also—
section 153 (meaning of “gilt-edged security” and “strip”), and
section 154 (regulations for determining market value of securities or strips).
(1) In this Act “gilt-edged security” means a security which—
(a) is a gilt-edged security for the purposes of TCGA 1992 (see Schedule 9 to that Act), or
(b) will be such a security on the making of an order under paragraph 1 of Schedule 9 to TCGA 1992, if the making of the order is anticipated in the prospectus under which the security is issued.
(2) For the purposes of sections 151 and 152 “strip”, in relation to a gilt-edged security, means a security issued under the National Loans Act 1968 (c. 13) which meets conditions A to C.
(3) Condition A is that the security is issued for the purpose of representing the right to or of securing—
(a) a payment corresponding to a payment of interest or principal remaining to be made under the gilt-edged security, or
(b) two or more payments each corresponding to a payment to be so made.
(4) Condition B is that the security is issued in conjunction with the issue of one or more other securities which, together with that security—
(a) represent the right to, or
(b) secure,
payments corresponding to every payment remaining to be made under the gilt-edged security.
(5) Condition C is that the security is not itself a security which—
(a) represents the right to, or
(b) secures,
payments corresponding to a part of every payment remaining to be made under the gilt-edged security.
(1) The Treasury may by regulations make provision for the purposes of sections 151 and 152 as to the manner of determining the market value at any time of a gilt-edged security (including any strip).
(2) The regulations may—
(a) make different provision for different cases, and
(b) contain such incidental, supplemental, consequential and transitional provision as the Treasury consider appropriate.
(3) The power in this section does not affect the power under section 202(5) of FA 1996 (gilt stripping).
(1) This section applies for the purpose of calculating the profits of a trade carried on by a person who—
(a) is authorised for the purposes of FISMA 2000 (see section 31(1) of that Act), but
(b) is not an investment company (within the meaning of section 130 of ICTA).
(2) A deduction is allowed for any sum spent by the person in paying a levy, so far as it is not otherwise allowable.
(3) A payment made to the person as a result of a repayment provision is brought into account as a receipt.
(4) For the purposes of this section “levy” means—
(a) a payment required under rules made under section 136(2) of FISMA 2000,
(b) a levy imposed under the Financial Services Compensation Scheme,
(c) a payment required under rules made under section 234 of FISMA 2000,
(d) a payment required under the rules referred to in paragraph 14(1) of Schedule 17 to FISMA 2000 (“scheme rules”) in accordance with paragraph 15(1) of that Schedule, or
(e) a payment required in accordance with the standard terms fixed under paragraph 18 of that Schedule (other than an award which is not an award of costs under rules made under section 230 of FISMA 2000 or under provision relating to costs contained in those standard terms).
(5) For the purposes of this section “repayment provision” means—
(a) any provision made by virtue of section 136(7) or 214(1)(e) of FISMA 2000, or
(b) any provision made by scheme rules for fees to be refunded in specified circumstances.
(1) This section applies for the purpose of calculating the profits of a trade of dealing in land.
(2) If the person carrying on the trade buys woodlands in the United Kingdom in the course of the trade, the part of the cost of the woodlands which is attributable to trees or saleable underwood growing on the land is ignored.
(3) If—
(a) the woodlands are subsequently sold in the course of the trade, and
(b) any of the trees or underwood are still growing on the land at the time of the sale,
the part of the price that is equal to the amount ignored under subsection (2) for the trees or underwood is ignored.
(1) This section applies for the purpose of calculating the profits of a trade if in a tax year a person who is UK resident, or ordinarily UK resident, carries on the trade the receipts of which include mineral royalties—
(a) which the person is entitled to receive under a mineral lease or agreement, and
(b) which are not chargeable to tax under Chapter 8 of Part 3 (rent receivable in connection with a UK section 12(4) concern) because of the priority rule in section 261.
(2) The person is treated as entitled to receive only half of the total of the mineral royalties arising under the lease or agreement in the tax year.
(3) Sections 341 to 343 (meaning of “mineral lease or agreement” and “mineral royalties”) apply for the purposes of this section as they apply for the purposes of Chapter 8 of Part 3.
(1) This section applies for the purpose of calculating the profits of a trade of dealing in land if a receipt of the trade falls within one of the following categories—
(a) lease premiums within section 277,
(b) sums within section 279 (sums payable instead of rent),
(c) sums within section 280 (sums payable for surrender of a lease),
(d) sums within section 281 (sums payable for variation or waiver of term of lease),
(e) consideration for the assignment of a lease within section 282 (lease granted at an undervalue), and
(f) amounts received on the sale of an estate or interest in land within section 284 (sales with right to re-conveyance) or section 285 (sale and leaseback transactions).
(2) The receipt is reduced by the relevant amount.
(3) The relevant amount is the amount which is treated as a receipt of a property business as a result of any of sections 277 to 285.
(4) But if—
(a) the person carrying on the trade makes a claim under section 301 or 302, and
(b) as a result of the claim a repayment of tax is made to that person,
the relevant amount is the amount which, for the purpose of determining the amount of the repayment of tax, is treated as brought into account as a receipt in calculating the profits of the property business.
(5) If subsection (4) applies, any adjustment of liability to tax may be made—
(a) by assessment or otherwise, and
(b) at any time at which it could be made if it related only to tax for the tax year in which the claim under section 301 or 302 is made.
(1) This section applies for the purpose of calculating the profits of the profession or vocation of a minister of a religious denomination.
(2) If the minister pays rent in respect of a dwelling-house and any part of the dwelling-house is used mainly and substantially for the purposes of the minister’s duty, a deduction is allowed for—
(a) one-quarter of the rent, or
(b) if less, the part of the rent that, on a just and reasonable apportionment, is attributable to that part of the dwelling-house.
(3) If—
(a) an interest in premises belongs to a charity or an ecclesiastical corporation,
(b) because of that interest, the minister has a residence in the premises from which to perform the minister’s duty, and
(c) the minister incurs expenses on the maintenance, repair, insurance or management of the premises,
a deduction is allowed under this subsection for part of those expenses.
(4) The amount of the deduction under subsection (3) is—
where—
A is the amount of the expenses, and
B is the amount of the expenses for which a deduction is otherwise allowable.
(1) The profits of a barrister or advocate in independent practice for a period of account ending not more than 7 years after the start of such practice may be calculated in accordance with this section.
(2) For this purpose barristers and advocates start in independent practice when they first hold themselves out as available for fee-earning work.
(3) The profits of a barrister or advocate for a period of account to which this section applies may be calculated—
(a) on a cash basis, or
(b) by reference to fees earned whose amount has been agreed or in respect of which a fee note has been delivered.
(4) Once a particular basis has been adopted it must be applied consistently.
(5) If for any period of account an accounting basis is adopted that complies with section 25 (generally accepted accounting practice), the exemption from that section given by this section ceases.
(6) In that case, section 25 applies to all subsequent periods of account.
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) the person carrying on the trade incurs expenditure on mineral exploration and access in an area or group of sands, and
(b) the presence of mineral deposits in commercial quantities has already been established in that area or group of sands.
(2) A deduction is allowed for the expenditure only if a deduction would have been allowed for it if the presence of mineral deposits in commercial quantities had not already been established in that area or group of sands.
(3) In this section “mineral exploration and access” has the same meaning as in Part 5 of CAA 2001 (see section 396(1) of that Act).
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) the person carrying on the trade is liable to pool betting duty,
(b) there is a reduction in that duty, and
(c) the person makes a qualifying payment in consequence of that reduction.
(2) A qualifying payment is one—
(a) made in order to meet (directly or indirectly) capital expenditure incurred by any person in improving the safety or comfort of spectators at a ground to be used for the playing of association football, or
(b) made to trustees established mainly for the support of athletic sports or athletic games but with power to support the arts.
(3) A deduction is allowed for the qualifying payment.
(1) This section applies for the purpose of calculating the profits of a trade, profession or vocation carried on by an intermediary who is treated as making a deemed employment payment in connection with the trade, profession or vocation.
(2) A deduction is allowed for—
(a) the amount of the deemed employment payment, and
(b) the amount of any employer’s national insurance contributions paid by the intermediary in respect of it.
(3) The deduction is allowed for the period of account in which the deemed employment payment is treated as made.
(4) No deduction in respect of—
(a) the deemed employment payment, or
(b) any employer’s national insurance contributions paid by the intermediary in respect of it,
may be made except in accordance with this section.
(5) In this section “deemed employment payment” and “intermediary” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003.
Income Tax (Trading and Other Income) Act 2005