|
| |
|
(5) | For the purposes of subsections (2) and (3) the part of an amount that |
| |
derives from a capital allowance or a deduction made under section |
| |
42(1) of the Finance (No. 2) Act 1992 shall be determined on such basis |
| |
as is just and reasonable. |
| |
(6) | In this section “the first restricted year” and “the pre-announcement |
| 5 |
allowance” have the meanings given by section 118ZJ.” |
| |
(2) | In section 117(2) of the Taxes Act 1988, in paragraph (a) of the definition of “the |
| |
aggregate amount”, after “a relevant year of assessment” there is inserted “or a |
| |
qualifying year of assessment within the meaning of section 118ZE”. |
| |
(3) | Section 118ZB of the Taxes Act 1988 (restriction on relief: members of limited |
| 10 |
liability partnerships) is renumbered as subsection (1) of that section and after |
| |
that provision there is added— |
| |
“(2) | However, section 117 does not apply in relation to a loss sustained by |
| |
an individual in a trade, or interest paid by him in connection with the |
| |
carrying on of a trade, in a qualifying year of assessment within the |
| 15 |
meaning of section 118ZE.” |
| |
(4) | In section 118ZD of the Taxes Act 1988 (carry forward of unrelieved losses by |
| |
members of limited liability partnerships), in subsection (2), for “and 118” there |
| |
is substituted “, 118 and 118ZE”. |
| |
Individuals in partnership: exit charge |
| 20 |
120 | Losses derived from exploiting licence: introductory |
| |
(1) | Section 121 (charge to income tax) applies in relation to an individual who |
| |
carries on or has carried on a trade in partnership if— |
| |
(a) | there is a disposal on or after 10 February 2004 of— |
| |
(i) | any licence acquired in carrying on the trade; or |
| 25 |
(ii) | any rights to income under any agreement that is related to or |
| |
| |
(b) | the individual receives any non-taxable consideration for the disposal |
| |
(“relevant consideration”); and |
| |
(c) | he has made a claim under section 380 or 381 of the Taxes Act 1988 in |
| 30 |
respect of a licence-related loss sustained in the trade in a qualifying |
| |
year (“a relevant claim”). |
| |
(2) | A “licence-related loss” means a loss that derives to any extent from |
| |
expenditure incurred in the trade in exploiting the licence. |
| |
(3) | In relation to an individual who carried on the trade at any time before 26 |
| 35 |
March 2004, the reference in subsection (2) to expenditure does not include |
| |
expenditure incurred before 10 February 2004. |
| |
(4) | A “qualifying year” means a year of assessment at any time during which the |
| |
individual carried on the trade in partnership which is also— |
| |
(a) | the year of assessment in which the trade is first carried on by him or |
| 40 |
any of the next three years of assessment; and |
| |
(b) | a year of assessment in which he did not devote a significant amount of |
| |
time to the trade (within the meaning given by section 124). |
| |
|
| |
|
| |
|
(5) | The reference in subsection (1)(b) to “non-taxable” consideration is to |
| |
| |
(a) | that (apart from section 121) is not chargeable to income tax; and |
| |
(b) | whose receipt is not an exit event for the purposes of section 114; |
| |
| and it is immaterial for the purposes of subsection (1)(b) whether the non- |
| 5 |
taxable consideration is the only consideration received by the individual for |
| |
| |
(6) | For the purposes of this section and sections 121 to 123, an agreement is related |
| |
to a licence if they are entered into in pursuance of the same arrangement |
| |
(regardless of the date on which either is entered into). |
| 10 |
(7) | For the purposes of this section and sections 121 to 123 an agreement, or part |
| |
of an agreement, that imposes an obligation to do a thing (rather than merely |
| |
conferring authority to do it) is not for that reason to be regarded as not being |
| |
a licence; and references to “exploiting” a licence shall be construed |
| |
| 15 |
| |
(1) | A chargeable event occurs whenever, on or after 10 February 2004, an |
| |
individual who carries on or has carried on a trade in partnership— |
| |
(a) | receives relevant consideration, if by the time he has received it he has |
| |
(at any time) made a relevant claim; or |
| 20 |
(b) | makes a relevant claim, if by the time he has made it he has received |
| |
| |
(2) | Where, as respects an individual, one or more chargeable events occurs in a |
| |
year of assessment in relation to a licence (“the licence in question”), so much |
| |
of the total consideration as does not exceed the chargeable amount shall be |
| 25 |
| |
(a) | annual profits or gains of the individual of that year of assessment; and |
| |
(b) | chargeable to income tax under Case VI of Schedule D. |
| |
(3) | The “total consideration” means the total amount or value of the relevant |
| |
consideration that by the end of that year of assessment has been received by |
| 30 |
the individual (whether or not in that year of assessment). |
| |
(4) | To find the chargeable amount— |
| |
(a) | take so much of the total consideration as does not exceed the net- |
| |
licence related loss; and |
| |
(b) | reduce the amount found under paragraph (a) (but not below nil) by |
| 35 |
the amount of any relevant consideration that by reason of this section |
| |
has been treated as annual profits or gains of previous years of |
| |
| |
(5) | The net licence-related loss is the amount, computed as at the end of the year |
| |
of assessment in which the chargeable event occurs, by which A exceeds B, |
| 40 |
| |
| A is the total of the individual’s claimed licence-related losses for |
| |
| |
| B is the total of his licence-related profits for any years of assessment. |
| |
(6) | In subsections (3) and (4), the references to relevant consideration are to |
| 45 |
relevant consideration received on or after 10 February 2004 and relating to the |
| |
|
| |
|
| |
|
licence in question (and where relevant consideration is received for a disposal |
| |
of rights to income under any agreement related to or containing a licence, the |
| |
consideration shall be regarded for the purposes of this section as relating to |
| |
| |
(7) | In this section “relevant consideration”, “relevant claim” and “qualifying year” |
| 5 |
have the meanings given by section 120. |
| |
122 | Definitions for purposes of section 121 |
| |
(1) | This section applies for the purposes of section 121(5). |
| |
(2) | The individual’s “claimed licence-related loss” for a qualifying year is so much |
| |
of the loss (if any) sustained by him in the trade in that year as derives from |
| 10 |
expenditure incurred in the trade in exploiting the licence in question and is |
| |
| |
(a) | in respect of which he has claimed relief under section 380 or 381 of the |
| |
| |
(b) | that he has claimed as an allowable loss under section 72 of the Finance |
| 15 |
| |
(3) | For the purposes of subsection (2) the part of a loss that falls within that |
| |
subsection shall be determined on such basis as is just and reasonable. |
| |
(4) | In relation to an individual who carried on the trade at any time before 26 |
| |
March 2004, the reference in subsection (2) to expenditure does not include |
| 20 |
expenditure incurred before 10 February 2004. |
| |
(5) | As respects any year of assessment, the individual’s “licence-related profit” is |
| |
such part of his profit (if any) from the trade for that year of assessment as |
| |
derives from income arising from any agreement that is related to or contains |
| |
| 25 |
(6) | The part of a profit that derives from such income shall be determined on such |
| |
basis as is just and reasonable. |
| |
123 | Disposals to which section 120 applies |
| |
(1) | The reference in section 120(1)(a) to a disposal of such a licence or rights as are |
| |
there mentioned includes, in particular— |
| 30 |
(a) | the revocation of the licence; |
| |
(b) | the disposal, giving up or loss by the individual, or by a partnership of |
| |
which he is a member, of any right under the licence; |
| |
(c) | any disposal, giving up or loss by the individual, or by a partnership of |
| |
which he is a member, of any right to any income (or any part of any |
| 35 |
income) under an agreement that is related to or contains the licence (“a |
| |
licence-related agreement”); |
| |
(d) | any default in the payment of income to which the individual, or a |
| |
partnership of which he is a member, has a right under a licence-related |
| |
| 40 |
(e) | a change in the individual’s entitlement to any profits deriving to any |
| |
extent from such income, such that his share of the profits is reduced or |
| |
| |
(f) | a change in the individual’s entitlement to any losses deriving to any |
| |
extent from expenditure incurred in exploiting the licence, such that he |
| 45 |
|
| |
|
| |
|
becomes entitled to a share, or a greater share, of the losses without |
| |
becoming entitled to a corresponding share of profits; |
| |
(g) | the disposal, giving up or loss of the individual’s interest in a |
| |
partnership that has the licence or a right to income under a licence- |
| |
related agreement, including the dissolution of the partnership. |
| 5 |
(2) | It is immaterial for the purposes of section 120(1)(a) and subsection (1)(b) and |
| |
(c) whether the licence or right is disposed of alone or as part of a larger |
| |
disposal (and the references here to disposal of a right include giving up or |
| |
| |
(3) | If there is an agreement under which the individual is entitled— |
| 10 |
(a) | to a particular share of any profits or losses arising in a period, and |
| |
(b) | to a different share of any profits or losses arising in a succeeding |
| |
period (“the later period”), |
| |
| his entitlement to the profits or losses arising in the later period shall be treated |
| |
for the purposes of subsection (1)(e) and (f) as changing at the beginning of the |
| 15 |
later period; and in paragraph (a) and (b) of this subsection a “share” of profits |
| |
or losses includes a nil share. |
| |
124 | “A significant amount of time” |
| |
(1) | For the purposes of section 120(4)(b) the individual shall be treated as having |
| |
“devoted a significant amount of time to the trade” in a given year of |
| 20 |
assessment if, for the whole of the relevant period, he spent an average of at |
| |
least ten hours a week personally engaged in activities carried on for the |
| |
| |
(2) | “The relevant period” means the basis period for the year of assessment in |
| |
| 25 |
(a) | if the basis period is less than six months and begins with the date when |
| |
the individual first carried on the trade, “the relevant period” means six |
| |
months beginning with that date; and |
| |
(b) | if the basis period is less than six months and ends with the date when |
| |
the individual ceased to carry on the trade, “the relevant period” means |
| 30 |
six months ending with that date. |
| |
(3) | In this section “basis period” means (subject to subsection (4)) the basis period |
| |
given by sections 60 to 63 of the Taxes Act 1988 as applied by section 111(4) and |
| |
| |
(4) | The basis period for a year of assessment to which section 61(1) of that Act |
| 35 |
applies is to be taken for the purposes of this section to be the period beginning |
| |
with the date when the individual first carried on the trade and ending with |
| |
the end of the year of assessment. |
| |
| |
125 | Companies in partnership |
| 40 |
(1) | This section applies if— |
| |
(a) | on or after 17 March 2004, a company that is or has been a member of a |
| |
| |
(i) | directly or indirectly draws out or receives back any capital |
| |
| 45 |
|
| |
|
| |
|
(ii) | receives consideration for a disposal on or after 17 March 2004 |
| |
of all or any of its interest in the partnership; |
| |
(b) | as at the relevant time, the sum of— |
| |
(i) | the total amount of any relevant withdrawals, and |
| |
(ii) | the total amount or value of any relevant consideration, |
| 5 |
| exceeds the company’s contribution to the partnership; |
| |
(c) | that excess (or any part of it) results directly or indirectly from an |
| |
arrangement under which any relevant profit was shared in such a way |
| |
that the company was not allocated all or part of its due share of the |
| |
| 10 |
(d) | if the company’s due shares of relevant profits had been allocated to the |
| |
company, some or all of them would have been chargeable to |
| |
| |
(2) | For the purposes of this section— |
| |
(a) | “the relevant time” means the time immediately after the capital is |
| 15 |
drawn out or received back or (as the case may be) the consideration is |
| |
| |
(b) | a “relevant withdrawal” means any capital that the company has, |
| |
directly or indirectly, drawn out or received back from the partnership |
| |
at any time on or after 17 March 2004; |
| 20 |
(c) | “relevant consideration” means consideration received by the company |
| |
at any time on or after 17 March 2004 for the disposal on or after that |
| |
date of all or any of its interest in the partnership; |
| |
(d) | “the company’s contribution to the partnership” means the sum of— |
| |
(i) | the amount that it has contributed to the partnership as capital |
| 25 |
(excluding any amount originally contributed by a person from |
| |
whom the company acquired an interest in the partnership); |
| |
| |
(ii) | any amount paid by the company to such a person for such an |
| |
| 30 |
(e) | a “relevant profit” is the profit of the partnership computed for any |
| |
period, but does not include any profit, or any part of a profit, that |
| |
derives from income arising before 17th March 2004; |
| |
(f) | the company’s “due share” of any relevant profit is the share of the |
| |
profit that the company would have been allocated if it had been |
| 35 |
allocated a share calculated by reference to the percentage of the total |
| |
capital contributed (as defined by subsection (3)) that was contributed |
| |
| |
(3) | To find “the total capital contributed” for the purposes of subsection (2)(f)— |
| |
(a) | find, as respects the end of each day in the period for which the profit |
| 40 |
was computed, the total amount of capital that as at that time had been |
| |
contributed to the partnership and had not been drawn out or received |
| |
| |
(b) | aggregate those amounts; and |
| |
(c) | divide by the number of days in that period. |
| 45 |
(4) | Where this section applies, the company shall be treated as receiving, at the |
| |
relevant time, annual profits or gains which are of an amount equal to the |
| |
chargeable amount and chargeable to tax under Case VI of Schedule D. |
| |
(5) | The chargeable amount is the lower of— |
| |
|
| |
|
| |
|
(a) | the amount by which, at the relevant time, the sum of the total amount |
| |
of any relevant withdrawals and the total amount or value of any |
| |
relevant consideration exceeds the company’s contribution to the |
| |
| |
(b) | the amount by which, at the relevant time, the total amount of the |
| 5 |
company’s due shares of relevant profits exceeds the total amount of |
| |
the shares of relevant profits that were actually allocated to the |
| |
| |
(6) | Where this section applies on more than one occasion in relation to the same |
| |
company and partnership, on each occasion after the first the amount found |
| 10 |
under each of paragraphs (a) and (b) of subsection (5) shall be reduced (but not |
| |
below nil) by any amount found under that paragraph on any of the previous |
| |
occasions that gave rise to a charge to tax. |
| |
126 | Companies in partnership: supplementary |
| |
(1) | In section 125 and this section “capital” includes— |
| 15 |
(a) | anything accounted for as partners’ capital, or partners’ equity, in the |
| |
accounts of the partnership drawn up in accordance with generally |
| |
accepted accountancy practice; or |
| |
(b) | if no such accounts are drawn up, anything that would be so accounted |
| |
for if such accounts had been drawn up. |
| 20 |
(2) | Where a partnership is dissolved by reason of one of the partners acquiring the |
| |
interests of the others, the remaining partner is to be treated for the purposes |
| |
of section 125 as having drawn out his and the others’ shares of capital from |
| |
| |
(3) | For the purposes of section 125(2)(e), where a profit for a period derives partly |
| 25 |
from income arising before 17th March 2004, the part of the profit that derives |
| |
from such income shall be determined on such basis as is just and reasonable. |
| |
(4) | For the purposes of section 125(2)(f) the capital contributed by the company |
| |
shall be taken to include amounts originally contributed as mentioned in |
| |
| 30 |
(5) | In section 125(3) the reference to capital that had been contributed includes |
| |
amounts purporting to be provided by way of loan where the loan— |
| |
(a) | carries no interest; or |
| |
(b) | carries interest at a rate less than that which might have been expected |
| |
if the loan had been between independent persons dealing at arm’s |
| 35 |
| |
(6) | For the purposes of section 125 a partnership is to be treated as the same |
| |
partnership notwithstanding a change in membership if any person who was |
| |
a member before the change remains a member after it. |
| |
| 40 |
| |
| |
(1) | After section 228 of the Capital Allowances Act 2001 (c. 2) (sale and leaseback: |
| |
|
| |
|
| |
|
| |
“Finance leaseback: parties’ income and profits |
| |
| 228A Application of sections 228B to 228E |
| |
(1) | Sections 228B to 228E apply where— |
| |
(a) | plant or machinery is the subject of a sale and finance leaseback |
| 5 |
for the purposes of section 221, and |
| |
(b) | section 222 (restriction of disposal value) applies. |
| |
(2) | Sections 228B to 228D also apply, with the modifications set out in |
| |
section 228F, where plant or machinery is the subject of a lease and |
| |
finance leaseback (as defined in section 228F). |
| 10 |
| 228B Lessee’s income or profits: deductions |
| |
(1) | For the purpose of income tax or corporation tax, in calculating the |
| |
lessee’s income or profits for a period of account the amount deducted |
| |
in respect of amounts payable under the leaseback may not exceed the |
| |
| 15 |
(2) | The permitted maximum is the total of— |
| |
(a) | finance charges shown in the accounts, and |
| |
(b) | depreciation, taking the value of the plant or machinery at the |
| |
beginning of the leaseback to be the restricted disposal value. |
| |
(3) | In relation to a period of account during which the leaseback |
| 20 |
terminates, the permitted maximum shall also include an amount |
| |
calculated in accordance with subsection (4). |
| |
(4) | The calculation is—![equation: cross[(*s12.00s*)times[char[C],char[u],char[r],char[r],char[e],char[n],char[t],string[
" "],char[B],char[o],char[o],char[k],string[" "],char[V],char[a],char[l],char[u],
char[e]],over[(*s12.00s*)times[char[O],char[r],char[i],char[g],char[i],char[n],char[
a],char[l],string[" "],char[(*s12.00s*)C],char[o],char[n],char[s],char[i],char[d],
char[e],char[r],char[a],char[t],char[i],char[o],char[n]],times[(*s12.00s*)char[O],
char[r],char[i],char[g],char[(*s12.00s*)i],char[(*s12.00s*)n],char[a],char[l],string[
" "],char[B],char[o],char[o],char[k],string[" "],char[V],char[a],char[l],char[u],
char[e]]]]](missing.gif) |
| |
| |
“Current Book Value” means the net book value of the leased plant |
| 25 |
or machinery immediately before the termination, |
| |
“Original Consideration” means the consideration payable to S for |
| |
entering into the relevant transaction, and |
| |
“Original Book Value” means the net book value of the leased |
| |
plant or machinery at the beginning of the leaseback. |
| 30 |
| 228C Lessee’s income or profits: termination of leaseback |
| |
(1) | Subsection (2) applies where the leaseback terminates. |
| |
(2) | For the purpose of the calculation of income tax or corporation tax, the |
| |
income or profits of the lessee from the relevant qualifying activity for |
| |
the period in which the termination occurs shall be increased by an |
| 35 |
amount calculated in accordance with subsection (3). |
| |
(3) | The calculation is—![equation: cross[(*s12.00s*)times[char[N],char[e],char[t],string[" "],char[C],char[o],char[
n],char[s],char[i],char[d],char[e],char[r],char[a],char[t],char[i],char[o],char[
n]],over[(*s12.00s*)times[(*s12.00s*)char[(*s12.00s*)C],char[(*s12.00s*)u],char[
(*s12.00s*)r],char[(*s12.00s*)r],char[(*s12.00s*)e],char[(*s12.00s*)n],char[(*s12.00s*)t],
string[" "],char[B],char[o],char[o],char[k],string[" "],char[V],char[a],char[l],
char[u],char[e]],times[(*s12.00s*)char[O],char[r],char[i],char[g],char[(*s12.00s*)i],
char[(*s12.00s*)n],char[a],char[l],string[" "],char[B],char[o],char[o],char[k],string[
" "],char[V],char[a],char[l],char[u],char[e]]]]](missing.gif) |
| |
| |
|
| |
|