|
| |
|
120 | “Disposal of a right of the individual to profits arising from the trade” |
| |
(1) | The reference in section 119(1)(b) to a disposal of a right of the individual to |
| |
profits arising from the trade includes, in particular— |
| |
(a) | the 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 |
| 5 |
income) where the right arises from the trade; |
| |
(b) | any default in the payment of income to which the individual, or a |
| |
partnership of which he is a member, has a right arising from the trade; |
| |
(c) | a change in the individual’s entitlement to any profits arising from the |
| |
trade such that his share of the profits is reduced or extinguished; |
| 10 |
(d) | a change in the individual’s entitlement to any losses arising from the |
| |
trade such that he becomes entitled to a share, or a greater share, of the |
| |
losses without becoming entitled to a corresponding share of profits; |
| |
(e) | the disposal, giving up or loss of the individual’s interest in a |
| |
partnership that carries on the trade, including the dissolution of the |
| 15 |
| |
(2) | It is immaterial for the purposes of subsection (1)(a) whether the right is |
| |
disposed of alone or as part of a larger disposal (and the references here to |
| |
disposal include giving up or loss). |
| |
(3) | If there is an agreement under which the individual is entitled— |
| 20 |
(a) | to a particular share of any profits or losses arising from the trade in a |
| |
| |
(b) | to a different share of any profits or losses arising from the trade in a |
| |
succeeding period (“the later period”), |
| |
his entitlement to the profits or losses arising in the later period shall be treated |
| 25 |
for the purposes of subsection (1)(c) and (d) as changing at the beginning of the |
| |
later period; and in paragraphs (a) and (b) of this subsection a “share” of profits |
| |
or losses includes a nil share. |
| |
121 | “The losses claimed” and “the individual’s capital contribution to the trade” |
| |
(1) | In section 119 “the losses claimed” means the total amount of any film-related |
| 30 |
losses sustained by the individual in the trade in any years of assessment, to the |
| |
extent that they are losses— |
| |
(a) | in respect of which the individual has (at any time) claimed relief under |
| |
section 380 or 381 of the Taxes Act 1988; or |
| |
(b) | that he has (at any time) claimed as allowable losses under section 72 of |
| 35 |
the Finance Act 1991 (c. 31). |
| |
(2) | In section 119 “the individual’s capital contribution to the trade” means |
| |
(subject to section 122(1)) the amount that the individual has contributed to the |
| |
trade as capital, less so much of that amount (if any) as— |
| |
(a) | he has directly or indirectly drawn out or received back; |
| 40 |
(b) | he is entitled so to draw out or receive back; |
| |
(c) | he has had directly or indirectly reimbursed to him by any person; |
| |
(d) | he is entitled to require any person so to reimburse to him. |
| |
(3) | In relation to a member of a limited liability partnership, the reference in |
| |
subsection (2) to the amount contributed to the trade as capital shall be read as |
| 45 |
a reference to the amount contributed to the limited liability partnership as |
| |
| |
|
| |
|
| |
|
(4) | In subsection (2) references to reimbursement include reimbursement effected |
| |
by discharging or assuming all or part of a liability of the individual. |
| |
(5) | Subsection (4) shall not be taken to limit what is to be treated for the purposes |
| |
of subsection (2) as the receipt back or reimbursement of an amount. |
| |
(6) | An amount drawn out or received back that would otherwise fall within |
| 5 |
subsection (2)(a), or an entitlement that would otherwise fall within subsection |
| |
(2)(b), shall be treated as not so falling if the amount drawn out or received |
| |
back is chargeable to income tax as profits of the trade. |
| |
122 | Computing the chargeable amount |
| |
(1) | Where a chargeable event occurs, anything treated for the purposes of section |
| 10 |
119(5)(a) as consideration received by the individual for a relevant disposal |
| |
shall not also be deducted under section 121(2)(a) to (d) in computing the |
| |
individual’s capital contribution to the trade for the purposes of section |
| |
| |
(2) | Where successive chargeable events occur as respects the individual and the |
| 15 |
| |
(a) | any consideration that is taken into account under section 119(5)(a) in |
| |
computing the chargeable amount on an earlier chargeable event shall |
| |
not be included again in computing the chargeable amount on a later |
| |
| 20 |
(b) | in computing the chargeable amount on a later chargeable event, any |
| |
amount found under section 119(5)(b) shall be reduced (but not below |
| |
nil) by the total of any amounts found under section 119(5)(b) (read |
| |
with this paragraph) on earlier chargeable events. |
| |
(3) | In computing the chargeable amount in any case, any consideration given to |
| 25 |
the individual for a relevant disposal shall be treated as if it had been received |
| |
free of any deduction actually made from it in consideration of any person’s |
| |
agreeing to or facilitating a relevant disposal or exit event. |
| |
123 | “Film-related losses” and “non-taxable consideration” |
| |
(1) | For the purposes of sections 119 and 121 a loss is a “film-related loss” if the |
| 30 |
computation of profits or losses that it results from is made in accordance with |
| |
| |
| sections 40A to 40C of the Finance (No. 2) Act 1992 (c. 48); |
| |
| sections 41 to 43 of that Act; |
| |
| section 48 of the Finance (No. 2) Act 1997 (c. 58). |
| 35 |
(2) | References in section 119 to “non-taxable” consideration are to consideration |
| |
that (apart from section 119) is not chargeable to income tax; and the reference |
| |
to “taxable” consideration is to be read accordingly. |
| |
|
| |
|
| |
|
Individuals in partnership: restriction of relief |
| |
124 | Restriction of relief: non-active partners |
| |
(1) | After section 118ZD of the Taxes Act 1988 there is inserted— |
| |
“Non-active general partners and non-active members of limited liability partnerships |
| |
| 118ZE Restriction on relief for non-active partners |
| 5 |
(1) | This section applies to an amount which may be given to an individual |
| |
under section 353, 380 or 381 in respect of a loss sustained by him in a |
| |
trade, or interest paid by him in connection with the carrying on of a |
| |
trade, in a qualifying year of assessment. |
| |
(2) | The amount may be given otherwise than against income consisting of |
| 10 |
profits arising from the trade only to the extent that— |
| |
| |
(b) | (as the case may be) the aggregate amount, |
| |
| does not exceed the amount of the individual’s contribution to the trade |
| |
as at the end of that year of assessment. |
| 15 |
(3) | A “qualifying year of assessment” means a year of assessment— |
| |
(a) | at any time during which the individual carried on the trade as |
| |
a general partner or a member of a limited liability partnership, |
| |
(b) | in which he did not devote a significant amount of time to the |
| |
trade (within the meaning given by section 118ZH), |
| 20 |
(c) | which is the year of assessment in which the trade is first carried |
| |
on by him or any of the next three years of assessment, |
| |
(d) | the basis period for which ends on or after 10 February 2004, |
| |
| |
(e) | which is not a year of assessment at any time during which he |
| 25 |
carried on the trade as a limited partner. |
| |
| |
(a) | a “general partner” means any partner who is not a limited |
| |
| |
(b) | “limited partner” has the meaning given by section 117(2), |
| 30 |
| and in paragraph (a) “any partner” does not include a member of a |
| |
limited liability partnership. |
| |
(5) | In this section and sections 118ZF to 118ZK, “basis period” means |
| |
(subject to subsection (6)) the basis period given by sections 60 to 63 as |
| |
applied by section 111(4) and (5). |
| 35 |
(6) | The basis period for a year of assessment to which section 61(1) applies |
| |
is to be taken for the purposes of this section and sections 118ZF to |
| |
118ZK 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 |
| |
| 40 |
(7) | In subsection (1) “a trade” does not include underwriting business |
| |
within the meaning of section 184 of the Finance Act 1993 (Lloyd’s |
| |
| |
|
| |
|
| |
|
(8) | This section has effect subject to sections 118ZJ and 118ZK (transitional |
| |
| |
| 118ZF Meaning of “the aggregate amount” |
| |
(1) | In section 118ZE(2) “the aggregate amount” means (subject to section |
| |
118ZK) the aggregate of any amounts given to the individual at any |
| 5 |
time under section 353, 380 or 381 in respect of a loss sustained by him |
| |
in the trade, or of interest paid by him in connection with carrying it on, |
| |
in a year of assessment falling within subsection (2). |
| |
(2) | A year of assessment falls within this subsection if— |
| |
(a) | it is a qualifying year of assessment within the meaning of |
| 10 |
| |
(b) | it is a year of assessment— |
| |
(i) | at any time during which the individual carried on the |
| |
trade as a member of a limited liability partnership or as |
| |
a limited partner within the meaning given by section |
| 15 |
| |
(ii) | the basis period for which ends on or after 10 February |
| |
| |
| 118ZG “The individual’s contribution to the trade” |
| |
(1) | For the purposes of section 118ZE(2), the individual’s contribution to |
| 20 |
the trade at any time (“the relevant time”) is the sum of— |
| |
(a) | the amount subscribed by him, |
| |
(b) | the amount of any profits of the trade to which he is entitled but |
| |
which he has not received in money or money’s worth, and |
| |
(c) | where there is a winding up, the amount that he has contributed |
| 25 |
to the assets of the partnership on its winding up. |
| |
(2) | For the purposes of subsection (1)(a) the “amount subscribed” by an |
| |
individual is the sum of— |
| |
(a) | the total amount (if any) contributed by him to the trade as |
| |
capital on or after 10 February 2004, reduced (but not below nil) |
| 30 |
by his withdrawn capital, and |
| |
(b) | the total amount (if any) contributed by him to the trade as |
| |
capital before 10 February 2004, reduced (but not below nil) |
| |
| |
(i) | the pre-announcement allowance (within the meaning |
| 35 |
| |
(ii) | the aggregate of any amounts given to him at any time |
| |
under section 353, 380 or 381 in respect of a loss |
| |
sustained by him in a trade, or of interest paid by him in |
| |
connection with carrying it on, in a year of assessment |
| 40 |
falling within subsection (3), and |
| |
(iii) | the amount (if any) of his withdrawn capital that has not |
| |
been used in the reduction to nil required by paragraph |
| |
| |
(3) | A year of assessment falls within this subsection if— |
| 45 |
(a) | it does not fall within section 118ZE(3)(d), and |
| |
| |
|
| |
|
| |
|
(i) | a year of assessment that would be a qualifying year of |
| |
assessment but for section 118ZE(3)(d), or |
| |
(ii) | a year of assessment at any time during which the |
| |
individual carried on the trade as a member of a limited |
| |
liability partnership or as a limited partner within the |
| 5 |
meaning given by section 117(2). |
| |
(4) | The individual’s “withdrawn capital” is so much, if any, of the amount |
| |
that he has contributed to the trade as capital as— |
| |
(a) | he has previously, directly or indirectly, drawn out or received |
| |
| 10 |
(b) | he so draws out or receives back during the period of five years |
| |
beginning with the relevant time, |
| |
(c) | he is or may be entitled so to draw out or receive back at any |
| |
time when he carries on the trade as a member of the |
| |
| 15 |
(d) | he is or may be entitled to require another person to reimburse |
| |
| |
(5) | An amount drawn out or received back that would otherwise fall |
| |
within subsection (4)(a) or (b), or an entitlement that would otherwise |
| |
fall within subsection (4)(c), shall be treated as not so falling if the |
| 20 |
amount drawn out or received back is chargeable to income tax as |
| |
| |
(6) | In relation to a member of a limited liability partnership, references in |
| |
this section to an amount contributed to the trade as capital shall be |
| |
read as references to an amount contributed to the limited liability |
| 25 |
| |
118ZH | “A significant amount of time” |
| |
(1) | For the purposes of section 118ZE the individual shall be treated as |
| |
having “devoted a significant amount of time to the trade” in a given |
| |
year of assessment if, for the whole of the relevant period, he spent an |
| 30 |
average of at least ten hours a week personally engaged in activities |
| |
carried on for the purposes of the trade. |
| |
(2) | “The relevant period” means the basis period for the year of assessment |
| |
in question, except that— |
| |
(a) | if the basis period is less than six months and begins with the |
| 35 |
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 six months ending with that date. |
| 40 |
(3) | Where relief has been given on the assumption that an individual will |
| |
meet the condition in subsection (1) and he fails to do so, the relief shall |
| |
be withdrawn by the making of an assessment under Case VI of |
| |
| |
118ZI | Carry forward of unrelieved losses of non-active partners |
| 45 |
(1) | Where amounts relating to a trade carried on by an individual in a |
| |
qualifying year of assessment are prevented from being given by |
| |
section 118ZE as it applies otherwise than by virtue of this section or |
| |
|
| |
|
| |
|
section 118ZD, subsection (3) of this section applies as respects each |
| |
subsequent year of assessment in which— |
| |
(a) | the individual carries on the trade in partnership or makes a |
| |
contribution to the assets of the partnership on its winding up, |
| |
| 5 |
(b) | any of his total restricted loss remains outstanding. |
| |
(2) | His “total restricted loss” means the total of any amounts, relating to |
| |
any one or more qualifying years of assessment, that have been |
| |
prevented from being given by section 118ZE as it applies otherwise |
| |
than by virtue of this section or section 118ZD. |
| 10 |
(3) | Sections 380 and 381 (and section 118ZE as it applies in relation to those |
| |
sections) shall have effect in the subsequent year of assessment as if— |
| |
(a) | any loss sustained by the individual in the trade in that year of |
| |
assessment were increased by an amount equal to so much of |
| |
his total restricted loss as remains outstanding in that year of |
| 15 |
| |
(b) | (if no loss is sustained) a loss of that amount were so sustained. |
| |
(4) | To ascertain whether any (and, if so, how much) of the individual’s |
| |
total restricted loss remains outstanding in the subsequent year of |
| |
assessment, deduct from the amount of his total restricted loss the |
| 20 |
| |
(a) | any relief given (otherwise than as a result of subsection (3)) |
| |
under any provision of the Tax Acts, in that or any previous |
| |
year of assessment, in respect of any of his total restricted loss, |
| |
| 25 |
(b) | any amount which was given as a result of subsection (3), in any |
| |
previous year of assessment, in respect of any of his total |
| |
restricted loss (or which would have been so given had a claim |
| |
| |
(5) | For the purposes of sections 118ZE and 118ZF (and of sections 117 and |
| 30 |
| |
(a) | any additional amount of loss deemed by subsection (3)(a) to |
| |
have been sustained in the subsequent year of assessment, and |
| |
(b) | any loss deemed by subsection (3)(b) to have been so sustained, |
| |
| shall be treated as having been sustained in a qualifying year of |
| 35 |
| |
(6) | Subsection (7) applies where the subsequent year of assessment— |
| |
(a) | is one in which the trade is not carried on in partnership by the |
| |
| |
(b) | is one in which he contributes to the assets of the partnership on |
| 40 |
| |
(7) | Where this subsection applies, nothing in section 381(4) or 384 |
| |
(restrictions on right of set-off) applies to— |
| |
(a) | an additional amount of loss deemed by subsection (3)(a) to |
| |
have been sustained in the subsequent year of assessment, or |
| 45 |
(b) | a loss deemed by subsection (3)(b) to have been so sustained. |
| |
(8) | In this section “qualifying year of assessment” has the meaning given |
| |
| |
|
| |
|