|
| |
|
(b) | everything done to or by the predecessors of that person or those |
| |
persons in carrying on the trade had been done to or by that person or |
| |
| |
862 | Sale of patent rights: effect of later cessation of trade |
| |
(1) | This section applies if— |
| 5 |
(a) | a person (“the trader”) sells the whole or part of any patent rights in |
| |
| |
(b) | by virtue of section 861 a charge under section 587 falls to be made on |
| |
any person for the time being carrying on the trade in partnership, |
| |
(c) | any such person permanently ceases to carry on the trade thereafter, |
| 10 |
| |
(d) | no person who carried on the trade immediately before the cessation |
| |
continues to carry on the trade immediately after the cessation. |
| |
(2) | Any amounts which would have been chargeable in later tax years are charged |
| |
in the tax year in which the cessation occurs. |
| 15 |
(3) | Each partner’s share (or, if the partner is dead, the share of the partner’s |
| |
personal representatives) of any additional amount chargeable under |
| |
subsection (2) is determined in accordance with the firm’s profit-sharing |
| |
arrangements immediately before the cessation. |
| |
(4) | If an additional amount is chargeable under subsection (2), the person liable |
| 20 |
may elect that the amount of income tax payable should be reduced to the |
| |
amount that would have been payable on the assumptions mentioned in |
| |
| |
| |
(a) | that subsection (2) does not apply, and |
| 25 |
(b) | that the total of the amounts that would have been charged in later tax |
| |
years is charged in equal instalments in each of the tax years— |
| |
(i) | beginning with the year in which the trader received the |
| |
proceeds of the sale or instalment of those proceeds, and |
| |
(ii) | ending with the year in which the cessation occurs. |
| 30 |
(6) | The election must be made on or before the first anniversary of the normal self- |
| |
assessment filing date for the tax year in which the cessation occurred. |
| |
(7) | For the purposes of this section “profit-sharing arrangements” means the rights |
| |
of the partners to share in the profits of the trade. |
| |
863 | Limited liability partnerships |
| 35 |
(1) | For income tax purposes, if a limited liability partnership carries on a trade, |
| |
profession or business with a view to profit— |
| |
(a) | all the activities of the limited liability partnership are treated as carried |
| |
on in partnership by its members (and not by the limited liability |
| |
| 40 |
(b) | anything done by, to or in relation to the limited liability partnership |
| |
for the purposes of, or in connection with, any of its activities is treated |
| |
as done by, to or in relation to the members as partners, and |
| |
(c) | the property of the limited liability partnership is treated as held by the |
| |
members as partnership property. |
| 45 |
|
| |
|
| |
|
| References in this subsection to the activities of the limited liability partnership |
| |
are to anything that it does, whether or not in the course of carrying on a trade, |
| |
profession or business with a view to profit. |
| |
(2) | For all purposes, except as otherwise provided, in the Income Tax Acts— |
| |
(a) | references to a firm include a limited liability partnership in relation to |
| 5 |
which subsection (1) applies, |
| |
(b) | references to members of a firm include members of such a limited |
| |
| |
(c) | references to a company do not include such a limited liability |
| |
| 10 |
(d) | references to members of a company do not include members of such a |
| |
limited liability partnership. |
| |
(3) | Subsection (1) continues to apply in relation to a limited liability partnership |
| |
which no longer carries on any trade, profession or business with a view to |
| |
| 15 |
(a) | if the cessation is only temporary, or |
| |
(b) | during a period of winding up following a permanent cessation, |
| |
| |
(i) | the winding up is not for reasons connected in whole or in part |
| |
with the avoidance of tax, and |
| 20 |
(ii) | the period of winding up is not unreasonably prolonged. |
| |
| This is subject to subsection (4). |
| |
(4) | Subsection (1) ceases to apply in relation to a limited liability partnership— |
| |
(a) | on the appointment of a liquidator or (if earlier) the making of a |
| |
winding-up order by the court, or |
| 25 |
(b) | on the occurrence of any event under the law of a territory outside the |
| |
United Kingdom corresponding to an event specified in paragraph (a). |
| |
| |
| |
| 30 |
| |
| |
| |
(a) | contains general rules which are of wider application than to a |
| |
particular Part of this Act including certain calculation rules (see |
| 35 |
| |
(b) | deals with supplementary matters including general definitions (see |
| |
| |
|
| |
|
| |
|
| |
General calculation rules etc. |
| |
| |
865 | Unpaid remuneration: non-trades and non-property businesses |
| |
(1) | This section applies if, in calculating profits or other income of a period of |
| 5 |
account for income tax purposes— |
| |
(a) | an amount is charged in the accounts for the period in respect of |
| |
employees’ remuneration, and |
| |
(b) | a deduction for the remuneration would otherwise be allowable for the |
| |
| 10 |
(2) | For this purpose “profits or other income” does not include the profits of— |
| |
(a) | a trade, profession or vocation, or |
| |
| |
| |
(3) | No deduction is allowed for the remuneration for the period of account unless |
| 15 |
it is paid before the end of the period of 9 months immediately following the |
| |
end of the period of account. |
| |
(4) | If the remuneration is paid after the end of that 9 month period, a deduction for |
| |
it is allowed for the period of account in which it is paid. |
| |
(5) | Section 37 (supplementary provision) applies for the purposes of this section |
| 20 |
as it applies for the purposes of section 36 (unpaid remuneration: trades, |
| |
professions and vocations). |
| |
(6) | Provision corresponding to that made by this section is made by— |
| |
(a) | sections 36 and 37 (in relation to trades, professions and vocations), and |
| |
(b) | section 272 (in relation to property businesses). |
| 25 |
Employee benefit contributions |
| |
866 | Employee benefit contributions: non-trades and non-property businesses |
| |
(1) | This section applies if, in calculating a person’s profits or other income of a |
| |
period for income tax purposes— |
| |
(a) | the profits or other income of the period are required to be calculated |
| 30 |
| |
(b) | a deduction would otherwise be allowable for the period for any |
| |
employee benefit contributions made or to be made by the person (“the |
| |
employer”) (but see subsection (5)). |
| |
(2) | For this purpose “profits or other income” does not include the profits of— |
| 35 |
(a) | a trade, profession or vocation, or |
| |
| |
| |
(3) | No deduction is allowed for the contributions for the period except so far as— |
| |
|
| |
|
| |
|
(a) | qualifying benefits are provided, or qualifying expenses are paid, out |
| |
of the contributions during the period or within 9 months from the end |
| |
| |
(b) | if the making of the contributions is itself the provision of qualifying |
| |
benefits, the contributions are made during the period or within 9 |
| 5 |
months from the end of it. |
| |
(4) | An amount disallowed under subsection (3) is allowed as a deduction for a |
| |
subsequent period so far as— |
| |
(a) | qualifying benefits are provided out of the contributions before the end |
| |
of the subsequent period, or |
| 10 |
(b) | if the making of the contributions is itself the provision of qualifying |
| |
benefits, the contributions are made before the end of the subsequent |
| |
| |
(5) | This section does not apply to any deduction that is allowable for— |
| |
(a) | anything given as consideration for goods or services provided in the |
| 15 |
course of a trade or profession, |
| |
(b) | contributions under a registered pension scheme or under a |
| |
superannuation fund to which section 615(3) of ICTA applies, |
| |
(c) | contributions under a qualifying overseas pension scheme in respect of |
| |
an individual who is a relevant migrant member of the pension scheme |
| 20 |
in relation to the contributions, or |
| |
(d) | contributions under an accident benefit scheme. |
| |
| For the purposes of paragraph (c) “qualifying overseas pension scheme” and |
| |
“relevant migrant member” have the same meaning as in Schedule 33 to FA |
| |
2004 (see paragraphs 4 to 6 of that Schedule). |
| 25 |
(6) | Sections 39 to 44 (supplementary provisions) apply for the purposes of this |
| |
section as they apply for the purposes of section 38 (employee benefit |
| |
contributions: trades, professions and vocations). |
| |
(7) | Provision corresponding to that made by this section is made by— |
| |
(a) | sections 38 to 44 (in relation to trades, professions and vocations), and |
| 30 |
(b) | section 272 (in relation to property businesses). |
| |
Business entertainment and gifts |
| |
867 | Business entertainment and gifts: non-trades and non-property businesses |
| |
(1) | This section applies for the purpose of calculating profits or other income |
| |
charged to income tax which arise from the carrying on of a business. |
| 35 |
(2) | For this purpose “business” does not include— |
| |
(a) | a trade, profession or vocation, or |
| |
| |
| |
(3) | The general rule is that no deduction is allowed in calculating the profits or |
| 40 |
other income for expenses incurred in providing entertainment or gifts in |
| |
connection with the business. |
| |
(4) | A deduction for expenses which are incurred— |
| |
|
| |
|
| |
|
(a) | in paying sums to or on behalf of an employee of the person carrying |
| |
| |
(b) | in putting sums at the disposal of an employee of that person, |
| |
| is prohibited by the general rule if (and only if) the sums are paid, or put at the |
| |
employee’s disposal, exclusively for meeting expenses incurred or to be |
| 5 |
incurred by the employee in providing the entertainment or gift. |
| |
(5) | The general rule is subject to— |
| |
section 46 (business entertainment: exceptions), and |
| |
section 47 (business gifts: exceptions), |
| |
| which apply in relation to a business as they apply in relation to a trade (but as |
| 10 |
if the reference to a basis period were to a tax year). |
| |
(6) | For the purposes of this section and those two sections as so applied— |
| |
(a) | “employee”, in relation to a company, includes a director of the |
| |
company and a person engaged in the management of the company, |
| |
(b) | “entertainment” includes hospitality of any kind, and |
| 15 |
(c) | the expenses incurred in providing entertainment or a gift include |
| |
expenses incurred in providing anything incidental to the provision of |
| |
| |
(7) | Provision corresponding to that made by this section is made by— |
| |
(a) | sections 45 to 47 (in relation to trades, professions and vocations), and |
| 20 |
(b) | section 272 (in relation to property businesses). |
| |
Social security contributions |
| |
868 | Social security contributions: non-trades etc. |
| |
(1) | This section applies for the purpose of calculating profits or other income |
| |
| 25 |
(2) | For this purpose “profits or other income” does not include— |
| |
(a) | the profits of a trade, profession, or vocation, |
| |
(b) | the profits of a property business, or |
| |
| |
| 30 |
(3) | No deduction is allowed for any contribution paid by any person under— |
| |
(a) | Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4), |
| |
| |
(b) | Part 1 of the Social Security Contributions and Benefits (Northern |
| |
Ireland) Act 1992 (c. 7). |
| 35 |
(4) | But this prohibition does not apply to an employer’s contribution. |
| |
(5) | For this purpose “an employer’s contribution” means— |
| |
(a) | a secondary Class 1 contribution, |
| |
(b) | a Class 1A contribution, or |
| |
(c) | a Class 1B contribution, |
| 40 |
| within the meaning of Part 1 of the Social Security Contributions and Benefits |
| |
Act 1992 or of the Social Security Contributions and Benefits (Northern |
| |
| |
|
| |
|
| |
|
(6) | Provision corresponding to that made by this section is made by— |
| |
(a) | section 53 (in relation to trades, professions and vocations), |
| |
(b) | section 272 (in relation to property businesses), and |
| |
(c) | section 360A of ITEPA 2003 (in relation to employment income). |
| |
Penalties, interest and VAT surcharges |
| 5 |
869 | Penalties, interest and VAT surcharges: non-trades etc. |
| |
(1) | This section applies for the purpose of calculating profits or other income |
| |
| |
(2) | For this purpose “profits or other income” does not include the profits of— |
| |
(a) | a trade, profession, or vocation, or |
| 10 |
| |
| |
(3) | No deduction is allowed for any penalty or interest mentioned in the first |
| |
column of the following table. |
| |
| 15 |
| | Description of tax, levy or duty |
| | | | Interest under any provision of Part 9 of |
| Income tax, capital gains tax |
| | | | | | | | | Interest required to be paid by |
| | | | | regulations made under section 71 of |
| | | 20 | | FA 2004 (construction industry) |
| | | | | Penalty under any of sections 60 to 70 of |
| | | | | | | | | | Interest under section 74 of VATA 1994 |
| | | | | Penalty under any of sections 8 to 11 of |
| | | 25 | | | | | | | Penalty under any of paragraphs 12 to |
| | | | | 19 of Schedule 7 to FA 1994 |
| | | | | Interest under paragraph 21 of that |
| | | | | | | | 30 | | Penalty under any provision of Part 5 of |
| | | | | | | | | | Interest under paragraph 26 or 27 of |
| | | | | | | | | | Penalty under any provision of |
| | | 35 | | | | | |
|
|
| |
|
| |
|
| | Description of tax, levy or duty |
| | | | Interest under any of paragraphs 70, 81 |
| | | | | to 85 and 109 of that Schedule |
| | | | | Penalty under any provision of Part 2 of |
| | | | | | | | 5 | | Interest under any of paragraphs 5 to 9 |
| | | | | of Schedule 5 to, paragraph 6 of |
| | | | | Schedule 8 to and paragraph 5 of |
| | | | | | | | | | Penalty under section 25 or 26 of FA |
| Customs, export and import |
| | 10 | | | | | | | Penalty under any provision of Part 4 of |
| | | | | | | | | | Interest under any provision of that Part |
| | | |
|
|
(5) | No deduction is allowed for any surcharge under section 59 of VATA 1994. |
| 15 |
(6) | Provision corresponding to that made by this section is made by— |
| |
(a) | section 54 (in relation to trades, professions and vocations), and |
| |
(b) | section 272 (in relation to property businesses). |
| |
| |
870 | Crime-related payments: non-trades and non-property businesses |
| 20 |
| |
(a) | applies for the purpose of calculating profits or other income charged |
| |
| |
(b) | does not apply for the purpose of calculating the profits of a trade, |
| |
profession or vocation or of a property business (but see subsection (4)). |
| 25 |
(2) | No deduction is allowed for expenses incurred— |
| |
(a) | in making a payment if the making of the payment constitutes a |
| |
| |
(b) | in making a payment outside the United Kingdom if the making of a |
| |
corresponding payment in any part of the United Kingdom would |
| 30 |
constitute a criminal offence in that part. |
| |
(3) | No deduction is allowed for expenses incurred in making a payment induced |
| |
by a demand which constitutes— |
| |
(a) | the offence of blackmail under section 21 of the Theft Act 1968 (c. 60) |
| |
| 35 |
(b) | the offence of extortion (Scotland), or |
| |
(c) | the offence of blackmail under section 20 of the Theft Act (Northern |
| |
Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland). |
| |
(4) | Provision corresponding to that made by this section is made by— |
| |
(a) | section 55 (in relation to trades, professions and vocations), and |
| 40 |
|
| |
|