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Income Tax (Trading and Other Income) Bill


 

Income Tax (Trading and Other Income) Bill

 
 

EXPLANATORY NOTES

Explanatory notes to the Bill, prepared by the Tax Law Rewrite Project at the Inland

Revenue, are published separately as Bill 9—EN.

tables

A Table of Origins and a Table of Destinations for the Bill are available in a separate

volume. The Tables have no official status.

EUROPEAN CONVENTION ON HUMAN RIGHTS

Mr Chancellor of the Exchequer has made the following statement under section

19(1)(a) of the Human Rights Act 1998:

In my view the provisions of the Income Tax (Trading and Other Income) Bill are

compatible with the Convention rights.

 

 

 

 

Income Tax (Trading and Other Income) Bill

 
   
 

Contents

Part 1

Overview

1   

Overview of Act

2   

Overview of priority rules

Part 2

Trading income

Chapter 1

Introduction

3   

Overview of Part 2

4   

Provisions which must be given priority over Part 2

Chapter 2

Income taxed as trade profits

Charge to tax on trade profits

5   

Charge to tax on trade profits

6   

Territorial scope of charge to tax

7   

Income charged

8   

Person liable

Trades and trade profits

9   

Farming and market gardening

10   

Commercial occupation of land other than woodlands

11   

Commercial occupation of woodlands

12   

Profits of mines, quarries and other concerns

13   

Visiting performers

14   

Visiting performers: supplementary

15   

Divers and diving supervisors

16   

Oil extraction and related activities

 

 
 

Income Tax (Trading and Other Income) Bill

iv

 

Starting and ceasing to trade

17   

Effect of becoming or ceasing to be a UK resident

18   

Effect of company starting or ceasing to be within charge to income tax

Trading income and property income

19   

Tied premises

20   

Caravan sites where trade carried on

21   

Surplus business accommodation

22   

Payments for wayleaves

Rent-a-room and foster-care relief

23   

Rent-a-room and foster-care relief

Chapter 3

Trade profits: basic rules

24   

Professions and vocations

25   

Generally accepted accounting practice

26   

Losses calculated on same basis as profits

27   

Receipts and expenses

28   

Items treated under CAA 2001 as receipts and expenses

29   

Interest

30   

Animals kept for trade purposes

31   

Relationship between rules prohibiting and allowing deductions

Chapter 4

Trade profits: rules restricting deductions

Introduction

32   

Professions and vocations

Capital expenditure

33   

Capital expenditure

Wholly and exclusively and losses rules

34   

Expenses not wholly and exclusively for trade and unconnected losses

Bad and doubtful debts

35   

Bad and doubtful debts

Unpaid remuneration

36   

Unpaid remuneration

37   

Unpaid remuneration: supplementary

 
 

Income Tax (Trading and Other Income) Bill

v

 

Employee benefit contributions

38   

Restriction of deductions

39   

Making of “employee benefit contributions”

40   

Provision of qualifying benefits

41   

Timing and amount of certain qualifying benefits

42   

Provision or payment out of employee benefit contributions

43   

Profits calculated before end of 9 month period

44   

Interpretation of sections 38 to 44

Business entertainment and gifts

45   

Business entertainment and gifts: general rule

46   

Business entertainment: exceptions

47   

Business gifts: exceptions

Car or motor cycle hire

48   

Car or motor cycle hire

49   

Car or motor cycle hire: supplementary

50   

Hiring cars (but not motor cycles) with low carbon dioxide emissions

Patent royalties

51   

Patent royalties

Interest payments

52   

Exclusion of double relief for interest

Social security contributions

53   

Social security contributions

Penalties, interest and VAT surcharges

54   

Penalties, interest and VAT surcharges

Crime-related payments

55   

Crime-related payments

Chapter 5

Trade profits: rules allowing deductions

Introduction

56   

Professions and vocations

Pre-trading expenses

57   

Pre-trading expenses

 
 

Income Tax (Trading and Other Income) Bill

vi

 

Incidental costs of obtaining finance

58   

Incidental costs of obtaining finance

59   

Convertible loans and loan stock etc.

Tenants under taxed leases

60   

Tenants under taxed leases: introduction

61   

Tenants occupying land for purposes of trade treated as incurring expenses

62   

Limit on deductions if tenant entitled to mineral extraction allowance

63   

Tenants dealing with land as property employed for purposes of trade

64   

Restrictions on section 61 expenses: lease premium receipts

65   

Restrictions on section 61 expenses: lease of part of premises

66   

Corporation tax receipts treated as taxed receipts

67   

Restrictions on section 61 expenses: corporation tax receipts

Renewals

68   

Replacement and alteration of trade tools

Payments for restrictive undertakings

69   

Payments for restrictive undertakings

Seconded employees

70   

Employees seconded to charities and educational establishments

71   

Educational establishments

Contributions to agents’ expenses

72   

Payroll deduction schemes: contributions to agents’ expenses

Counselling and retraining expenses

73   

Counselling and other outplacement services

74   

Retraining courses

75   

Retraining courses: recovery of tax

Redundancy payments etc.

76   

Redundancy payments and approved contractual payments

77   

Payments in respect of employment wholly in employer’s trade

78   

Payments in respect of employment in more than one capacity

79   

Additional payments

80   

Payments made by the Government

Personal security expenses

81   

Personal security expenses

Contributions to local enterprise organisations or urban regeneration companies

82   

Contributions to local enterprise organisations or urban regeneration

companies

 
 

Income Tax (Trading and Other Income) Bill

vii

 

83   

Meaning of “local enterprise organisation”

84   

Approval of local enterprise agencies

85   

Supplementary provisions with respect to approvals

86   

Meaning of “urban regeneration company”

Scientific research

87   

Expenses of research and development

88   

Payments to research associations, universities etc.

Expenses connected with patents, designs and trade marks

89   

Expenses connected with patents

90   

Expenses connected with designs or trade marks

Export Credits Guarantee Department

91   

Payments to Export Credits Guarantee Department

Expenses connected with foreign trades

92   

Expenses connected with foreign trades

93   

Allocation of expenses

94   

Family expenses

Chapter 6

Trade profits: receipts

Introduction

95   

Professions and vocations

Capital receipts

96   

Capital receipts

Debts released

97   

Debts incurred and later released

Amounts received following earlier cessation

98   

Acquisition of trade: receipts from transferor’s trade

Reverse premiums

99   

Reverse premiums

100   

Excluded cases

101   

Tax treatment of reverse premiums

102   

Arrangements not at arm’s length

103   

Connected persons and property arrangements

 
 

 
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Revised 1 December 2004