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858 | Resident partners and double taxation agreements |
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(1) | This section applies if— |
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(a) | a UK resident (“the partner”) is a member of a firm which— |
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(i) | resides outside the United Kingdom, or |
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(ii) | carries on a trade the control and management of which is |
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outside the United Kingdom, and |
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(b) | by virtue of any arrangements having effect under section 788 of ICTA |
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(“the arrangements”) any of the income of the firm is relieved from |
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income tax in the United Kingdom. |
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(2) | The partner is liable to income tax on the partner’s share of the income of the |
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firm despite the arrangements. |
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(3) | If the partner’s share of the income of the firm consists of or includes a share in |
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a qualifying distribution— |
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(a) | made by a UK resident company, and |
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(b) | chargeable to tax under Chapter 3 of Part 4, |
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| the partner (and not the firm) is, despite the arrangements, entitled to the share |
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of the tax credit which corresponds to the partner’s share of the distribution. |
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859 | Special provisions about farming and property income |
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(1) | The rule in section 9(2) (farming trades) operates in relation to firms so that— |
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(a) | all farming in the United Kingdom which a firm carries on, other than |
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farming carried on as part of another trade, is treated as one trade, but |
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(b) | the farming carried on by a firm which is treated as one trade is not |
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included in any farming trade of any partner in the firm. |
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(2) | Section 264 (UK property business) operates in relation to firms so that— |
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(a) | every business and transaction mentioned in that section carried on, or |
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entered into, by a firm constitutes the firm’s UK property business, but |
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(b) | each business or transaction included in the firm’s UK property |
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business is not included in any UK property business of any partner in |
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(3) | Section 265 (overseas property business) operates in relation to firms so that— |
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(a) | every business and transaction mentioned in that section carried on, or |
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entered into, by a firm constitutes the firm’s overseas property |
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(b) | each business or transaction included in the firm’s overseas property |
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business is not included in any overseas property business of any |
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(1) | A change in the persons carrying on a trade from one period of account to the |
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next does not prevent Chapter 17 of Part 2 (adjustment income) applying in |
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relation to the trade so long as a person carrying on the trade immediately |
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before the change continues to carry on the trade immediately after the change. |
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(2) | A change in the persons carrying on a trade does not constitute the permanent |
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cessation of the trade for the purposes of Chapter 17 of Part 2 so long as a |
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person carrying on the trade immediately before the change continues to carry |
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on the trade immediately after the change. |
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(3) | In the case of a trade carried on by a firm the amount of any adjustment under |
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Chapter 17 of Part 2 is calculated as if the firm were a UK resident individual. |
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(4) | Each partner’s share of any amount of adjustment income is determined |
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according to the firm’s profit-sharing arrangements for the 12 months ending |
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immediately before the date on which the new basis was adopted. |
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(5) | Any election under Chapter 17 of Part 2 must be made jointly by all the persons |
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who have been members of the firm in that 12 month period. |
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(6) | For the purposes of this section— |
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(a) | “adjustment income” and “change of basis” have the same meaning as |
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(b) | “profit-sharing arrangements” means the rights of the partners to share |
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in the profits of the trade, and |
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(c) | references to the date on which a new basis was adopted are to the first |
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day of the first period of account for which the new basis was adopted. |
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(7) | Sections 849 to 856 do not apply so far as this section applies. |
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861 | Sale of patent rights: effect of partnership changes |
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(1) | This section applies if— |
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(a) | a person (“the trader”) sells the whole or part of any patent rights in |
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(b) | the tax condition, the partnership condition and the non-cessation |
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(2) | The tax condition is that— |
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(a) | tax is charged under section 587 on the proceeds of the sale or on any |
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instalment of those proceeds, and |
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(b) | by virtue of any of sections 590(2) or (4), 591(2) or 592(2), one sixth of |
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the amount chargeable is charged in the tax year in which the trader |
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receives the proceeds or the instalment and in each of the 5 subsequent |
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(3) | The partnership condition is that— |
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(a) | the trader is a firm at the time of the sale, or |
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(b) | the trade is carried on in partnership at any time during the period |
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beginning with the tax year in which the trader receives the proceeds |
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or the instalment and ending with the last of the 5 subsequent tax years |
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(“the tax spreading period”). |
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(4) | The non-cessation condition is that— |
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(a) | there is a change in the persons carrying on the trade during the tax |
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(b) | a person who carried on the trade immediately before the change |
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continues to carry on the trade immediately after the change. |
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(5) | Any amounts chargeable under section 587 during the remainder of the tax |
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spreading period are charged on the person or persons for the time being |
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(6) | Such amounts are charged as if— |
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(a) | that person or those persons had at all times been carrying on the trade, |
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(b) | everything done to or by the predecessors of that person or those |
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persons in carrying on the trade had been done to or by that person or |
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862 | Sale of patent rights: effect of later cessation of trade |
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(1) | This section applies if— |
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(a) | a person (“the trader”) sells the whole or part of any patent rights in |
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(b) | by virtue of section 861 a charge under section 587 falls to be made on |
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any person for the time being carrying on the trade in partnership, |
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(c) | any such person permanently ceases to carry on the trade thereafter, |
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(d) | no person who carried on the trade immediately before the cessation |
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continues to carry on the trade immediately after the cessation. |
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(2) | Any amounts which would have been chargeable in later tax years are charged |
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in the tax year in which the cessation occurs. |
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(3) | Each partner’s share (or, if the partner is dead, the share of the partner’s |
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personal representatives) of any additional amount chargeable under |
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subsection (2) is determined in accordance with the firm’s profit-sharing |
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arrangements immediately before the cessation. |
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(4) | If an additional amount is chargeable under subsection (2), the person liable |
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may elect that the amount of income tax payable should be reduced to the |
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amount that would have been payable on the assumptions mentioned in |
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(a) | that subsection (2) does not apply, and |
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(b) | that the total of the amounts that would have been charged in later tax |
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years is charged in equal instalments in each of the tax years— |
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(i) | beginning with the year in which the trader received the |
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proceeds of the sale or instalment of those proceeds, and |
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(ii) | ending with the year in which the cessation occurs. |
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(6) | The election must be made on or before the first anniversary of the normal self- |
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assessment filing date for the tax year in which the cessation occurred. |
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(7) | For the purposes of this section “profit-sharing arrangements” means the rights |
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of the partners to share in the profits of the trade. |
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863 | Limited liability partnerships |
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(1) | For income tax purposes, if a limited liability partnership carries on a trade, |
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profession or business with a view to profit— |
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(a) | all the activities of the limited liability partnership are treated as carried |
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on in partnership by its members (and not by the limited liability |
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(b) | anything done by, to or in relation to the limited liability partnership |
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for the purposes of, or in connection with, any of its activities is treated |
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as done by, to or in relation to the members as partners, and |
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(c) | the property of the limited liability partnership is treated as held by the |
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members as partnership property. |
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| References in this subsection to the activities of the limited liability partnership |
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are to anything that it does, whether or not in the course of carrying on a trade, |
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profession or business with a view to profit. |
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(2) | For all purposes, except as otherwise provided, in the Income Tax Acts— |
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(a) | references to a firm include a limited liability partnership in relation to |
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which subsection (1) applies, |
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(b) | references to members of a firm include members of such a limited |
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(c) | references to a company do not include such a limited liability |
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(d) | references to members of a company do not include members of such a |
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limited liability partnership. |
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(3) | Subsection (1) continues to apply in relation to a limited liability partnership |
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which no longer carries on any trade, profession or business with a view to |
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(a) | if the cessation is only temporary, or |
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(b) | during a period of winding up following a permanent cessation, |
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(i) | the winding up is not for reasons connected in whole or in part |
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with the avoidance of tax, and |
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(ii) | the period of winding up is not unreasonably prolonged. |
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| This is subject to subsection (4). |
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(4) | Subsection (1) ceases to apply in relation to a limited liability partnership— |
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(a) | on the appointment of a liquidator or (if earlier) the making of a |
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winding-up order by the court, or |
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(b) | on the occurrence of any event under the law of a territory outside the |
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United Kingdom corresponding to an event specified in paragraph (a). |
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(a) | contains general rules which are of wider application than to a |
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particular Part of this Act including certain calculation rules (see |
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(b) | deals with supplementary matters including general definitions (see |
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General calculation rules etc. |
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865 | Unpaid remuneration: non-trades and non-property businesses |
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(1) | This section applies if, in calculating profits or other income of a period of |
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account for income tax purposes— |
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(a) | an amount is charged in the accounts for the period in respect of |
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employees’ remuneration, and |
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(b) | a deduction for the remuneration would otherwise be allowable for the |
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(2) | For this purpose “profits or other income” does not include the profits of— |
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(a) | a trade, profession or vocation, or |
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(3) | No deduction is allowed for the remuneration for the period of account unless |
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it is paid before the end of the period of 9 months immediately following the |
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end of the period of account. |
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(4) | If the remuneration is paid after the end of that 9 month period, a deduction for |
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it is allowed for the period of account in which it is paid. |
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(5) | Section 37 (supplementary provision) applies for the purposes of this section |
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as it applies for the purposes of section 36 (unpaid remuneration: trades, |
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professions and vocations). |
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(6) | Provision corresponding to that made by this section is made by— |
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(a) | sections 36 and 37 (in relation to trades, professions and vocations), and |
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(b) | section 272 (in relation to property businesses). |
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Employee benefit contributions |
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866 | Employee benefit contributions: non-trades and non-property businesses |
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(1) | This section applies if, in calculating a person’s profits or other income of a |
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period for income tax purposes— |
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(a) | the profits or other income of the period are required to be calculated |
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(b) | a deduction would otherwise be allowable for the period for any |
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employee benefit contributions made or to be made by the person (“the |
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employer”) (but see subsection (5)). |
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(2) | For this purpose “profits or other income” does not include the profits of— |
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(a) | a trade, profession or vocation, or |
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(3) | No deduction is allowed for the contributions for the period except so far as— |
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(a) | qualifying benefits are provided, or qualifying expenses are paid, out |
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of the contributions during the period or within 9 months from the end |
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(b) | if the making of the contributions is itself the provision of qualifying |
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benefits, the contributions are made during the period or within 9 |
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months from the end of it. |
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(4) | An amount disallowed under subsection (3) is allowed as a deduction for a |
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subsequent period so far as— |
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(a) | qualifying benefits are provided out of the contributions before the end |
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of the subsequent period, or |
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(b) | if the making of the contributions is itself the provision of qualifying |
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benefits, the contributions are made before the end of the subsequent |
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(5) | This section does not apply to any deduction that is allowable for— |
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(a) | anything given as consideration for goods or services provided in the |
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course of a trade or profession, |
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(b) | contributions under a registered pension scheme or under a |
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superannuation fund to which section 615(3) of ICTA applies, |
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(c) | contributions under a qualifying overseas pension scheme in respect of |
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an individual who is a relevant migrant member of the pension scheme |
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in relation to the contributions, or |
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(d) | contributions under an accident benefit scheme. |
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| For the purposes of paragraph (c) “qualifying overseas pension scheme” and |
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“relevant migrant member” have the same meaning as in Schedule 33 to FA |
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2004 (see paragraphs 4 to 6 of that Schedule). |
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(6) | Sections 39 to 44 (supplementary provisions) apply for the purposes of this |
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section as they apply for the purposes of section 38 (employee benefit |
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contributions: trades, professions and vocations). |
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(7) | Provision corresponding to that made by this section is made by— |
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(a) | sections 38 to 44 (in relation to trades, professions and vocations), and |
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(b) | section 272 (in relation to property businesses). |
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Business entertainment and gifts |
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867 | Business entertainment and gifts: non-trades and non-property businesses |
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(1) | This section applies for the purpose of calculating profits or other income |
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charged to income tax which arise from the carrying on of a business. |
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(2) | For this purpose “business” does not include— |
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(a) | a trade, profession or vocation, or |
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(3) | The general rule is that no deduction is allowed in calculating the profits or |
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other income for expenses incurred in providing entertainment or gifts in |
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connection with the business. |
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(4) | A deduction for expenses which are incurred— |
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(a) | in paying sums to or on behalf of an employee of the person carrying |
| |
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(b) | in putting sums at the disposal of an employee of that person, |
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| is prohibited by the general rule if (and only if) the sums are paid, or put at the |
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employee’s disposal, exclusively for meeting expenses incurred or to be |
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incurred by the employee in providing the entertainment or gift. |
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(5) | The general rule is subject to— |
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section 46 (business entertainment: exceptions), and |
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section 47 (business gifts: exceptions), |
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| which apply in relation to a business as they apply in relation to a trade (but as |
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if the reference to a basis period were to a tax year). |
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(6) | For the purposes of this section and those two sections as so applied— |
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(a) | “employee”, in relation to a company, includes a director of the |
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company and a person engaged in the management of the company, |
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(b) | “entertainment” includes hospitality of any kind, and |
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(c) | the expenses incurred in providing entertainment or a gift include |
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expenses incurred in providing anything incidental to the provision of |
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(7) | Provision corresponding to that made by this section is made by— |
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(a) | sections 45 to 47 (in relation to trades, professions and vocations), and |
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(b) | section 272 (in relation to property businesses). |
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Social security contributions |
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868 | Social security contributions: non-trades etc. |
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(1) | This section applies for the purpose of calculating profits or other income |
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(2) | For this purpose “profits or other income” does not include— |
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(a) | the profits of a trade, profession, or vocation, |
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(b) | the profits of a property business, or |
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| 30 |
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(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), |
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(b) | Part 1 of the Social Security Contributions and Benefits (Northern |
| 35 |
Ireland) Act 1992 (c. 7). |
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(4) | But this prohibition does not apply to an employer’s contribution. |
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(5) | For this purpose “an employer’s contribution” means— |
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(a) | a secondary Class 1 contribution, |
| |
(b) | a Class 1A contribution, or |
| 40 |
(c) | a Class 1B contribution, |
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