Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
74

157
Relief in respect of mineral royalties
(1)
This section applies for the purpose of calculating the profits of a trade if in a
tax year a person who is UK resident, or ordinarily UK resident, carries on the
trade the receipts of which include mineral royalties—
(a)
which the person is entitled to receive under a mineral lease or
5
agreement, and
(b)
which are not chargeable to tax under Chapter 8 of Part 3 (rent
receivable in connection with a UK section 12(4) concern) because of the
priority rule in section 261.
(2)
The person is treated as entitled to receive only half of the total of the mineral
10
royalties arising under the lease or agreement in the tax year.
(3)
Sections 341 to 343 (meaning of “mineral lease or agreement” and “mineral
royalties”) apply for the purposes of this section as they apply for the purposes
of Chapter 8 of Part 3.
158
Lease premiums etc: reduction of receipts
15
(1)
This section applies for the purpose of calculating the profits of a trade of
dealing in land if a receipt of the trade falls within one of the following
categories—
(a)
lease premiums within section 277,
(b)
sums within section 279 (sums payable instead of rent),
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(c)
sums within section 280 (sums payable for surrender of a lease),
(d)
sums within section 281 (sums payable for variation or waiver of term
of lease),
(e)
consideration for the assignment of a lease within section 282 (lease
granted at an undervalue), and
25
(f)
amounts received on the sale of an estate or interest in land within
section 284 (sales with right to re-conveyance) or section 285 (sale and
leaseback transactions).
(2)
The receipt is reduced by the relevant amount.
(3)
The relevant amount is the amount which is treated as a receipt of a property
30
business as a result of any of sections 277 to 285.
(4)
But if—
(a)
the person carrying on the trade makes a claim under section 301 or 302,
and
(b)
as a result of the claim a repayment of tax is made to that person,
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the relevant amount is the amount which, for the purpose of determining the
amount of the repayment of tax, is treated as brought into account as a receipt
in calculating the profits of the property business.
(5)
If subsection (4) applies, any adjustment of liability to tax may be made—
(a)
by assessment or otherwise, and
40
(b)
at any time at which it could be made if it related only to tax for the tax
year in which the claim under section 301 or 302 is made.

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
75

Ministers of religion
159
Ministers of religion
(1)
This section applies for the purpose of calculating the profits of the profession
or vocation of a minister of a religious denomination.
(2)
If the minister pays rent in respect of a dwelling-house and any part of the
5
dwelling-house is used mainly and substantially for the purposes of the
minister’s duty, a deduction is allowed for—
(a)
one-quarter of the rent, or
(b)
if less, the part of the rent that, on a just and reasonable apportionment,
is attributable to that part of the dwelling-house.
10
(3)
If—
(a)
an interest in premises belongs to a charity or an ecclesiastical
corporation,
(b)
because of that interest, the minister has a residence in the premises
from which to perform the minister’s duty, and
15
(c)
the minister incurs expenses on the maintenance, repair, insurance or
management of the premises,

a deduction is allowed under this subsection for part of those expenses.
(4)
The amount of the deduction under subsection (3) is—

where—
20
A is the amount of the expenses, and
B is the amount of the expenses for which a deduction is otherwise
allowable.
Barristers and advocates
160
Alternative basis of calculation in early years of practice
25
(1)
The profits of a barrister or advocate in independent practice for a period of
account ending not more than 7 years after the start of such practice may be
calculated in accordance with this section.
(2)
For this purpose barristers and advocates start in independent practice when
they first hold themselves out as available for fee-earning work.
30
(3)
The profits of a barrister or advocate for a period of account to which this
section applies may be calculated—
(a)
on a cash basis, or
(b)
by reference to fees earned whose amount has been agreed or in respect
of which a fee note has been delivered.
35
(4)
Once a particular basis has been adopted it must be applied consistently.
(5)
If for any period of account an accounting basis is adopted that complies with
section 25 (generally accepted accounting practice), the exemption from that
section given by this section ceases.

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
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(6)
In that case, section 25 applies to all subsequent periods of account.
Mineral exploration and access
161
Mineral exploration and access
(1)
This section applies for the purpose of calculating the profits of a trade if—
(a)
the person carrying on the trade incurs expenditure on mineral
5
exploration and access in an area or group of sands, and
(b)
the presence of mineral deposits in commercial quantities has already
been established in that area or group of sands.
(2)
A deduction is allowed for the expenditure only if a deduction would have
been allowed for it if the presence of mineral deposits in commercial quantities
10
had not already been established in that area or group of sands.
(3)
In this section “mineral exploration and access” has the same meaning as in
Part 5 of CAA 2001 (see section 396(1) of that Act).
Persons liable to pool betting duty
162
Payments by persons liable to pool betting duty
15
(1)
This section applies for the purpose of calculating the profits of a trade if—
(a)
the person carrying on the trade is liable to pool betting duty,
(b)
there is a reduction in that duty, and
(c)
the person makes a qualifying payment in consequence of that
reduction.
20
(2)
A qualifying payment is one—
(a)
made in order to meet (directly or indirectly) capital expenditure
incurred by any person in improving the safety or comfort of spectators
at a ground to be used for the playing of association football, or
(b)
made to trustees established mainly for the support of athletic sports or
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athletic games but with power to support the arts.
(3)
A deduction is allowed for the qualifying payment.
Intermediaries treated as making employment payments
163
Deduction for deemed employment payment
(1)
This section applies for the purpose of calculating the profits of a trade,
30
profession or vocation carried on by an intermediary who is treated as making
a deemed employment payment in connection with the trade, profession or
vocation.
(2)
A deduction is allowed for—
(a)
the amount of the deemed employment payment, and
35
(b)
the amount of any employer’s national insurance contributions paid by
the intermediary in respect of it.
(3)
The deduction is allowed for the period of account in which the deemed
employment payment is treated as made.

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
77

(4)
No deduction in respect of—
(a)
the deemed employment payment, or
(b)
any employer’s national insurance contributions paid by the
intermediary in respect of it,

may be made except in accordance with this section.
5
(5)
In this section “deemed employment payment” and “intermediary” have the
same meaning as in Chapter 8 of Part 2 of ITEPA 2003.
164
Special rules for partnerships
(1)
This section applies for the purpose of calculating the profits of a trade,
profession or vocation carried on by a firm that is treated as making a deemed
10
employment payment in connection with the trade, profession or vocation.
(2)
The amount of the deduction allowed under section 163 is limited to the
amount that reduces the profits of the firm for the tax year to nil.
(3)
The expenses of the firm in connection with the relevant engagements for any
period of account are limited to the total of—
15
(a)
5% of the amount taken into account in step 1 of the calculation in
section 54(1) of ITEPA 2003 (calculation of deemed employment
payment), and
(b)
the amount deductible in step 3 of that calculation.
(4)
In this section “deemed employment payment” and “the relevant
20
engagements” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003.
Waste disposal
165
Deduction for site preparation expenditure
(1)
This section applies for the purpose of calculating the profits of a trade of a
period of account in which waste materials are deposited on a waste disposal
25
site if—
(a)
the person carrying on the trade (“the trader”), or a predecessor, has
incurred site preparation expenditure in relation to the site in the
course of carrying on the trade, and
(b)
at the time the trader first deposits waste materials on the site, the
30
trader holds a waste disposal licence which is then in force.
(2)
A deduction is allowed for the amount of the site preparation expenditure
allocated to the period of account under section 166.
(3)
For the purposes of this section “predecessor”, in relation to the trader, means
a person who—
35
(a)
has ceased to carry on the trade carried on by the trader or ceased to
carry on a trade so far as relating to the site, and
(b)
has transferred the whole of the site to the trader,

and it does not matter for this purpose whether or not the estate or interest in
the site transferred to the trader is the same as that held by that person.
40
(4)
For the purposes of this section and section 166, if site preparation expenditure
has been incurred by a predecessor—

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
78

(a)
the trade carried on by the trader is treated as the same as the trade
carried on by the predecessor, and
(b)
deductions are to be allowed to the trader (and not to the predecessor)
as if everything done to or by the predecessor were done to or by the
trader.
5
(5)
For—
(a)
the meaning of “site preparation expenditure”, “waste disposal licence”
and “waste disposal site”, and
(b)
a rule about pre-trading expenditure,

see section 167.
10
166
Allocation of site preparation expenditure
(1)
The amount of site preparation expenditure allocated to a period of account for
the purposes of section 165(2) is the amount given by the formula—

where—
RE means residual expenditure (see subsection (2)),
15
WD means the volume of waste materials deposited on the waste disposal
site during the period, and
SV means the volume of the waste disposal site not used up for the
deposit of waste materials at the end of the period.
(2)
“Residual expenditure” means the total of all site preparation expenditure
20
incurred by the trader in relation to the waste disposal site at any time before
the end of the period, less—
(a)
any of that expenditure for which an allowance has been, or may be,
made for income or corporation tax purposes under the enactments
relating to capital allowances,
25
(b)
any of that expenditure for which a deduction has been allowed in
calculating for income or corporation tax purposes the profits of an
earlier period of account, and
(c)
if the trader started to carry on the trade before 6th April 1989, the
excluded amount of any unrelieved old expenditure (see subsections
30
(3) and (4)).
(3)
The excluded amount of unrelieved old expenditure is calculated by
multiplying the unrelieved old expenditure (see subsection (4)) by the
fraction—

where—
35
WD means the volume of waste materials deposited on the site before 6th
April 1989, and
SV means the volume of the site not used up for the deposit of waste
materials immediately before that date.
(4)
“Unrelieved old expenditure” means site preparation expenditure which—
40

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
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(a)
was incurred by the trader in relation to the waste disposal site before
6th April 1989, and
(b)
does not fall within subsection (2)(a) or (b).
167
Site preparation expenditure: supplementary
(1)
For the purposes of this section and sections 165 and 166—
5
“site preparation expenditure”, in relation to a waste disposal site, means
expenditure incurred on preparing the site for the deposit of waste
materials,
“waste disposal licence” means—
(a)
a disposal licence under Part 1 of the Control of Pollution Act
10
1974 (c. 40) or Part 2 of the Pollution Control and Local
Government (Northern Ireland) Order 1978 (S.I. 1978/1049
(N.I. 19)),
(b)
a waste management licence under Part 2 of the Environmental
Protection Act 1990 (c. 43) or any corresponding provision for
15
the time being in force in Northern Ireland,
(c)
a permit under regulations under section 2 of the Pollution
Prevention and Control Act 1999 (c. 24) or any corresponding
provision for the time being in force in Northern Ireland,
(d)
an authorisation under the Radioactive Substances Act 1960
20
(c. 34) or the Radioactive Substances Act 1993 (c. 12) for the
disposal of radioactive waste, or
(e)
a nuclear site licence under the Nuclear Installations Act 1965
(c. 57), and
“waste disposal site” means a site used, or to be used, for the disposal of
25
waste materials by their deposit on the site.
(2)
For the purposes of sections 165 and 166, expenditure incurred for the
purposes of a trade by a person about to carry on the trade is treated as if it
were incurred—
(a)
on the date on which the person starts to carry on the trade, and
30
(b)
in the course of carrying it on.
168
Site restoration payments
(1)
This section applies for the purpose of calculating the profits of a trade if the
person carrying on the trade makes a site restoration payment in the course of
carrying it on.
35
(2)
A deduction is allowed for the unrelieved amount of the payment.
(3)
The deduction is allowed for the period of account in which the payment is
made.
(4)
The unrelieved amount of a site restoration payment is the amount of the
payment, less—
40
(a)
any amount of the payment that represents expenditure for which an
allowance has been, or may be, made under the enactments relating to
capital allowances, and
(b)
any amount of the payment that represents expenditure for which a
deduction has been allowed in calculating the profits of the trade of an
45
earlier period of account.

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades
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(5)
A “site restoration payment” means a payment made in connection with the
restoration of a site (or part of a site) in order to comply with—
(a)
a condition of a waste disposal licence (as defined in section 167(1)),
(b)
a condition imposed on the grant of planning permission to use the site
for the collection, treatment, conversion and final depositing of waste
5
materials or for the carrying out of any of those activities, or
(c)
a relevant planning obligation.
(6)
For this purpose “a relevant planning obligation” means—
(a)
an obligation arising under an agreement made under section 106 of the
Town and Country Planning Act 1990 (c. 8) (as originally enacted) or
10
any corresponding provision for the time being in force in Northern
Ireland,
(b)
an obligation arising under an agreement made under section 75 of the
Town and Country Planning (Scotland) Act 1997 (c. 8),
(c)
a planning obligation entered into under section 106 of the Town and
15
Country Planning Act 1990 (as substituted by section 12 of the Planning
and Compensation Act 1991 (c. 34)) or any corresponding provision for
the time being in force in Northern Ireland, or
(d)
a planning obligation entered into under section 299A of the Town and
Country Planning Act 1990 or any corresponding provision for the time
20
being in force in Northern Ireland.
Cemeteries and crematoria
169
Cemeteries and crematoria: introduction
(1)
This section and sections 170 to 172 apply for the purpose of calculating the
profits of a period of account (“the relevant period”) of a trade which consists
25
of or includes—
(a)
the carrying on of a cemetery, or
(b)
the carrying on of a crematorium and, in connection with doing so, the
maintenance of memorial garden plots,

and the following provisions of this section apply for the interpretation of this
30
section and those sections.
(2)
References to the sale of land in a cemetery include the sale of a right of
interment in land in a cemetery.
(3)
References to the sale of land in a memorial garden include the appropriation
of part of a memorial garden in return for a dedication fee or similar payment.
35
(4)
“Ancillary capital expenditure” means capital expenditure incurred for the
purposes of the trade by the person carrying on the trade (“the trader”), or a
predecessor, on—
(a)
any building or structure (other than a dwelling-house) which is in the
cemetery or memorial garden and is likely to have little or no value
40
when the cemetery or memorial garden is full,
(b)
the purchase of an interest in, or the preparation of, any land taken up
by such a building or structure, or
(c)
the purchase of an interest in, or the preparation of, any other land in
the cemetery or memorial garden which is not suitable or adaptable for
45
use for interments or memorial garden plots and which is likely to have
little or no value when the cemetery or memorial garden is full.