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 2 — Income taxed as trade profits
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(3)
But subsection (2) does not prevent a loss made before the change of residence
from being set off under section 385 of ICTA against profits arising after the
change.
(4)
This section applies to professions and vocations as it applies to trades.
(5)
In the case of a trade carried on by a firm, see sections 852(6) and (7) and 854(5).
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Effect of company starting or ceasing to be within charge to income tax
(1)
This section applies if a company starts or ceases to be within the charge to
income tax under this Chapter in respect of a trade.
(2)
The company is treated for the purposes of this Part—
(a)
as starting to carry on the trade when it starts to be within the charge, or
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(b)
as permanently ceasing to carry on the trade when it ceases to be within
the charge.
Trading income and property income
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Tied premises
(1)
This section applies if —
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(a)
in the course of carrying on a trade a person (“the trader”) supplies, or
is concerned in the supply of, goods sold or used on premises occupied
by another person,
(b)
the trader has an estate or interest in the premises,
(c)
the estate or interest is dealt with as property employed for the
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purposes of the trade, and
(d)
receipts and expenses in connection with the premises would
otherwise be brought into account in calculating the profits of a
property business of the trader.
(2)
Both the receipts and expenses are instead brought into account in calculating
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the profits of the trade.
(3)
Any apportionment of receipts or expenses that is necessary because—
(a)
the receipts or expenses do not relate only to the premises, or
(b)
the above conditions are met only in relation to part of the premises,

is to be made on a just and reasonable basis.
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Caravan sites where trade carried on
(1)
This section applies if—
(a)
a person (“the trader”) carries on material activities connected with the
operation of a caravan site,
(b)
the activities are, or are part of, a trade, and
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(c)
receipts from, and expenses of, lettings of caravans or pitches for
caravans on the site would otherwise be brought into account in
calculating the profits of a property business of the trader.
(2)
The trader may instead bring both the receipts and expenses into account in
calculating the profits of the trade.
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Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 2 — Income taxed as trade profits
9

(3)
But if the conditions in subsection (1)(a) and (b) are met for only part of a tax
year, subsection (2) applies only to the receipts and expenses that would
otherwise be brought into account in calculating the profits of the property
business for that part of the tax year.
(4)
In this section—
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“caravan site” means—
(a)
land on which a caravan is stationed for the purposes of human
habitation, and
(b)
land which is used in conjunction with land on which a caravan
is so stationed, and
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“letting” includes a licence to occupy.
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Surplus business accommodation
(1)
This section applies if—
(a)
a person (“the trader”) carrying on a trade obtains receipts from a
letting of business accommodation that is temporarily surplus to
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requirements (see subsections (3) and (4)),
(b)
the accommodation is not held as trading stock,
(c)
the receipts are in respect of part of a building of which another part is
used to carry on the trade,
(d)
the receipts are relatively small, and
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(e)
the receipts, and the expenses of the letting, would otherwise be
brought into account in calculating the profits of a property business of
the trader.
(2)
The trader may instead bring both the receipts and expenses into account in
calculating the profits of the trade.
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(3)
Accommodation is temporarily surplus to requirements only if—
(a)
it has been used within the last 3 years to carry on the trade or acquired
within the last 3 years,
(b)
the trader intends to use it to carry on the trade at a later date, and
(c)
the letting is for a term of not more than 3 years.
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(4)
If accommodation is temporarily surplus to requirements at the beginning of a
period of account, it continues to be temporarily surplus to requirements until
the end of that period.
(5)
If under this section any of the receipts from and expenses of a letting are
brought into account in calculating the profits of the trade, all subsequent
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receipts from and expenses of the letting must be dealt with in the same way
(but only so long as this section continues to apply).
(6)
In this section “letting” includes a licence to occupy.
(7)
This section applies to professions and vocations as it applies to trades.
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Payments for wayleaves
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(1)
This section applies if—
(a)
a person (“the trader”) carries on a trade on some or all of the land to
which a wayleave relates,

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 2 — Income taxed as trade profits
10

(b)
rent is receivable, or expenses are incurred, by the trader in respect of
the wayleave, and
(c)
apart from any rent or expenses in respect of a wayleave, no other
receipts or expenses in respect of any of the land are brought into
account in calculating the profits of any property business of the trader.
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(2)
If—
(a)
the trader would otherwise be liable to tax under Chapter 9 of Part 3 in
respect of the rent for the wayleave (rent receivable for UK electric-line
wayleaves), or
(b)
expenses would otherwise be brought into account in calculating the
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profits charged under that Chapter,

the trader may instead bring both the rent and expenses into account in
calculating the profits of the trade.
(3)
If—
(a)
rent for the wayleave would otherwise be brought into account in
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calculating the profits of a property business of the trader, or
(b)
expenses incurred by the trader in respect of the wayleave would
otherwise be so brought into account,

the trader may instead bring both the rent and expenses into account in
calculating the profits of the trade.
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(4)
In this section “rent” includes—
(a)
a receipt mentioned in section 266(3), and
(b)
any other receipt in the nature of rent.
(5)
In this section “wayleave” means an easement, servitude or right in or over
land which is enjoyed in connection with—
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(a)
an electric, telegraph or telephone wire or cable,
(b)
a pipe for the conveyance of any thing, or
(c)
any apparatus used in connection with such a pipe.
(6)
The reference to the enjoyment of an easement, servitude or right in connection
with an electric, telegraph or telephone wire or cable includes (in particular) its
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enjoyment in connection with—
(a)
a pole or pylon supporting such a wire or cable, or
(b)
apparatus used in connection with such a wire or cable.
(7)
This section applies to professions and vocations as it applies to trades.
Rent-a-room and foster-care relief
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Rent-a-room and foster-care relief
(1)
The rules for calculating the profits of a trade carried on by an individual are
subject to Chapter 1 of Part 7 (rent-a-room relief).
(2)
That Chapter provides relief on income from the use of furnished
accommodation in the individual’s only or main residence (see, in particular,
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sections 792 and 796).
(3)
The rules for calculating the profits of a trade, profession or vocation carried on
by an individual are subject to Chapter 2 of Part 7 (foster-care relief).

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 3 — Trade profits: basic rules
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(4)
That Chapter provides relief on income from the provision by the individual of
foster care (see, in particular, sections 813, 816, 822 and 823).
Chapter 3
Trade profits: basic rules
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Professions and vocations
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Apart from section 30 (animals kept for trade purposes), the provisions of this
Chapter apply to professions and vocations as they apply to trades.
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Generally accepted accounting practice
(1)
The profits of a trade must be calculated in accordance with generally accepted
accounting practice, subject to any adjustment required or authorised by law
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in calculating profits for income tax purposes.
(2)
This does not—
(a)
require a person to comply with the requirements of the Companies Act
1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/
1032 (N.I. 6)) except as to the basis of calculation, or
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(b)
impose any requirements as to audit or disclosure.
(3)
This section is subject to section 160 (barristers and advocates in early years of
practice).
(4)
This section does not affect provisions of the Income Tax Acts relating to the
calculation of the profits of Lloyd’s underwriters.
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Losses calculated on same basis as profits
(1)
The same rules apply for income tax purposes in calculating losses of a trade
as apply in calculating profits.
(2)
This is subject to any express provision to the contrary.
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Receipts and expenses
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(1)
In the Income Tax Acts, in the context of the calculation of the profits of a trade,
references to receipts and expenses are to any items brought into account as
credits or debits in calculating the profits.
(2)
There is no implication that an amount has been actually received or paid.
(3)
This section is subject to any express provision to the contrary.
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Items treated under CAA 2001 as receipts and expenses
The rules for calculating the profits of a trade need to be read with—
(a)
the provisions of CAA 2001 which treat charges as receipts of a trade,
and
(b)
the provisions of CAA 2001 which treat allowances as expenses of a
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trade.