|
| |
|
| must be determined by the General or Special Commissioners in the same way |
| |
| |
(2) | If the same General Commissioners have jurisdiction in relation to each of the |
| |
persons whose trade, profession or vocation is concerned (including any |
| |
company within the charge to corporation tax), the question must be |
| 5 |
determined by those Commissioners. |
| |
(3) | But this does not apply if all parties concerned agree that the question should |
| |
be determined by the Special Commissioners. |
| |
(4) | In any other case, the question must be determined by the Special |
| |
| 10 |
| |
Deductions from profits: unremittable amounts |
| |
187 | Professions and vocations |
| |
The provisions of this Chapter apply to professions and vocations as they |
| |
| 15 |
188 | Application of Chapter |
| |
(1) | This Chapter applies if— |
| |
(a) | an amount received by, or owed to, a person carrying on a trade (“the |
| |
trader”) is brought into account as a receipt in calculating the profits of |
| |
| 20 |
(b) | the amount is paid or owed in a territory outside the United Kingdom, |
| |
| |
(c) | some or all of the amount is unremittable. |
| |
(2) | An amount received is unremittable if it cannot be transferred to the United |
| |
Kingdom merely because of foreign exchange restrictions. |
| 25 |
(3) | An amount owed is unremittable if it cannot be paid in the United Kingdom |
| |
| |
(a) | it temporarily cannot be paid in the territory in which it is owed merely |
| |
because of foreign exchange restrictions, or |
| |
(b) | it can be paid in that territory but, if it were paid there, the amount paid |
| 30 |
would not be transferable to the United Kingdom merely because of |
| |
foreign exchange restrictions. |
| |
(4) | “Foreign exchange restrictions” are restrictions imposed by any of the |
| |
| |
(a) | the laws of the territory where the amount is paid or owed, |
| 35 |
(b) | executive action of its government, and |
| |
(c) | the impossibility of obtaining there currency that could be transferred |
| |
| |
189 | Relief for unremittable amounts |
| |
| 40 |
(a) | the trader has profits from the trade in a period of account, and |
| |
|
| |
|
| |
|
(b) | an unremittable amount has been brought into account as a receipt for |
| |
| |
| a deduction of the amount is allowed from those profits (but see subsection |
| |
| |
(2) | If the trader has profits from the trade in a period of account and the total of— |
| 5 |
(a) | any unremittable amounts brought into account as receipts for that |
| |
| |
(b) | any amount carried forward under this subsection or subsection (3) |
| |
from the previous period of account, |
| |
| exceeds the amount of those profits, the excess may be carried forward to the |
| 10 |
| |
(3) | If the trader does not have profits from the trade in a period of account and an |
| |
unremittable amount has been brought into account as a receipt for that period, |
| |
| |
(a) | any unremittable amounts brought into account as receipts for that |
| 15 |
| |
(b) | any amount carried forward under this subsection or subsection (2) |
| |
from the previous period of account, |
| |
| may be carried forward to the next period of account. |
| |
(4) | If an amount is carried forward under this section to a period of account in |
| 20 |
which the trader has profits from the trade, a deduction of the amount is |
| |
allowed from those profits (but see subsection (5)). |
| |
(5) | The total amount deducted under this section from the profits from a trade in |
| |
a period of account must not exceed the amount of the profits. |
| |
190 | Restrictions on relief |
| 25 |
(1) | No deduction is allowed under section 189 in relation to an amount so far as— |
| |
(a) | it is used to finance expenditure or investment outside the United |
| |
| |
(b) | it is applied outside the United Kingdom in another way. |
| |
(2) | No deduction is allowed under section 189 in relation to an amount owed so |
| 30 |
far as a deduction is allowed in respect of it under section 35 (bad and doubtful |
| |
| |
(3) | No deduction is allowed under section 189 in relation to an amount owed so |
| |
far as a payment under a contract of insurance has been received in relation to |
| |
| 35 |
(4) | No deduction is allowed under section 189 in relation to an amount brought |
| |
into account in calculating profits if relief under section 842 (unremittable |
| |
income) may be claimed in relation to that amount. |
| |
| |
(1) | This section applies if— |
| 40 |
(a) | some or all of an unremittable amount has been deducted from profits |
| |
| |
(b) | any of the following events occurs. |
| |
| |
|
| |
|
| |
|
(a) | the amount or part of it ceases to be unremittable, |
| |
(b) | the amount or part of it is used to finance expenditure or investment |
| |
outside the United Kingdom, |
| |
(c) | the amount or part of it is applied outside the United Kingdom in |
| |
| 5 |
(d) | the amount or part of it is exchanged for, or discharged by, an amount |
| |
that is not unremittable, |
| |
(e) | a deduction is allowed in respect of the amount or part of it under |
| |
section 35 (bad and doubtful debts), and |
| |
(f) | if the amount is an amount owed, a payment under a contract of |
| 10 |
insurance is received in relation to the amount or part of it. |
| |
(3) | The amount or the part of it in question is brought into account as a receipt in |
| |
calculating the profits of the trade for the period of account in which the event |
| |
occurs, but only so far as— |
| |
(a) | it has been deducted from profits under section 189, and |
| 15 |
(b) | it has not already been brought into account as a receipt in calculating |
| |
the profits of the trade as a result of this section. |
| |
(4) | If the event is the receipt of a payment under a contract of insurance, the |
| |
amount brought into account as a receipt must not exceed the amount of the |
| |
| 20 |
| |
Disposal and acquisition of know-how |
| |
192 | Meaning of “know-how” etc. |
| |
(1) | In this Chapter “know-how” means any industrial information or techniques |
| |
| 25 |
(a) | manufacturing or processing goods or materials, |
| |
(b) | working a source of mineral deposits (including searching for, |
| |
discovering or testing mineral deposits or obtaining access to them), or |
| |
(c) | carrying out any agricultural, forestry or fishing operations. |
| |
| 30 |
“mineral deposits” includes any natural deposits capable of being lifted or |
| |
extracted from the earth and for this purpose geothermal energy is |
| |
treated as a natural deposit, and |
| |
“source of mineral deposits” includes a mine, an oil well and a source of |
| |
| 35 |
(3) | For the purposes of this Chapter any consideration received for giving, or |
| |
wholly or partly fulfilling, an undertaking which— |
| |
(a) | is given in connection with a disposal of know-how, and |
| |
(b) | restricts, or is designed to restrict, any person’s activities in any way, |
| |
| is treated as consideration received for the disposal of the know-how. |
| 40 |
(4) | It does not matter whether or not the undertaking is legally enforceable. |
| |
(5) | For the purposes of this Chapter references to a sale of know-how include an |
| |
exchange of know-how and any provision of this Chapter referring to a sale |
| |
has effect with the necessary modifications. |
| |
|
| |
|
| |
|
(6) | Those modifications include, in particular, reading references to the proceeds |
| |
of sale and to the price as including the consideration for the exchange. |
| |
193 | Disposal of know-how if trade continues to be carried on |
| |
(1) | This section applies if— |
| |
(a) | a person carrying on a trade receives consideration for the disposal of |
| 5 |
know-how which has been used in the trade, |
| |
(b) | the person continues to carry on the trade after the disposal, and |
| |
(c) | neither section 194 (disposal of know-how as part of disposal of all or |
| |
part of a trade) nor section 195 (seller controlled by buyer etc.) applies. |
| |
(2) | The amount or value of the consideration is treated for all purposes as a trading |
| 10 |
receipt, except so far as it is brought into account under section 462 of CAA |
| |
| |
(3) | If the know-how is sold together with other property, the net proceeds of the |
| |
sale of the know-how are treated as being so much of the net proceeds of the |
| |
sale of all the property as, on a just and reasonable apportionment, is |
| 15 |
attributable to the know-how. |
| |
(4) | For this purpose all property sold as a result of one bargain is treated as sold |
| |
| |
(a) | separate prices are, or purport to be, agreed for separate items of that |
| |
| 20 |
(b) | there are, or purport to be, separate sales of separate items of that |
| |
| |
(5) | Any question about the way in which a sum is to be apportioned under this |
| |
section must be determined in accordance with section 563(2) to (6) of CAA |
| |
2001 (procedure for determining certain questions affecting two or more |
| 25 |
persons) if it materially affects two or more taxpayers. |
| |
(6) | For this purpose a question materially affects two or more taxpayers if at the |
| |
time when the question falls to be determined it appears that the determination |
| |
is material to the liability to tax (for whatever period) of two or more persons. |
| |
194 | Disposal of know-how as part of disposal of all or part of a trade |
| 30 |
(1) | This section applies if — |
| |
(a) | a person carrying on a trade receives consideration for the disposal of |
| |
know-how which has been used in the trade, and |
| |
(b) | the know-how is disposed of as part of the disposal of all or part of the |
| |
| 35 |
(2) | If the person disposing of the know-how is within the charge to income tax, the |
| |
consideration is treated for income tax purposes as a capital receipt for |
| |
| |
(3) | If the person acquiring the know-how— |
| |
(a) | is within the charge to income tax, and |
| 40 |
(b) | provided the consideration, |
| |
| the consideration is treated for income tax purposes as a capital payment for |
| |
| |
|
| |
|
| |
|
(4) | But the consideration is not treated for income tax purposes as a capital |
| |
payment for goodwill if, before the acquisition, the trade was carried on wholly |
| |
outside the United Kingdom. |
| |
(5) | If the person disposing of the know-how is within the charge to income tax— |
| |
| 5 |
(b) | the person acquiring the know-how (whether or not within the charge |
| |
| |
| may jointly elect for this section not to apply (but see section 195). |
| |
(6) | The election must be made within two years of the disposal. |
| |
| 10 |
(a) | an election is made under subsection (3) of section 531 of ICTA |
| |
(corresponding corporation tax provision), and |
| |
(b) | the person making the acquisition mentioned in that subsection is |
| |
within the charge to income tax, |
| |
| the persons making the election under that subsection are treated as also |
| 15 |
making an election under this section (even though the person disposing of the |
| |
know-how is not within the charge to income tax). |
| |
195 | Seller controlled by buyer etc. |
| |
(1) | This section applies if a disposal of know-how is by way of sale and— |
| |
(a) | the seller is a body of persons over which the buyer has control, |
| 20 |
(b) | the buyer is a body of persons over which the seller has control, or |
| |
(c) | both the seller and the buyer are bodies of persons and another person |
| |
has control over both of them. |
| |
| |
(a) | section 193 does not apply, and |
| 25 |
(b) | no election may be made under section 194. |
| |
(3) | For the purposes of this section “body of persons” includes a firm. |
| |
| |
| |
| 30 |
196 | Professions and vocations |
| |
The provisions of this Chapter apply to professions and vocations as they |
| |
| |
| |
197 | Meaning of “accounting date” |
| 35 |
(1) | In this Chapter “accounting date”, in relation to a tax year, means— |
| |
(a) | the date in the tax year to which accounts are drawn up, or |
| |
(b) | if there are two or more such dates, the latest of them. |
| |
|
| |
|
| |
|
| |
(a) | section 211(2) (middle date treated as accounting date), and |
| |
(b) | section 214(3) (date treated as accounting date if date changed in tax |
| |
year in which there is no accounting date). |
| |
| 5 |
| |
(1) | The general rule is that the basis period for a tax year is the period of 12 months |
| |
ending with the accounting date in that tax year. |
| |
(2) | This applies unless a different basis period is given by one of the following |
| |
| 10 |
section 199 (first tax year), |
| |
section 200 (second tax year), |
| |
section 201 (tax year in which there is no accounting date), |
| |
section 202 (final tax year), |
| |
section 209 or 210 (first accounting date shortly before end of tax year), |
| 15 |
section 212 (tax year in which middle date treated as accounting date), |
| |
section 215 (change of accounting date in third tax year), and |
| |
section 216 (change of accounting date in later tax year). |
| |
| |
(1) | The basis period for the tax year in which a person starts to carry on a trade— |
| 20 |
(a) | begins with the date on which the person starts to carry on the trade, |
| |
| |
(b) | ends with 5th April in the tax year. |
| |
(2) | But if a person starts and permanently ceases to carry on a trade in the same tax |
| |
year, the basis period for the tax year is that given by section 202(2). |
| 25 |
| |
(1) | The basis period for the second tax year in which a person carries on a trade is |
| |
| |
| |
(a) | the accounting date falls less than 12 months after the date on which the |
| 30 |
person starts to carry on the trade, and |
| |
(b) | the person does not permanently cease to carry on the trade, |
| |
| the basis period is the period of 12 months beginning with the date on which |
| |
the person starts to carry on the trade. |
| |
| 35 |
(a) | the accounting date falls 12 months or more after the date on which the |
| |
person starts to carry on the trade, and |
| |
(b) | the person does not permanently cease to carry on the trade, |
| |
| the basis period is that given by the general rule in section 198. |
| |
| 40 |
(a) | there is no accounting date, and |
| |
|
| |
|
| |
|
(b) | the person does not permanently cease to carry on the trade, |
| |
| the basis period is the same as the tax year. |
| |
(5) | If in that tax year the person permanently ceases to carry on the trade, the basis |
| |
period is that given by section 202(1). |
| |
201 | Tax year in which there is no accounting date |
| 5 |
(1) | If a person carries on a trade in a tax year and— |
| |
(a) | there is no accounting date in the tax year, and |
| |
(b) | the person does not start or permanently cease to carry on the trade in |
| |
| |
| the basis period for the tax year is the period of 12 months beginning |
| 10 |
immediately after the end of the basis period for the previous tax year. |
| |
(2) | But this is subject to— |
| |
(a) | section 200 (second tax year), and |
| |
(b) | sections 215 and 216 (change of accounting date in third tax year or later |
| |
| 15 |
| |
(1) | The basis period for the tax year in which a person permanently ceases to carry |
| |
| |
(a) | begins immediately after the end of the basis period for the previous tax |
| |
| 20 |
(b) | ends with the date on which the person permanently ceases to carry on |
| |
| |
(2) | But if a person starts and permanently ceases to carry on a trade in the same tax |
| |
| |
(a) | begins with the date on which the person starts to carry on the trade, |
| 25 |
| |
(b) | ends with the date on which the person permanently ceases to carry on |
| |
| |
| |
203 | Apportionment etc. of profits to basis periods |
| 30 |
(1) | This section applies if the basis period for a tax year does not coincide with a |
| |
| |
(2) | Any of the following steps may be taken if they are necessary in order to arrive |
| |
at the profits or losses of the basis period— |
| |
(a) | apportioning the profits or losses of a period of account to the parts of |
| 35 |
that period falling in different basis periods, and |
| |
(b) | adding the profits or losses of a period of account (or part of a period) |
| |
to profits or losses of other periods of account (or parts). |
| |
(3) | The steps must be taken by reference to the number of days in the periods |
| |
| 40 |
|
| |
|