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House of Commons

Session 2004 - 05 Internet Publications Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill (Volume I)
[As Amended in the Joint Committee]
The Bill is divided into three volumes. Volume I contains Clauses 1 to 364 to the Bill.
Volume II contains Clauses 365 to 886 to the Bill. Volume III contains the Schedules
to the Bill.
[AS AMENDED IN THE JOINT COMMITTEE]
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
Bill 51 – I 53/4
Income Tax (Trading and Other Income) Bill (Volume I) ii
16    Oil extraction and related activities
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
Income Tax (Trading and Other Income) Bill (Volume I) iii
37    Unpaid remuneration: supplementary
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
Income Tax (Trading and Other Income) Bill (Volume I) iv
Pre-trading expenses
57    Pre-trading expenses
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
Income Tax (Trading and Other Income) Bill (Volume I) v
Contributions to local enterprise organisations or urban regeneration companies
82    Contributions to local enterprise organisations or urban regeneration
companies
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
Income Tax (Trading and Other Income) Bill (Volume I) vi
103    Connected persons and property arrangements
Assets of mutual concerns
104    Distribution of assets of mutual concerns
Industrial development grants
105    Industrial development grants
Proceeds of insurance etc.
106    Sums recovered under insurance policies etc.
Chapter 7
Trade profits: gifts to charities etc.
107    Professions and vocations
108    Gifts of trading stock to charities etc.
109    Receipt by donor or connected person of benefit attributable to certain gifts
110    Meaning of “designated educational establishment”
Chapter 8
Trade profits: herd basis rules
Introduction
111    Election for application of herd basis rules
112    Meaning of “animal”, “herd”, “production herd” etc.
113    Other interpretative provisions
The herd basis rules
114    Initial cost of herd and value of herd
115    Addition of animals to herd
116    Replacement of animals in herd
117    Amount of receipt if old animal slaughtered under disease control order
118    Sale of animals from herd
119    Sale of whole or substantial part of herd
120    Acquisition of new herd begun within 5 years of sale
121    Section 120: sale for reasons outside farmer’s control
122    Replacement of part sold begun within 5 years of sale
123    Section 122: sale for reasons outside farmer’s control
Elections
124    Herd basis elections
125    Five year gap in which no production herd kept
126    Slaughter under disease control order
Income Tax (Trading and Other Income) Bill (Volume I) vii
Preventing abuse of the herd basis rules
127    Preventing abuse of the herd basis rules
Supplementary
128    Information if election made
129    Further assessment etc. if herd basis rules apply
Chapter 9
Trade profits: films and sound recordings
Introduction
130    Expenditure to which this Chapter applies
131    Meaning of “film” and related expressions
132    Meaning of “original master version” and “certified master version”
133    Meaning of “relevant period”
Expenditure treated as revenue in nature
134    Expenditure treated as revenue in nature
Films and sound recordings: normal rules for allocating expenditure
135    Films and sound recordings: production or acquisition expenditure
Certified master versions: special rules for allocating expenditure
136    Application of provisions about certified master versions
137    Certified master versions: preliminary expenditure
138    Certified master versions: production or acquisition expenditure
Certified master versions: limited-budget films
139    Certified master versions: production expenditure on limited-budget films
140    Certified master versions: acquisition expenditure on limited-budget films
141    “Total production expenditure in respect of the original master version”
142    When expenditure is incurred
Election for sections 134 to 140 not to apply
143    Election for sections 134 to 140 not to apply
Supplementary
144    Meaning of “genuinely intended for theatrical release”
Chapter 10
Trade profits: certain telecommunication rights
145    Professions and vocations
146    Meaning of “relevant telecommunication right”

© Parliamentary copyright 2005	Revised 4 February 2005