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785 | Restriction on exemption: sales of future earnings |
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(1) | This section applies if the value as a going concern mentioned in section 784(4) |
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or (5) is derived to a material extent from prospective income or receipts |
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derived directly or indirectly from the individual’s activities in the occupation. |
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(2) | The exemption under section 784 applies to the value so derived only if the |
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future earnings condition is met. |
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(3) | The future earnings condition is met if, ignoring all capital amounts, the |
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individual will receive full consideration for the prospective income or |
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receipts, whether as a partner in a partnership or as an employee or otherwise. |
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(4) | The references in subsections (1) and (3) to income or receipts include |
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references to payments for any description of copyright, licence, franchise or |
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other right deriving its value from the individual’s activities (including past |
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786 | Recovery of tax where consideration receivable by person not assessed |
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(1) | This section applies if a person (“A”) is assessed to tax under this Chapter in |
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respect of consideration receivable by another person (“B”). |
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(2) | Consideration is not regarded as having become receivable by B for this |
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purpose until B can effectively enjoy or dispose of it. |
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(3) | A is entitled to recover from B any part of the tax which A has paid. |
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(4) | If any part of the tax remains unpaid at the end of the period of 6 months |
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beginning with the date when it became due and payable, it is recoverable |
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from B as if B were the person assessed. |
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(5) | Subsection (4) does not affect the right to recover the tax from A. |
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(6) | For the purposes of this section, any income which an individual is treated as |
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having as a result of this Chapter (the “occupation income”) is treated as the |
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highest part of the individual’s total income. |
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(7) | But if in the tax year— |
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(a) | more than one capital amount is treated as the individual’s occupation |
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(b) | the individual is also treated as having income as a result of Chapter 3 |
| |
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| only a just and reasonable proportion of each capital amount treated as |
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occupation income is to be treated as the highest part of the individual’s total |
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(8) | See section 1012 for the relationship between— |
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(a) | the rules in subsections (6) and (7), and |
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(b) | other rules requiring particular income to be treated as the highest part |
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of a person’s total income. |
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|
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|
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787 | Recovery of tax: certificates of tax paid etc |
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(1) | For the purposes of section 786(3), an officer of Revenue and Customs must, if |
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requested to do so, produce a certificate specifying— |
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(a) | the amount of income in respect of which tax has been paid, and |
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(b) | the amount of tax paid. |
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(2) | The certificate is conclusive evidence of any facts stated in it. |
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(3) | See also section 944 (under which directions may be given for payments within |
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this Chapter to non-UK residents to be subject to a duty to deduct income tax). |
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Power to obtain information |
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788 | Power to obtain information |
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(1) | An officer of Revenue and Customs may by notice require any person to |
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provide the officer within such period as the officer may direct with such |
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particulars as the officer may reasonably require for the purposes of this |
| |
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(2) | That period must be at least 30 days. |
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(3) | The particulars which a person must provide under this section, if required to |
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do so by such a notice, include particulars about— |
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(a) | transactions or arrangements with respect to which the person is or was |
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acting on behalf of others, |
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(b) | transactions or arrangements which in the opinion of the officer should |
| 20 |
properly be investigated for the purposes of this Chapter, although in |
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the person’s opinion no liability to tax arises under this Chapter, and |
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(c) | whether the person has taken or is taking any part and, if so, what part |
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in transactions or arrangements of a description specified in the notice. |
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(4) | Subsection (3) is subject to subsection (5). |
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(5) | In relation to anything done by a solicitor on behalf of a client who does not |
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consent to the provision of information required to be provided by a notice |
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under subsection (1), the solicitor may not be compelled under this section to |
| |
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(a) | state that the solicitor was acting on behalf of a client, and |
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(b) | give the name and address of the client. |
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(6) | A solicitor is not treated as having taken part in a transaction or arrangement |
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for the purposes of subsection (3)(c) merely because of giving professional |
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advice to a client about it. |
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“company” includes any body corporate, and |
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|
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|
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Avoidance involving trading losses |
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(1) | This Chapter imposes charges to income tax on— |
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(a) | individuals who are treated as receiving income under section 792 |
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(individuals in partnership claiming excess relief), |
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(b) | individuals who are treated as receiving income under section 797 |
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(individuals claiming relief for film-related trading losses), and |
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(c) | individuals who are treated as receiving income under section 805 |
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(individuals in partnership claiming relief for licence-related trading |
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(2) | The charges apply if (among other things) the individual makes a loss in a |
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trade for which the individual claims sideways relief or capital gains relief. |
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(3) | For the purposes of this Chapter sideways relief is— |
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(a) | trade loss relief against general income (see sections 64 to 70), or |
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(b) | early trade losses relief (see sections 72 to 74). |
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(4) | For the purposes of this Chapter— |
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(a) | capital gains relief is, in relation to a loss, the treatment of the loss as an |
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allowable loss by virtue of section 261B of TCGA 1992 (use of trading |
| 20 |
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(b) | capital gains relief is claimed for a loss when a claim under that section |
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is made in relation to the loss. |
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(5) | References in this Chapter to a firm are to be read in the same way as references |
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to a firm in Part 9 of ITTOIA 2005 (which contains special provision about |
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Individuals in partnership: recovery of excess relief |
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791 | Charge to tax on income treated as received under section 792 |
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(1) | Income tax is charged on income treated as received by an individual under |
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(2) | Tax is charged under this section on the amount of the income treated as |
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received in the tax year. |
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(3) | The person liable for any tax charged under this section is the individual |
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treated as receiving the income. |
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792 | Partners claiming excess sideways or capital gains relief |
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(1) | This section applies if— |
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(a) | an individual carrying on a trade (“the relevant trade”) as a partner in |
| |
a firm makes post-1 December 2004 losses in the relevant trade for |
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which the individual claims relief within subsection (2), |
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|
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|
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|
(b) | any of sections 104, 107 and 110 applies in relation to the relief (whether |
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or not any of those sections restricts the amount of the relief), and |
| |
(c) | after the individual makes the claim or claims, a chargeable event |
| |
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(2) | The relief within this subsection is— |
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(a) | sideways relief but only if the whole or part of the relief is claimed |
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against income of the individual apart from profits of the relevant |
| |
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(b) | capital gains relief. |
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(3) | A chargeable event occurs whenever— |
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(a) | the amount of the individual’s contribution to the firm is reduced as a |
| |
result of the application of regulations made under section 114, and |
| |
(b) | that reduction in the individual’s contribution to the firm immediately |
| |
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(i) | the total amount of trade losses claimed (less any reclaimed |
| 15 |
relief) becoming greater than the contribution, or |
| |
(ii) | an increase in the amount by which the total amount of trade |
| |
losses claimed (less any reclaimed relief) exceeds the |
| |
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(4) | The individual is treated as receiving an amount of income every time a |
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| The income is treated as arising otherwise than as profits of a trade. |
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(5) | The amount of the income is calculated in accordance with section 793. |
| |
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(a) | the firm is carrying on, or has carried on, more than one trade, and |
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(b) | subsection (1)(a) and (b) applies in relation to losses made by the |
| |
individual in one or more of those trades as a partner in the firm, |
| |
| the firm’s trades are taken together for the purpose of determining whether a |
| |
chargeable event occurs at any time after a claim in relation to any of those |
| |
losses has been made and, if one does occur, the amount of income treated as |
| 30 |
received by the individual at that time. |
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| See section 794(6) for modifications giving effect to this. |
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(7) | References in this section to an individual being a partner in a firm include a |
| |
reference to an individual being a limited partner within the meaning of |
| |
section 106 as a result of subsection (1)(c) of that section. |
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(8) | And, accordingly, in the case of an individual who is such a limited partner, in |
| |
this section and in sections 793 to 795 references to the individual’s firm are |
| |
references to the relationship between the individual and the other persons |
| |
mentioned in section 106(3)(a). |
| |
793 | Calculating the amount of income treated as received |
| 40 |
(1) | The amount of income treated as received by the individual under section 792 |
| |
when the chargeable event occurs is the lowest of amounts A to C. |
| |
(2) | Amount A is the amount by which the individual’s contribution to the firm is |
| |
reduced as a result of the application of regulations made under section 114. |
| |
(3) | Amount B is the amount given by— |
| 45 |
|
| |
|
| |
|
(a) | taking, at the time immediately after the chargeable event occurs, the |
| |
total amount of trade losses claimed that are post-1 December 2004 |
| |
| |
(b) | reducing that amount (but not below nil) by any reclaimed relief. |
| |
(4) | Amount C is the amount given by— |
| 5 |
(a) | taking the amount by which, at the time immediately after the |
| |
chargeable event occurs, the total amount of trade losses claimed |
| |
exceeds the individual’s contribution to the firm, and |
| |
(b) | reducing that amount (but not below nil) by any reclaimed relief. |
| |
794 | Meaning of “the total amount of trade losses claimed” etc |
| 10 |
(1) | In sections 792 and 793 “the total amount of trade losses claimed” means the |
| |
total amount of losses within subsection (2) for which the individual has |
| |
claimed sideways relief or capital gains relief. |
| |
(2) | The losses within this subsection are losses made by the individual in the |
| |
| 15 |
(a) | in a tax year at a time during which the individual carries on the |
| |
relevant trade as a limited partner or as a member of an LLP, or |
| |
(b) | in an early tax year during which the individual carries on the relevant |
| |
trade as a non-active partner. |
| |
| Expressions used in this subsection are to be read as if contained in Chapter 3 |
| 20 |
| |
(3) | In sections 792 and 793 “reclaimed relief” means the total amount of income |
| |
treated as received by the individual under section 792 as a result of that |
| |
section being previously applied in relation to claims for relief for losses made |
| |
by the individual in the relevant trade. |
| 25 |
(4) | In sections 792 and 793 “the individual’s contribution to the firm” at any time |
| |
means the individual’s contribution to the firm or the LLP (as the case may be) |
| |
at that time as calculated for the purposes of the relevant restriction provision. |
| |
(5) | The “relevant restriction provision” means— |
| |
(a) | whichever of sections 104, 107 and 110 applied as mentioned in section |
| 30 |
| |
(b) | if more than one of those sections applied as mentioned in section |
| |
792(1)(b), the section which so applied to the amount of relief which |
| |
could be given for the loss most recently made by the individual in the |
| |
| 35 |
(6) | In a case to which section 792(6) applies, for the purpose of determining the |
| |
total amount of trade losses claimed, the amount of the reclaimed relief and the |
| |
relevant restriction provision— |
| |
(a) | apply subsections (1) and (2) in relation to each of the trades that the |
| |
firm is carrying on, or has carried on, and then add the results together, |
| 40 |
| |
(b) | apply subsections (3) and (5)(b) as if references to the relevant trade |
| |
were references to any of the trades that the firm is carrying on, or has |
| |
| |
| But if a trade is of the kind mentioned in section 110(8), do not apply subsection |
| 45 |
(2)(b) in relation to it. |
| |
|
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