(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 217,
(b) sums within section 219 (sums payable instead of rent),
(c) sums within section 220 (sums payable for surrender of a lease),
(d) sums within section 221 (sums payable for variation or waiver of terms of lease),
(e) consideration for the assignment of a lease within section 222 (lease granted at an undervalue), and
(f) amounts received on the sale of an estate or interest in land within section 224 (sales with right to reconveyance) or section 225 (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 business as a result of any of sections 217 to 225.
(4) But if—
(a) the company carrying on the trade makes a claim under section 238 or 239, and
(b) as a result of the claim a repayment of tax is made to that company,
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
(b) at any time at which it could be made if it related only to tax for the accounting period in which the claim under section 238 or 239 is made.
(1) This section applies for the purpose of calculating the profits of a trade if—
(a) the company carrying on the trade incurs expenditure on mineral 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 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).
(1) This section applies for the purpose of calculating the profits of a trade carried on by an intermediary which is treated as making a deemed employment payment in connection with the trade.
(2) A deduction is allowed for—
(a) the amount of the deemed employment payment, and
(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.
(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) In this section “deemed employment payment” and “intermediary” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003 (see sections 49 and 50 of that Act).
(1) This section applies for the purpose of calculating the profits of a trade carried on by a firm that is treated as making a deemed employment payment in connection with the trade.
(2) The amount of the deduction allowed under section 139 is limited to the amount that reduces the profits of the firm of the period of account 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—
(a) 5% of the amount taken into account at Step 1 of the calculation in section 54(1) of ITEPA 2003 (calculation of deemed employment payment), and
(b) the amount deductible at Step 3 of that calculation.
(4) In this section “deemed employment payment” and “the relevant engagements” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003 (see sections 49 and 50 of that Act).
(1) This section applies for the purpose of calculating the profits of a trade carried on by a managed service company (the “MSC”) which is treated as making a deemed employment payment in connection with the trade.
(2) A deduction is allowed for—
(a) the amount of the deemed employment payment, and
(b) the amount of any employer's national insurance contributions paid by the MSC in respect of it.
(3) The deduction is allowed for the period of account in which the deemed employment payment is treated as made.
(4) If the MSC is a firm, the amount of the deduction allowed under subsection (2) is limited to the amount that reduces the profits of the firm of the period of account to nil.
(5) No deduction in respect of—
(a) the deemed employment payment, or
(b) any employer's national insurance contributions paid by the MSC in respect of it,
may be made except in accordance with this section.
(6) In this section the following expressions have the same meanings as in Chapter 9 of Part 2 of ITEPA 2003—
“deemed employment payment” (see section 61D(2) of that Act),
“employer's national insurance contributions” (see section 61J(1) of that Act),
“managed service company” (see section 61B of that Act).
141A Intermediaries providing worker's services to public authority or medium or large client
(1) This section applies for the purposes of calculating the trading profits of a person where—
(a) the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),
(b) a deemed direct payment is treated as made under subsection (3) of that section, and
(c) the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.
(2) The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.
(3) In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).
(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 site if—
(a) the company 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 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 143.
(3) For the purposes of this section “predecessor”, in relation to the trader, means a person who—
(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.
(4) For the purposes of this section and section 143, if site preparation expenditure has been incurred by a predecessor—
(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) 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 144.
(1) The amount of site preparation expenditure allocated to a period of account for the purposes of section 142(2) is the amount given by the formula—
RE
×
WD
SV
+
WD
where—
RE means residual expenditure (see subsection (2)),
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 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 corporation or income tax purposes under the enactments relating to capital allowances,
(b) any of that expenditure for which a deduction has been made in calculating for corporation or income tax purposes the profits of an earlier period of account, and
(c) if the trader started to carry on the trade before 6 April 1989, the excluded amount of any unrelieved old expenditure (see subsections (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—
WD
SV
+
WD
where—
WD means the volume of waste materials deposited on the site before 6 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—
(a) was incurred by the trader in relation to the waste disposal site before 6 April 1989, and
(b) does not fall within subsection (2)(a) or (b).
(1) For the purposes of this section and sections 142 and 143 “waste disposal licence” means—
(a) a disposal licence under Part 1 of the Control of Pollution Act 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 the time being in force in Northern Ireland,
(c) a permit or authorisation under regulations under—
(i) section 2 of the Pollution Prevention and Control Act 1999 (c. 24), ...
(ii) Article 4 of the Environment (Northern Ireland) Order 2002 (S.I. 2002/3153 (N.I. 7)), or
(iii) any corresponding provision for the time being in force in Scotland,
(d) an authorisation under the Radioactive Substances Act 1960 (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).
(2) For the purposes of this section and sections 142 and 143—
“site preparation expenditure”, in relation to a waste disposal site, means expenditure incurred on preparing the site for the deposit of waste materials, and
“waste disposal site” means a site used, or to be used, for the disposal of waste materials by their deposit on the site.
(3) For the purposes of sections 142 and 143, expenditure incurred for the purposes of a trade by a company about to carry on the trade is treated as if it were incurred—
(a) on the date on which the company starts to carry on the trade, and
(b) in the course of carrying it on.
(1) This section applies for the purpose of calculating the profits of a trade if the company carrying on the trade makes a site restoration payment in the course of carrying it on.
(2) Subject to subsection (3A), a deduction is allowed for the unrelieved amount of the payment.
(3) The deduction is allowed—
(a) (if the payment is made, whether directly or indirectly, to a connected person) for the period of account in which that part of the restoration work to which the payment relates is completed, or
(b) (in any other case) for the period of account in which the payment is made.
(3A) But no deduction is allowed if the payment arises from arrangements—
(a) to which the person carrying on the trade is a party, and
(b) the main purpose, or one of the main purposes, of which is to obtain a deduction under this section.
(4) The unrelieved amount of a site restoration payment is the amount of the payment, less—
(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 made in calculating the profits of the trade of an earlier period of account.
(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 144(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 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 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 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 being in force in Northern Ireland.
(7) Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(1) This section and sections 147 to 149 apply for the purpose of calculating the profits of a period of account (“the relevant period”) of a trade which consists 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 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.
(4) “Ancillary capital expenditure” means capital expenditure incurred for the purposes of the trade by the company 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 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 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.
(5) “Predecessor”, in relation to the trader, means a person who carried on the trade at any time before the trader started to do so.
(6) “Preparation”, in relation to land, means levelling or draining the land or making it suitable in some other way for use as a cemetery or memorial garden.
(1) This section applies if, in the relevant period, an interest in land in the cemetery or memorial garden is sold with a view to the land being used—
(a) for the purpose of interments, or
(b) for memorial garden plots.
(2) A deduction is allowed for—
(a) capital expenditure incurred by the trader, or a predecessor, on the purchase of an interest in the land or on the preparation of the land, and
(b) ancillary capital expenditure allocated to the relevant period under section 148 (allocation of ancillary capital expenditure).
(3) But no expenditure is to be brought into account—
(a) under both paragraphs (a) and (b) of subsection (2), ...
(b) under both subsection (2)(a) above and section 170(2)(b) of ITTOIA 2005 (relief for income tax purposes) or under both subsection (2)(b) above and section 170(2)(a) of ITTOIA 2005, or
(c) under both subsection (2)(b) above and section 149B(4), 149C(4) or 149D(3).
whether for the same or different periods of account.
(4) Any purchase price paid on a sale in connection with a change in the persons carrying on the trade is ignored in calculating the amount of the deduction.
(5) No deduction is allowed for any expenditure which is excluded by section 149 (exclusion of expenditure met by subsidies).
(1) The amount of ancillary capital expenditure allocated to the relevant period for the purposes of section 147(2)(b) is the amount given by the formula—
RE
×
PSR
PAR
+
PSR
where—
RE means residual expenditure (see subsection (2)),
PSR means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden sold in the relevant period, and
PAR means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden which are or could be made available for sale at the end of the relevant period.
(2) “Residual expenditure” means the total of all ancillary capital expenditure incurred at any time before the end of the relevant period, less—
(a) ancillary capital expenditure incurred on buildings or structures which were destroyed before the beginning of the first sale period,
(b) the excluded amount of any remaining old expenditure (see subsection (3)),
(c) if, after the beginning of the first sale period and before the end of the relevant period, an asset representing ancillary capital expenditure was sold or destroyed, the net sale proceeds or the compensation, and
(d) any amount deducted under section 147(2)(b) above, or under section 170(2)(b) of ITTOIA 2005, for a period of account ending before the relevant period.
(3) The excluded amount of remaining old expenditure is calculated by multiplying the remaining old expenditure by the fraction—
PSB
PAB
+
PSB
where—
PSB means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden sold before the beginning of the basis period for the tax year 1954-55, and
PAB means the number of grave-spaces or memorial garden plots in the cemetery or memorial garden which were or could have been made available for sale immediately before the beginning of the basis period for that tax year.
(4) In this section—
“compensation”, in relation to the destruction of an asset, means—
insurance money or other compensation received by the trader, or a predecessor, in respect of the destruction, and
money received for the remains of the asset by the trader or predecessor,
“the first sale period” means—
the period of account in which an interest in land in the cemetery or memorial garden was first sold for the purposes of the trade with a view to the land being used for the purpose of interments or for memorial garden plots, or
if later, the basis period for the tax year 1954-55, and
“remaining old expenditure” means ancillary capital expenditure which—
was incurred before the beginning of the basis period for the tax year 1954-55, and
does not fall within subsection (2)(a).
(1) Expenditure is excluded for the purposes of section 147 so far as it has been, or is to be, met (directly or indirectly) by—
(a) the Crown,
(b) a government or local or other public authority (whether in the United Kingdom or elsewhere), or
(c) any person other than the person incurring the expenditure.
(2) This is subject to the following exceptions.
(3) Expenditure is not excluded for the purposes of section 147 if it is met (directly or indirectly) by a grant—
(a) made under Northern Ireland legislation, and
(b) declared by the Treasury by an order under section 534 of CAA 2001 to correspond to a grant under Part 2 of the Industrial Development Act 1982 (c. 52).
(4) Expenditure is not excluded for the purposes of section 147 if it is met (directly or indirectly) by—
(a) insurance money, or
(b) other compensation money,
payable in respect of an asset which has been destroyed, demolished or put out of use.
(5) Expenditure is not excluded for the purposes of section 147 if—
(a) it has been, or is to be, met (directly or indirectly) by a person other than the Crown or a government or local or other public authority, and
(b) no deduction is allowed for the expenditure in calculating for corporation or income tax purposes the profits of a trade carried on by that person.
149A Niches, memorials and inscriptions: introduction
(1) Sections 149B to 149E apply in calculating the profits of a trade which consists of or includes—
(a) the carrying on of a crematorium, and
(b) in connection with carrying on the crematorium—
(i) the sale of niches or memorials, or
(ii) the making of inscriptions.
(2) In those sections—
(a) “the trade” is the trade mentioned in subsection (1),
(b) “the trader” is the company carrying on the trade, and
(c) a “predecessor” is a person who carried on the trade at any time before the trader started doing so.
(1) This section sets out the deductions that are allowed in respect of a nicheif proceeds from the sale of the niche are brought into account as a receipt in calculating the profits of the trade.
(2) A deduction is allowed for two-thirds of the costs incurred (by the trader or a predecessor) in the formation of the niche.
(3) Formation of the lining and of any tablet associated with the niche is taken to be part of the formation of the niche.
(4) If the niche is in a building that is used wholly or mainly for the purpose of providing niches, a further deduction is allowed for two-thirds of the associated building costs.
(5) In relation to a niche in a building—
(a) “the associated building costs” is the relevant proportion of the costs of the building, and
(b) “the relevant proportion” is the proportion that the area occupied by the niche bears to the area of the building as a whole or, if the proportion cannot reasonably be calculated on that basis, such proportion as may be calculated on a just and reasonable basis.
(1) This section sets out the deductions that are allowed in respect of a memorial if proceeds from the sale of the memorial are brought into account as a receipt in calculating the profits of the trade.
(2) A deduction is allowed for the costs incurred (by the trader or a predecessor) in producing the memorial.
(3) If the memorial includes an inscription, making that inscription is taken to be part of producing the memorial.
(4) If the memorial is attached to a building that is used wholly or mainly for the purpose of accommodating memorials or the memorial comprises an entire building, a further deduction is allowed for two-thirds of the associated building costs.
(5) In relation to a memorial attached to or comprising a building, “the associated building costs” means—
(a) the amount found by dividing the costs of the building by the total number of memorials that the building is capable of accommodating, or
(b) if the memorial comprises an entire building, the costs of that building.
(1) This section sets out the deductions that are allowed in respect of an inscription if proceeds from making the inscription are brought into account in calculating the profits of the trade.
(2) A deduction is allowed for the costs incurred (by the trader or a predecessor) in making the inscription.
(3) If the inscription is made on an existing framework designed to hold more than one inscription, a further deduction is allowed for two-thirds of the associated framework costs.
(4) In relation to an inscription made on an existing framework, “the associated framework costs”—
(a) is the amount found by dividing the costs of the framework by the total number of inscriptions that the framework is designed to hold, and
(b) includes, if the framework is attached to a building that is used wholly or mainly for the purpose of accommodating memorials, the amount found by dividing the costs of the building by the total number of memorials that the building is capable of accommodating.
(5) This section does not apply to an inscription if it is made as part of producing a memorial (see section 149C).
(1) For the purposes of sections 149B to 149D, the costs of a building are to be determined in accordance with this section.
(2) If the building was acquired for the purposes of the trade, the costs of the building are the lower of—
(a) the market value of the building when it was acquired, and
(b) the costs incurred in acquiring the building.
(3) If the building was constructed for the purposes of the trade, the costs of the building are the costs incurred in constructing the building.
(4) In either case—
(a) the acquisition cost (or market value) of the land on which the building is situated is to be ignored, and
(b) for these purposes, costs (or values) are to be apportioned between the land and the building on a just and reasonable basis.
(5) Any construction costs incurred with respect to the building after it was acquired or constructed for the purposes of the trade must be brought into account as costs of the building.
(6) But costs incurred in maintaining the building must not be brought into account.
(7) Costs must not be included as costs of the building if a deduction is or is to be brought into account for them under section 147(2) (deduction for capital expenditure).
(8) A reference in this section to costs incurred is to costs incurred either by the trader or a predecessor.
(9) In sections 149B to 149D and this section, “building” includes any other type of structure.
(1) If a company carrying on a trade incurs expenditure on the production or acquisition of the original master version of a sound recording, the expenditure is treated for corporation tax purposes as expenditure of a revenue nature.
(2) If expenditure is treated under this section as revenue in nature, sums received by the company from the disposal of the original master version of the sound recording—
(a) are treated for corporation tax purposes as receipts of a revenue nature, and
(b) are brought into account in calculating the profits of the relevant period in which they are received.
(3) For this purpose sums received from the disposal of the original master version include—
(a) sums received from the disposal of any interest or right in or over the original master version (including an interest or right created by the disposal), and
(b) insurance, compensation or similar money derived from the original master version.
(1) This section applies in calculating for corporation tax purposes the profits or losses of a company from a trade if—
(a) the trade consists of or includes the exploitation of original master versions of sound recordings, and
(b) the original master versions do not constitute trading stock of the trade as defined by section 163.
(2) Expenditure that—
(a) is incurred on the production or acquisition of the original master version of a sound recording, and
(b) is of a revenue nature (whether as a result of section 150 or otherwise),
must be allocated to relevant periods in accordance with this section.
(3) The company must allocate to a relevant period so much of the expenditure as is just and reasonable having regard to—
(a) the amount of the expenditure that remains unallocated at the beginning of the period,
(b) the proportion that the estimated value of the original master version of the sound recording that is realised in that period (whether by way of income or otherwise) bears to the total value so realised and the estimated remaining value of the original master version at the end of the period, and
(c) the need to bring the whole of the expenditure into account over the time during which the value of the original master version is expected to be realised.
(4) The company may also allocate to a relevant period a further amount, so long as the total amount allocated does not exceed the value of the original master version of the sound recording realised in that period (whether by way of income or otherwise).
(1) For the purposes of sections 150 and 151—
(a) “sound recording” does not include a film soundtrack,
(b) “original master version” means the master tape or master audio disc of the recording,
(c) references to the original master version of a sound recording include any rights in the original master version that are held or acquired with it, and
(d) “relevant period” means—
(i) a period for which accounts of the trade are made up, or
(ii) if no accounts of the trade are made up for a period, an accounting period of the company.
(2) In subsection (1)(a) “film” is to be read in accordance with section 1181.
153 Reserves of marketing authorities and certain other statutory bodies
(1) This section applies to a statutory body if its object (or one of its objects) is—
(a) marketing an agricultural product, or
(b) stabilising the price of an agricultural product.
(2) Subsections (3) and (4) apply if the body is required, by or under an approved scheme or arrangement (“the scheme”), to pay the whole or part of any trading surplus into a reserve fund meeting the conditions specified in section 154.
(3) Any sums which the body is required by or under the scheme to pay into the fund out of the profits of its trade are allowed as deductions in calculating the profits of the trade.
(4) Any sums withdrawn by the body from the fund are taken into account as trading receipts, except so far as—
(a) they are required, by or under the scheme, to be paid to a Minister or department,
(b) they are distributed to producers of the product in question, or
(c) they are refunded to persons who pay any levy or duty.
(5) In this section—
“approved scheme or arrangement” means a scheme or arrangement approved by, or made with, a Minister or department,
“producers of the product” includes persons producing the product from another product,
“statutory body” means a body established by or under an enactment,
“trading surplus” means a surplus from the body's trading operations or other trade receipts.
(1) These are the conditions to be met by the reserve fund (see section 153(2)).
(2) The first condition is that no sum may be withdrawn from the fund without the authority or consent of a Minister or department.
(3) The second condition is that if—
(a) money has been paid to the body by a Minister or department—
(i) in connection with arrangements for maintaining guaranteed prices, or
(ii) in connection with the body's trading arrangements, and
(b) the money is repayable to the Minister or department,
sums standing to the credit of the fund are required to be applied (in whole or in part) in repaying the money.
(4) The requirement mentioned in subsection (3) must be imposed by or under the scheme or arrangement mentioned in section 153(2).
(5) The third condition is that—
(a) the fund is reviewed by a Minister at intervals fixed by or under the scheme or arrangement mentioned in section 153(2), and
(b) if the fund appears to the Minister to exceed what is reasonably required by the body, the excess is withdrawn from the fund.
(1) In sections 153 and 154 “Minister” means—
(a) a Minister of the Crown,
(b) the Scottish Ministers,
(c) the Welsh Ministers, or
(d) a Minister within the meaning of the Northern Ireland Act 1998 (c. 47).
(2) In sections 153 and 154 “department” means—
(a) a government department,
(b) a part of the Scottish Administration,
(c) a part of the Welsh Assembly Government, or
(d) a Northern Ireland department.
(1) In this Chapter “trading stock”, in relation to a trade, means anything (whether land or other property)—
(a) which is sold in the ordinary course of the trade, or
(b) which would be so sold if it were mature or its manufacture, preparation or construction were complete.
(2) It does not include—
(a) materials used in the manufacture, preparation or construction of any such thing,
(b) any services performed in the ordinary course of the trade, or
(c) any article produced, or any material used, in the performance of any such services.
(1) This section applies if trading stock of a company's trade is appropriated by the company for any other purpose.
(2) In calculating the profits of the trade—
(a) the amount which the stock appropriated would have realised if sold in the open market at the time of the appropriation is brought into account as a receipt, and
(b) the value of anything in fact received for it is left out of account.
(3) The receipt is treated as arising on the date of the appropriation.
(1) This section applies if something that—
(a) belongs to a company carrying on a trade, but
(b) is not trading stock of the trade,
becomes trading stock of the trade.
(2) In calculating the profits of the trade—
(a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time it became trading stock of the trade, and
(b) the value of anything in fact given for it is left out of account.
(3) The cost is treated as being incurred on the date it became trading stock of the trade.
(1) This section applies if—
(a) trading stock of a trade is disposed of otherwise than in the course of the trade, and
(b) section 157 does not apply.
(2) In calculating the profits of the trade—
(a) the amount which the stock disposed of would have realised if sold in the open market at the time of the disposal is brought into account as a receipt, and
(b) any consideration obtained for it is left out of account.
(3) The receipt is treated as arising on the date of the disposal.
(4) This section is subject to section 161.
(1) This section applies if—
(a) trading stock of a trade has been acquired otherwise than in the course of the trade, and
(b) section 158 does not apply.
(2) In calculating the profits of the trade—
(a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time of the acquisition, and
(b) the value of anything in fact given for it is left out of account.
(3) The cost is treated as being incurred on the date of the acquisition.
(4) This section is subject to section 161.
(1) Section 159 or 160 does not apply if the relevant consideration—
(a) falls to be adjusted for tax purposes under Part 4 of TIOPA 2010, or
(b) falls within that Part without falling to be so adjusted.
(1A) Subsection (1B) applies in relation to a disposal or acquisition if—
(a) by virtue of subsection (1), section 159 or 160 does not apply, and
(b) the market value amount is greater than the Part 4 TIOPA amount.
(1B) An amount equal to the market value amount less the Part 4 TIOPA amount is to be brought into account in calculating the profits of the trade (in addition to the Part 4 TIOPA amount).
(1C) In subsections (1A) and (1B)—
“market value amount” means the amount referred to in section 159(2)(a) or 160(2)(a);
“Part 4 TIOPA amount” means the amount which, following the application of Part 4 of TIOPA 2010 to the relevant consideration, is brought into account in respect of the relevant consideration in calculating the profits of the trade.
(2) For the purposes of subsection (1)(b), the relevant consideration falls within Part 4 of TIOPA 2010 without falling to be adjusted under that Part if—
(a) the condition in section 147(1)(a) of TIOPA 2010 is met, and
(b) the participation condition is met (see subsection (3A)), but
(c) either—
(i) one of the conditions in section 147(1)(c) and (d) of TIOPA 2010 is not met, or
(ii) one of the exceptions mentioned in subsection (3) applies.
(3) The exceptions are those in—
(a) section 447(5) (exchange gains or losses from loan relationships)
(b) section 694(8) (exchange gains or losses from derivative contracts),
(c) section 213 of TIOPA 2010 (saving for provisions relating to capital allowances), and
(d) section 214 of TIOPA 2010 (saving for provisions relating to chargeable gains).
(3A) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (2)(b) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.
(4) In this section “relevant consideration” means—
(a) in relation to section 159, the consideration for the disposal of the trading stock, and
(b) in relation to section 160, the consideration for the acquisition of the trading stock.
(1) If a company permanently ceases to carry on a trade, in calculating the profits of the trade—
(a) trading stock belonging to the trade at the time of the cessation must be valued, and
(b) the value must be determined in accordance with sections 164 to 167 (bases of valuation).
(2) But no valuation of the stock is required under this Chapter if section 147(3) or (5) of TIOPA 2010 (provision not at arm's length) has effect in relation to any provision which—
(a) is made or imposed in relation to the stock, and
(b) has effect in connection with the cessation.
(2A) Subsection (2B) applies if—
(a) by virtue of subsection (2), no valuation of the stock under this Chapter is required, and
(b) the market value of the stock is greater than the Part 4 TIOPA amount.
(2B) An amount equal to the market value of the stock less the Part 4 TIOPA amount is to be brought into account in calculating the profits of the trade (in addition to the Part 4 TIOPA amount).
(2C) In subsections (2A) and (2B)—
“market value”, in relation to stock, is the value the stock would have been determined to have if it had been valued in accordance with sections 164 to 167, and
“Part 4 TIOPA amount” is the amount which, following the application of Part 4 of TIOPA 2010 in relation to the provision referred to in subsection (2), is brought into account in respect of that provision in calculating the profits of the trade.
(3) If there is a partnership change, no valuation of the stock is required under this Chapter so long as a company carrying on the trade in partnership immediately before the change continues to carry it on in partnership after the change.
(4) The reference in subsection (3) to a partnership change is to a change in the persons carrying on the trade in circumstances where the trade is carried on by persons in partnership immediately before or immediately after the change (or at both those times).
(1) In this Chapter “trading stock” means—
(a) any property (whether land or other property) which is sold in the ordinary course of the trade or would be so sold if it were mature or its manufacture, preparation or construction were complete, or
(b) materials used in the manufacture, preparation or construction of any property mentioned in paragraph (a).
(2) In this Chapter “trading stock” includes also any services performed in the ordinary course of the trade—
(a) the performance of which is wholly or partly completed at the time of the cessation, and
(b) for which it would be reasonable to expect that a charge would be made if there were no cessation and, in the case of partly completed services, their performance were fully completed,
and any article produced, and any material used, in the performance of any such services.
(3) In this Chapter references to the sale or transfer of trading stock include the sale or transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the performance of any such services.
(1) The value of trading stock belonging to the trade at the time of the cessation is determined as follows.
(2) If the stock is sold to a person who—
(a) carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom, and
(b) is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for corporation or income tax purposes,
the value is determined in accordance with section 165 (sale to unconnected person), 166 (sale to connected person) or 167 (election by connected persons).
(3) But if section 125 (preventing abuse of the herd basis rules) applies—
(a) the value is not determined in accordance with any of those sections, and
(b) the value is instead taken to be that given by section 125 (the price which the animals transferred would have fetched if sold in the open market at the time of the sale).
(4) In any other case, the value is taken to be the amount which the stock would have realised if sold in the open market at the time of the cessation.
165 Sale basis of valuation: sale to unconnected person
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for corporation or income tax purposes, and
(b) the buyer is not connected with the seller.
(2) The value is taken to be the amount in fact realised on the sale.
(3) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.
166 Sale basis of valuation: sale to connected person
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for corporation or income tax purposes,
(b) the buyer is connected with the seller, and
(c) no election is made under section 167 (election by connected persons).
(2) The value is taken to be the amount which would have been realised if the sale had been between independent persons dealing at arm's length.
167 Sale basis of valuation: election by connected persons
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for corporation or income tax purposes,
(b) the buyer is connected with the seller, and
(c) an election is made under this section.
(2) The parties to the sale may make an election under this section if the value of the stock determined under section 166 exceeds both—
(a) its acquisition value, and
(b) the amount in fact realised on the sale.
(3) If an election is made, the value is taken to be—
(a) its acquisition value, or
(b) if greater, the amount in fact realised on the sale.
(4) An election under this section must be made by both parties not later than two years after the end of the accounting period in which the cessation occurred.
(5) The “acquisition value” of trading stock means the amount which would have been deductible as representing its acquisition value, in calculating the profits of the trade, on the following assumptions—
(a) that the stock had been sold in the course of the trade, immediately before the cessation, for a price equal to the value of the stock determined under section 166, and
(b) that the period for which those profits were to be calculated began immediately before the sale.
(6) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.
For the purposes of sections 164 to 167 two persons are connected with each other if any of the following tests is met—
(a) they are connected with each other within the meaning of section 1122 of CTA 2010,
(b) one of them is a firm and the other has a right to a share of the assets or income of the firm,
(c) one of them is a body corporate and the other has control over that body,
(d) both of them are firms and some other person has a right to a share of the assets or income of both of them, or
(e) both of them are bodies corporate, or one of them is a firm and the other is a body corporate, and in either case some other person has control over both of them.
169 Cost to buyer of stock valued on sale basis of valuation
(1) This section applies for the purpose of calculating the profits of the trade carried on by the buyer of trading stock.
(2) If the value of the stock is determined in accordance with—
(a) section 164(3) or sections 165 to 167 (sale basis of valuation), or
(b) section 175(3) or sections 176 to 178 of ITTOIA 2005 (corresponding income tax rules),
the cost of the stock to the buyer is taken to be the value as so determined.