(1) For the purposes of section 38 qualifying benefits are provided if there is—
(a) a payment of money, or
(b) a transfer of assets,
which meets condition A, B, C or D.
(2) Condition A is that the payment or transfer gives rise both to an employment income tax charge and to an NIC charge.
(3) Condition B is that the payment or transfer would give rise to both charges if—
(a) the duties of the employment in respect of which the payment or transfer was made were performed in the United Kingdom, and
(b) the person in respect of whose employment the payment or transfer was made met at all relevant times the conditions as to residence or presence in Great Britain or Northern Ireland prescribed under section 1(6) of the Contributions and Benefits Act.
(4) Condition C is that the payment or transfer is made in connection with the termination of the recipient's employment with the employer.
(5) Condition D is that the payment or transfer is made under an employer-financed retirement benefits schemeand the payment or transfer—
(a) gives rise to an employment income tax charge under Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act, or
(b) is an excluded benefit as defined in section 393B(3) of that Act.
(6) None of the conditions is met if the payment or transfer is by way of loan.
(6A) For the purposes of section 38 qualifying benefits are also provided if—
(a) a relevant step within the meaning of Part 7A of ITEPA 2003 is taken, and
(b) Chapter 2 of that Part applies by reason of the step.
(7) In this section—
“the Contributions and Benefits Act” means—
the Social Security Contributions and Benefits Act 1992 (c. 4), or
the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7),
“employment income tax charge” means a charge to tax under ITEPA 2003 (whether on the recipient or on someone else), and
“NIC charge” means a liability to pay national insurance contributions under section 6 (Class 1 contributions), section 10 (Class 1A contributions) or section 10A (Class 1B contributions) of the Contributions and Benefits Act.
41 Timing and amount of certain qualifying benefits
(1) If the provision of a qualifying benefit takes the form of a payment of money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies to the money, is provided for the purposes of section 38 when the money is treated as received for the purposes of that Chapter (applying the rules in section 18 of that Act (receipt of money earnings)).
(1A) Except so far as subsection (1) applies to the provision of the qualifying benefit, if the provision of a qualifying benefit is a chargeable relevant step, for the purposes of section 38—
(a) the benefit is provided when A's employment with B starts if the chargeable relevant step is taken before then, or
(b) otherwise, the benefit is provided when the chargeable relevant step is taken.
(2) If the provision of a qualifying benefit takes the form of a transfer of an asset which meets condition A, B, C or D in section 40 , the amount provided for the purposes of section 38 is the total of—
(a) the amount (if any) spent on the asset by a scheme manager , ...
(b) in a case where the asset was transferred to a scheme manager by the employer, the amount of the deduction that would be allowable as mentioned in subsection (1) of that section in respect of the transfer, and
(c) if the transfer is a chargeable relevant step, the cost of the relevant step so far as not covered by paragraph (a) or (b).
(3) But if the amount given by subsection (2) is more than the amount that—
(a) is charged to tax under ITEPA 2003 in respect of the transfer, or
(b) would be so charged if condition B in section 40 were met,
the deduction allowable under section 38(2) or (3) is limited to that lower amount.
(4) If the provision of a qualifying benefit is a chargeable relevant step which does not involve a sum of money (see section 554Z(10) of ITEPA 2003) and is not covered by subsection (2), the amount provided for the purposes of section 38 is the cost of the relevant step (subject to subsection (5)).
(5) If the provision of a qualifying benefit is a chargeable relevant step which is not covered by subsection (2) (whether or not it involves a sum of money), the amount provided for the purposes of section 38 is not to exceed the amount that—
(a) is charged to tax under ITEPA 2003 in relation to the relevant step (whether under Part 7A of that Act or otherwise), or
(b) would be charged had not A been non-UK resident in any tax year.
(6) In this section—
(a) “chargeable relevant step” means a relevant step within the meaning of Part 7A of ITEPA 2003 by reason of which Chapter 2 of that Part applies (and references to A and B are to be read accordingly), and
(b) references to the cost of a chargeable relevant step are to be read in accordance with section 554Z3(6) of that Act.
42 Provision or payment out of employee benefit contributions
(1) For the purposes of section 38(2)(a)—
(a) any qualifying benefits provided, or
(b) any qualifying expenses paid,
by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided or paid out of the contributions.
(2) This operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 38(2)(a).
(3) For the purposes of section 38(3)(a) any qualifying benefits provided by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided out of the contributions.
(4) This operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 38(2)(a) or (3)(a).
(5) For the purposes of this section no account is taken of any other amount received or paid by the scheme manager .
43 Profits calculated before end of 9 month period
(1) This section applies if the profits of the trade are calculated before the end of the 9 month period mentioned in section 38(2).
(2) It must be assumed, in making the calculation, that any benefits, expenses or contributions which are not provided, paid or made when the calculation is made will not be provided, paid or made before the end of that period.
(3) But if the benefits, expenses or contributions are subsequently provided, paid or made before the end of that period, nothing in this section prevents the calculation being revised and any tax return being amended accordingly.
(1) In this section and sections 38 to 43—
“accident benefit scheme” means an employee benefit scheme under which benefits may be provided only by reason of a person's disablement, or death, caused by an accident occurring during the person's service as an employee of the employer,
“employee benefit contribution” is to be read in accordance with section 39(1),
“employee benefit scheme” has the meaning given by section 39(2) to (4) ,
“the employer” is to be read in accordance with section 38(1),
“employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see section 393A of that Act), but ignoring section 393B(2)(a) and (c) of that Act
“qualifying benefits” is to be read in accordance with section 40,
“qualifying expenses” includes any expenses of the third party (other than the provision of benefits to employees of the employer)—
which are incurred in operating the employee benefit scheme, and
which, if incurred by the employer, would be deductible in calculating for income tax purposes the employer's profits for any period, and
“scheme manager” means a person who administers an employee benefit scheme (acting in that capacity).
(2) A reference in this section and sections 38 to 43 to a person's employee includes the holder of an office under that person, and “employment” is to be read accordingly.
(1) The general rule is that no deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade.
(2) A deduction for expenses which are incurred—
(a) in paying sums to or on behalf of an employee of the person carrying on the trade (“the trader”), or
(b) in putting sums at the disposal of an employee of the trader,
is prohibited by the general rule if (and only if) the sums are paid, or put at the employee's disposal, exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift.
(3) The general rule is subject to exceptions—
for entertainment (see section 46), and
for gifts (see section 47).
(4) For the purposes of this section and those two sections—
(a) “employee”, in relation to a company, includes a director of the company and a person engaged in the management of the company,
(b) “entertainment” includes hospitality of any kind, and
(c) the expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift.
(1) The prohibition in section 45 on deducting expenses incurred in providing entertainment does not apply in either of cases A and B.
(2) Case A is where—
(a) the entertainment is of a kind which it is the trader's trade to provide, and
(b) the entertainment is provided in the ordinary course of the trade either for payment or free of charge in order to advertise to the public generally.
(3) Case B is where the entertainment is provided for employees of the trader unless—
(a) the entertainment is also provided for others, and
(b) the provision of the entertainment for the employees is incidental to its provision for the others.
(1) The prohibition in section 45 on deducting expenses incurred in providing gifts does not apply in any of cases A, B, C and D.
(2) Case A is where—
(a) the gift is of an item which it is the trader's trade to provide, and
(b) the item is given away in the ordinary course of the trade in order to advertise to the public generally.
(3) Case B is where the gift incorporates a conspicuous advertisement for the trader unless—
(a) the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or
(b) the cost of the gift to the trader, together with any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) given to the same person in the same tax year, exceeds £50.
The Treasury may by order amend the sum for the time being specified in paragraph (b) so as to increase it.
(4) Case C is where gifts are provided for employees of the trader unless—
(a) gifts are also provided for others, and
(b) the provision of the gifts for the employees is incidental to the provision of gifts for the others.
(5) Case D is where the gift is given to—
(a) a charity,
(b) the Historic Buildings and Monuments Commission for England, or
(c) the Trustees of the National Heritage Memorial Fund.
(1) This section applies if, in calculating the profits of a trade, a deduction is allowed for expenses incurred on the hiring of a car which is not—
(a) a car that is first registered before 1 March 2001,
(b) a car that has low CO2 emissions,
(c) a car that is electrically propelled, or
(d) a qualifying hire car.
(2) The amount of the deduction which would otherwise be allowable is reduced by 15%.
(3) Subsection (4) applies if a deduction is reduced as a result of subsection (2), or a corresponding provision, and subsequently—
(a) there is a rebate (however described) of the hire charges, or
(b) a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency arrangement.
(4) The amount that, as a result of the rebate or release—
(a) is brought into account as a receipt of the trade ..., or
(b) is treated as a post-cessation receipt under section 249 (debts released after cessation),
is reduced by 15% .
(4A) In this section “corresponding provision” means—
(a) section 56(2) of CTA 2009 (car ... hire: trade profits and property income), or
(b) section 1251(2) of CTA 2009 (car ... hire: expenses of management), including as applied by section 82(4) of FA 2012. ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) In section 48 “car ...” means a mechanically propelled road vehicle other than ...—
(za) a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),
(a) a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or
(b) a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.
(1A) In section 48—
“a car that has low CO2 emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car);
“electrically propelled” has the meaning given in section 268B of that Act.
(2) In section 48 “a qualifying hire car ...” means a car ... which—
(a) is hired under a hire-purchase agreement ... under which there is no option to purchase,
(b) is hired under a hire-purchase agreement under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1% of the retail price of the car ... when new, or
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) is leased under a long-funding lease (within the meaning of section 70G of CAA 2001).
(3) For this purpose “hire-purchase agreement” has the meaning given by section 998A of ITA 2007.
(6) In this section ... “new” means unused and not second-hand.
(1) Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met.
(2) Condition A is that—
(a) the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and
(b) if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.
(3) Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—
(a) the sub-hire period consists of more than 45 consecutive days, or
(b) if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,
but see subsection (4).
(4) Condition B is not met if—
(a) the customer is an employee of the taxpayer or of a person connected with the taxpayer, or
(b) during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.
(5) Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—
(a) to disapply or reduce the effect of section 48, or
(b) other avoidance of tax.
(6) For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—
(a) the sub-hire period, and
(b) the remainder of the period during which the car is made available to the taxpayer,
according to the respective lengths of those periods.
(7) A period of consecutive days (“the main period”) is linked to—
(a) a period of consecutive days that ends not more than 14 days before the main period begins,
(b) a period of consecutive days that begins not more than 14 days after the main period ends, and
(c) a period of consecutive days linked to a period in paragraph (a) or (b).
(8) For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.
(9) In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.
(1) This section applies where connected persons incur expenses on the hiring of the same car for the same period and—
(a) section 48 would (but for this section) apply to the expenses of two or more of those persons, or
(b) section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons.
(2) This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).
(3) In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following—
(a) where there is one commercial lessee, any such expenses incurred by that lessee, and
(b) where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.
(4) In this section—
(a) references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and
(b) “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length.
(1) In calculating the profits of a trade, no deduction is allowed—
(a) for any tax year for the interest paid on a debt or liability in respect of which relief is given under section 383 of ITA 2007(see subsection (5) below), or
(b) for any relevant tax year for other interest on the same debt or liability.
(2) A tax year is a relevant one if the interest in respect of which the relief is given could, but for the relief, have been brought into account in calculating the profits of a trade of the tax year.
(3) For the purposes of subsection (1)(b) all interest which—
(a) is capable of being brought into account in calculating the profits of a trade, and
(b) is payable by any person on money advanced to the person on current account,
is treated as interest on the same debt.
(4) It does not matter if the money is advanced—
(a) on one or more accounts, or
(b) by the same or separate banks or other persons.
(5) For the purposes of this section relief under section 383 of ITA 2007 is to be treated as given only when the claim for the relief can no longer be varied (whether on appeal or otherwise).
(6) For a rule excluding relief under section 383 of ITA 2007 if interest on a debt or liability is brought into account in calculating the profits of a trade, see section 387(2) and (3) of that Act .
(1) In calculating the profits of a trade, no deduction is allowed for any contribution paid by any person under—
(a) Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4), or
(b) Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7).
(2) But this prohibition does not apply to an employer's contribution.
(3) For this purpose “an employer's contribution” means—
(a) a secondary Class 1 contribution,
(b) a Class 1A contribution, or
(c) a Class 1B contribution,
within the meaning of Part 1 of the Social Security Contributions and Benefits Act 1992 or of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
54 Penalties , interest and VAT surcharges and interest
(1) In calculating the profits of a trade, no deduction is allowed for any penalty or interest mentioned in the first column of the following table.
(2) This is the table—
Penalty or interest | Description of tax, levy or duty
Interest under any provision of Part 9 of TMA 1970 | Income tax, capital gains tax and corporation tax
Interest under section 101 of FA 2009 in connection with sums required to be deducted under section 61 of FA 2004 (construction industry)
Penalty under any of sections 60 to 70 of VATA 1994 | Value added tax
Interest under section 101 of FA 2009 in respect of an amount of value added tax
Penalty under any of sections 8 to 11 of FA 1994 | Excise duties
Penalty under any of paragraphs 12 to 19 of Schedule 7 to FA 1994 | Insurance premium tax
Interest under section 60(8) of FA 1994 or paragraph 21 of Schedule 7 to FA 1994
Penalty under any provision of Part 5 of Schedule 5 to FA 1996 | Landfill tax
Interest under section 56(5) of, or paragraph 26 or 27 of Schedule 5 to, FA 1996
Penalty under any provision of Schedule 6 to FA 2000 | Climate change levy
Interest under any of paragraphs 70, 81 to 85 , 109 and 123(6) of that Schedule
Penalty under any provision of Part 2 of FA 2001 | Aggregates levy
Interest under section 42(6) of, or any of paragraphs 5 to 9 of Schedule 5 to, paragraph 6 of Schedule 8 to and paragraph 5 of Schedule 10 to, FA 2001
Penalty under section 25 or 26 of FA 2003 | Customs duties
Penalty under any provision of Part 4 of FA 2003 | Stamp duty land tax
Interest under any provision of that Part
Penalty under Schedule 24 to FA 2007 | Various taxes and excise duties
Penalty under Schedule 41 to FA 2008 | Various taxes and excise duties
Penalty under Schedule 16 to F(No. 2)A 2017 | Various taxes
(3) In calculating the profits of a trade, no deduction is allowed for any surcharge under section 59 of VATA 1994.
(1) In calculating the profits of a trade, no deduction is allowed for expenses incurred—
(a) in making a payment if the making of the payment constitutes a criminal offence, or
(b) in making a payment outside the United Kingdom if the making of a corresponding payment in any part of the United Kingdom would constitute a criminal offence in that part.
(2) In calculating the profits of a trade, no deduction is allowed for expenses incurred in making a payment induced by a demand which constitutes—
(a) the offence of blackmail under section 21 of the Theft Act 1968 (c. 60) (England and Wales),
(b) the offence of extortion (Scotland), or
(c) the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland).
(1) Section 33A(3) of CAA 2001 provides that no deduction is allowed in respect of certain expenditure on an integral feature of a building or structure (within the meaning of that section).
(2) But section 33A(3) of CAA 2001 does not apply in calculating the profits of a trade on the cash basis.
(1) Where plant or machinery (“the asset”) is leased and a rental rebate is payable by the lessor, the amount of the deduction allowable in respect of the rebate is limited to—
(a) the amount of the lessor's income from the lease, or
(b) in the case of a finance lease, that amount excluding the finance charge.
(2) “Rental rebate” means any sum payable to the lessee that is calculated by reference to the termination value of the asset.
(3) For this purpose—
(a) the termination value of an asset is the value of the asset at or about the time when the lease terminates,
(b) calculation by reference to the termination value includes calculation by reference to any one or more of—
(i) the proceeds of sale, if the asset is sold,
(ii) any insurance proceeds, compensation or similar sums in respect of the asset,
(iii) an estimate of the market value of the asset, and
(c) calculation by reference to the termination value also includes—
(i) determination in a way which, or by reference to factors or criteria which, might reasonably be expected to produce a broadly similar result to calculation by reference to the termination value, or
(ii) any other form of calculation indirectly by reference to the termination value.
(4) For the purposes of this section—
(a) the income of the lessor from the lease is the total of all the amounts receivable in connection with the lease that have been brought into account in calculating the lessor's income for income tax purposes, excluding—
(i) disposal receipts brought into account under Part 2 of CAA 2001 (see section 60(1) of that Act), and
(ii) so much of any amount as represents charges for services or qualifying UK or foreign tax (within the meaning of section 70YE of that Act) to be paid by the lessor, and
(b) the finance charge, in relation to a finance lease, is—
(i) if the lease is one that, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, so much of the rentals under the lease as fall (or would fall) to be treated as interest, or
(ii) in any other case, the amount that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment.
(5) Where the asset is acquired by the lessor in a transaction in relation to which an election is made under section 266 of CAA 2001 (election where predecessor and successor are connected persons), this section applies as if the successor had been the lessor at all material times and everything done to or by the predecessor had been done to or by the successor.
(6) Where the whole or part of a rental rebate is disallowed under this section as a deduction in computing profits—
(a) the amount disallowed, or
(b) if less, the amount by which the rental rebate exceeds the amount of capital expenditure incurred by the lessor,
may be treated for the purposes of capital gains tax as an allowable loss accruing to the lessor on the termination of the lease.
That allowable loss is deductible only from chargeable gains accruing to the lessor on the disposal of the asset.
(7) This section does not apply to a long funding finance lease (see section 148C).
Apart from sections 87 to 90 (scientific research and expenses connected with patents, designs and trade marks) and section 97A (cash basis: value of trading stock on cessation of trade), the provisions of this Chapter apply to professions and vocations as they apply to trades.
(1) The following sections do not apply in calculating the profits of a trade on the cash basis—
sections 60 to 67 (tenants under taxed leases).
...
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) In calculating the profits of a trade on the cash basis, any reference in this Chapter to the incurring of expenses is to be read as a reference to the paying of expenses.
(1) This section applies if a person incurs expenses for the purposes of a trade before (but not more than 7 years before) the date on which the person starts to carry on the trade (“the start date”).
(2) If, in calculating the profits of the trade—
(a) no deduction would otherwise be allowed for the expenses, but
(b) a deduction would be allowed for them if they were incurred on the start date,
the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).
57A Expenses incurred by traders on food and drink
(1) In calculating the profits of a trade, a deduction is allowed for any reasonable expenses incurred on food or drink for consumption by the trader at a place to which the trader travels in the course of carrying on the trade, or while travelling to a place in the course of carrying on the trade, if conditions A and B are met.
(2) Condition A is met if—
(a) a deduction is allowed for the expenses incurred by the trader in travelling to the place, or
(b) where the expenses of travelling to the place are not incurred by the trader, a deduction would be allowed for them if they were.
(3) Condition B is met if—
(a) at the time the expenses are incurred on the food or drink, the trade is by its nature itinerant, or
(b) the trader does not travel to the place more than occasionally in the course of carrying on the trade and either—
(i) the travel in connection with which the expenses are incurred on the food or drink is undertaken otherwise than as part of the trader’s normal pattern of travel in the course of carrying on the trade, or
(ii) the trader does not have such a normal pattern of travel.
(1) In calculating the profits of a trade, a deduction is allowed for incidental costs of obtaining finance by means of—
(a) a loan, or
(b) the issue of loan stock,
if the interest on the loan or stock is deductible in calculating the profits of the trade.
(2) “Incidental costs of obtaining finance” means expenses—
(a) which are incurred on fees, commissions, advertising, printing and other incidental matters, and
(b) which are incurred wholly and exclusively for the purpose of obtaining the finance, providing security for it or repaying it.
(3) Expenses incurred wholly and exclusively for the purpose of—
(a) obtaining finance, or
(b) providing security for it,
are incidental costs of obtaining the finance even if it is not in fact obtained.
(4) But the following are not incidental costs of obtaining finance—
(a) sums paid because of losses resulting from movements in the rate of exchange between different currencies,
(b) sums paid for the purpose of protecting against such losses,
(c) the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
(d) stamp duty.
(5) This section needs to be read with —
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) section 59 (which provides for restrictions in relation to convertible loans and loan stock etc.).
(1) No deduction is allowed under section 58 in respect of a loan or loan stock if—
(a) it carries the right of conversion into, or to the acquisition of, shares or other securities, and
(b) the right is exercisable before the end of the period of 3 years from the date when the loan was obtained or the stock issued (“the 3 year period”).
(2) “Other securities” does not include a loan or loan stock—
(a) the interest on which is deductible in calculating the profits of the person's trade, and
(b) which does not carry such a right as is mentioned in subsection (1).
(3) But the restriction imposed by subsection (1) does not apply if the right is not, or is not wholly, exercised before the end of the 3 year period.
(4) In such a case any incidental costs of obtaining finance incurred before the end of the 3 year period are treated as incurred immediately after the end of it.
(5) If the right is exercised within the 3 year period as to part of the loan or loan stock, only the following incidental costs of obtaining finance are treated as incurred.
(6) The costs are those corresponding to the proportion of the loan or loan stock in respect of which the right is not exercised within that period.
(1) Sections 61 to 67 apply if land used in connection with a trade is subject to a taxed lease.
(2) Section 61 (tenants occupying land for purposes of trade treated as incurring expenses) applies in calculating the profits of a trade carried on by the tenant under the taxed lease for the purpose of making deductions for the expenses of the trade.
(3) But any deduction for an expense under section 61 is subject to the application of any provision of Chapter 4 of this Part.
(4) In this section and sections 61 to 67 the following expressions have the same meaning as in Chapter 4 of Part 3 (profits of property businesses: lease premiums etc.)—
“receipt period” (see section 288(6)),
“taxed lease” (see section 287(4)),
“taxed receipt” (see section 287(4)), and
“unreduced amount” (see section 290(2)).
(5) Section 290(3) and (4) (unreduced amount of taxed receipt under section 277 as a result of section 278) applies for the purposes of sections 61 to 65.
(6) In sections 64 to 67 references to a reduction under section 288 below or section 228 of CTA 2009 by reference to a taxed receipt have the same meaning as in Chapter 4 of Part 3 (see section 290(6)).
(7) In the application of sections 64 to 67 to Scotland—
(a) references to a lease being granted out of a taxed lease are to the grant of a sublease of land subject to the taxed lease, and
(b) references to the lease so granted are to be read as references to the sublease.
61 Tenants occupying land for purposes of trade treated as incurring expenses
(1) The tenant under the taxed lease is treated as incurring an expense of a revenue nature in respect of the land subject to the taxed lease for each qualifying day.
(2) If there is more than one taxed receipt, this section applies separately in relation to each of them.
(3) A day is a “qualifying day”, in relation to a taxed receipt, if it is a day—
(a) that falls within the receipt period of the taxed receipt, and
(b) on which the tenant occupies the whole or part of the land subject to the taxed lease for the purposes of carrying on a trade.
(4) If on the qualifying day the tenant occupies the whole of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula—
A
TRP
A is the unreduced amount of the taxed receipt, and TRP is the number of days in the receipt period of the taxed receipt.
(5) If on the qualifying day the tenant occupies part of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula—
F
×
A
TRP
where—
F is the fraction of the land that is so occupied calculated on a just and reasonable basis, and
A and TRP have the same meaning as in subsection (4).
(5A) No expense is to be determined under this section by reference to the taxed receipt if section 292(4B) or (4C) applies.
(6) This section is subject to section 62 (limit on deductions if tenant entitled to mineral extraction allowance).
62 Limit on deductions if tenant entitled to mineral extraction allowance
(1) This section applies if the tenant under the taxed lease has become entitled, in respect of expenditure on the acquisition of an interest in the land subject to the taxed lease, to an allowance for a tax year under Part 5 of CAA 2001 (mineral extraction allowances) in respect of expenditure falling within section 403 of that Act (qualifying expenditure on acquiring a mineral asset).
(2) If the allowance is in respect of the whole of the expenditure, no deduction is allowed for expenses under section 61 for a qualifying day falling within that or a later tax year.
(3) If the allowance is in respect of only part of the expenditure (“the allowable part”) the amount of the deduction for expenses under section 61 for a qualifying day falling within that or a later tax year is calculated by multiplying the amount that, apart from this section, would be the amount of the deduction for the qualifying day by—
WE
-
AP
WE
where—
WE is the whole of the expenditure, and
AP is the allowable part of the expenditure.
63 Tenants dealing with land as property employed for purposes of trade
(1) This section applies if the tenant under the taxed lease—
(a) does not occupy the land subject to the taxed lease, or a part of it, but
(b) deals with the tenant's interest in the land, or the part of it, as property employed for the purposes of carrying on a trade.
(2) Section 61 applies as if the land or the part of it were occupied by the tenant for the purposes of the trade.
(3) But the tenant is not treated as incurring an expense in respect of the land for a qualifying day as a result of this section so far as the tenant is treated as incurring an expense under section 292 (tenants under taxed leases treated as incurring expenses) in respect of the land for the day in calculating the profits of the tenant's property business.
(4) This section is subject to sections 64 and 65 (restrictions on section 61 expenses where the additional calculation rule is relevant).
64 Restrictions on section 61 expenses: lease premium receipts
(1) This section applies if a lease has been granted out of the taxed lease and—
(a) in calculating the amount of a receipt of a property business under Chapter 4 of Part 3 (profits of property businesses: lease premiums etc) in respect of the lease, there is a reduction under section 288 (the additional calculation rule) by reference to the taxed receipt, or
(b) in calculating the amount of a receipt of a property business under Chapter 4 of Part 4 of CTA 2009 (profits of a property business: lease premiums etc) in respect of the lease, there is a reduction under section 228 of that Act (the additional calculation rule) by reference to the taxed receipt.
In this section and sections 65 and 67 the receipt that is so reduced is referred to as a “lease premium receipt”.
(2) Subsections (3) to (5) provide for the application of section 61 as a result of section 63 for a qualifying day that falls within the receipt period of the lease premium receipt.
(3) The tenant under the taxed lease is treated as incurring an expense under section 61 as a result of section 63 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.
(4) If the condition in subsection (3) is met, the amount of that expense for the qualifying day by reference to the taxed receipt is equal to that excess.
(5) If the qualifying day falls within the receipt period of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.
(6) In this section—
the “daily amount” of the taxed receipt is given by the formula—
A
TRP
where—
A is the unreduced amount of the taxed receipt, and
TRP is the number of days in the receipt period of the taxed receipt, and
the “daily reduction” of a lease premium receipt is given by the formula—
AR
RRP
where—
AR is the reduction under section 288 below or section 228 of CTA 2009 by reference to the taxed receipt, and
RRP is the number of days in the receipt period of the lease premium receipt.
(7) Section 65 explains how this section operates if the lease does not extend to the whole of the premises subject to the taxed lease.
65 Restrictions on section 61 expenses: lease of part of premises
(1) This section applies if—
(a) section 64 applies, and
(b) the lease granted out of the taxed lease does not extend to the whole of the premises subject to the taxed lease.
(2) Subsections (3) to (5) apply for a qualifying day that falls within the receipt period of the lease premium receipt.
(3) Sections 61, 63 and 64 apply separately in relation to the part of the premises subject to the lease and to the remainder of the premises.
(4) If—
(a) more than one lease that does not extend to the whole of the premises subject to the taxed lease has been granted out of the taxed lease, and
(b) the qualifying day falls within the receipt period of two or more lease premium receipts that relate to different leases,
sections 61, 63 and 64 apply separately in relation to each part of the premises subject to a lease to which such a lease premium receipt relates and to the remainder of the premises.
(5) Where sections 61, 63 and 64 apply in relation to a part of the premises, A becomes the amount calculated by multiplying the unreduced amount of the taxed receipt by the fraction of the premises constituted by the part.
(6) This fraction is calculated on a just and reasonable basis.
67 Restrictions on section 61 expenses: corporation tax receipts under ICTA
(1) This section provides for the application of section 61 as a result of section 63 if—
(a) a lease has been granted out of the taxed lease,
(b) in calculating the amount of a corporation tax receipt in respect of the lease, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(c) the amount chargeable on the superior interest is the taxed receipt for the purposes of section 61.
(2) Sections 61 and 63 to 65 apply as follows—
(a) the corporation tax receipt is treated as if it were a lease premium receipt for the purposes of sections 64 and 65,
(b) references in those sections to the reduction under section 288 by reference to the taxed receipt are, in relation to the corporation tax receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
(c) for the purposes of those sections the receipt period of the corporation tax receipt is—
(i) in the case of a corporation tax receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(ii) in the case of a corporation tax receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(3) There is a corporation tax receipt in respect of a lease if—
(a) there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc. as rent and assignments for profit of lease granted at an undervalue) in respect of the lease for an accounting period ending after 5th April 2005 but before 1st April 2009, or
(b) there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
(4) References to a reduction under section 37(2) or (3) of ICTA in a corporation tax receipt by reference to the amount chargeable on the superior interest are to the difference between—
(a) the amount of the corporation tax receipt before the operation of section 37(2) or (3) of ICTA, and
(b) the amount of the corporation tax receipt after the operation of that subsection,
so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.
(1) In calculating the profits of a trade, a deduction is allowed for a payment—
(a) which is treated as earnings of an employee by virtue of section 225 of ITEPA 2003 (payments for restrictive undertakings), and
(b) which is made, or treated as made for the purposes of section 226 of that Act (valuable consideration given for restrictive undertakings), by the person carrying on the trade.
(2) The deduction is allowed for the period of account in which the payment—
(a) is made, or
(b) is treated as made for the purposes of section 226 of ITEPA 2003.
70 Employees seconded to charities and educational establishments
(1) This section applies if a person carrying on a trade (“the employer”) makes the services of a person employed for the purposes of the trade available to—
(a) a charity, or
(b) an educational establishment,
on a basis that is stated and intended to be temporary.
(2) In calculating the profits of the trade, a deduction is allowed for expenses of the employer that are attributable to the employee's employment during the period of the secondment.
(3) In this section—
“educational establishment” means—
in England and Wales, any of the bodies mentioned in section 71(1),
in Scotland, any of the bodies mentioned in section 71(2),
in Northern Ireland, any of the bodies mentioned in section 71(3), and
any other educational body which is for the time being approved for the purposes of this section by the Secretary of State or, in Northern Ireland, the Department of Education, and
“the period of the secondment” means the period for which the employee's services are made available to the charity or educational establishment.
(1) A body in England and Wales is an educational establishment for the purposes of section 70 if it is—
(a) a local authority (but only to the extent that the services of the employee are made available to the authority for the purposes of, or in connection with, the education functions of the authority),
(b) an educational institution maintained or otherwise supported, in the exercise of their education functions, by a local authority,
(c) an independent school within the meaning of the Education Act 1996 (c. 56) registered under section 161 of the Education Act 2002 (c. 32), ...
(ca) an alternative provision Academy that is not an independent school within the meaning of the Education Act 1996,
(d) an institution within the further education sector, or the higher education sector, within the meaning of the Further and Higher Education Act 1992 (c. 13), or
(e) a 16 to 19 Academy.
(2) A body in Scotland is an educational establishment for the purposes of section 70 if it is—
(a) an education authority within the meaning of the Education (Scotland) Act 1980 (c. 44),
(b) an educational establishment within the meaning of the Education (Scotland) Act 1980 managed by an education authority within the meaning of that Act,
(c) a public or grant-aided school within the meaning of the Education (Scotland) Act 1980,
(d) an independent school within the meaning of the Education (Scotland) Act 1980,
(e) a central institution within the meaning of the Education (Scotland) Act 1980,
(f) an institution within the higher education sector within the meaning of section 56(2) of the Further and Higher Education (Scotland) Act 1992 (c. 37), or
(g) a college of further education within the meaning of section 36(1) of the Further and Higher Education (Scotland) Act 1992.
(3) A body in Northern Ireland is an educational establishment for the purposes of section 70 if it is—
(a) an education and library board within the meaning of the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)),
(b) a college of education, a grant-aided school or an independent school within the meaning of the Education and Libraries (Northern Ireland) Order 1986, or
(c) an institution of further education within the meaning of the Further Education (Northern Ireland) Order 1997 (S.I. 1997/1772 (N.I. 15)).
(4) In subsection (1) “local authority” and “education functions” have the same meaning as in the Education Act 1996 (see section 579(1) of that Act).