72 Payroll deduction schemes: contributions to agents' expenses
(1) This section applies if—
(a) a person carrying on a trade (“the employer”) is liable to make payments to an individual,
(b) income tax falls to be deducted from those payments as a result of PAYE regulations, and
(c) the employer withholds sums from those payments in accordance with an approved scheme and pays the sums to an approved agent.
(2) In calculating the profits of the employer's trade, a deduction is allowed for expenses incurred by the employer in making a payment to the agent for expenses which—
(a) have been incurred, or
(b) are to be incurred,
by the agent in connection with the agent's functions under the scheme.
(2A) In calculating the profits of the employer's trade on the cash basis, subsection (2) has effect as if paragraph (b) were omitted.
(3) In this section “approved agent” and “approved scheme” have the same meaning as in section 714 of ITEPA 2003.
(1) In calculating the profits of a trade, a deduction is allowed for counselling expenses if—
(a) the person carrying on the trade (“the employer”) incurs the expenses,
(b) the expenses are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
(c) the relevant conditions are met.
(2) In this section “counselling expenses” means expenses incurred—
(a) in the provision of services to the employee in connection with the cessation of the office or employment,
(b) in the payment or reimbursement of fees for such provision, or
(c) in the payment or reimbursement of travelling expenses in connection with such provision.
(3) In this section “the relevant conditions” means—
(a) conditions A to D for the purposes of section 310 of ITEPA 2003 (employment income exemptions: counselling and other outplacement services), and
(b) in the case of travel expenses, condition E for those purposes.
(1) In calculating the profits of a trade, a deduction is allowed for retraining course expenses if—
(a) the person carrying on the trade (“the employer”) incurs the expenses,
(b) they are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
(c) the relevant conditions are met.
(2) In this section—
“retraining course expenses” means expenses incurred in the payment or reimbursement of retraining course expenses within the meaning given by section 311(2) of ITEPA 2003, and
“the relevant conditions” means—
the conditions in subsections (3) and (4) of section 311 of ITEPA 2003 (employment income exemptions: retraining courses), and
in the case of travel expenses, the conditions in subsection (5) of that section.
(1) This section applies if—
(a) an employer's liability to tax for a tax year is determined on the assumption that a deduction for expenditure is allowed under section 74, and
(b) the deduction would not otherwise have been allowed.
(2) If, subsequently—
(a) the condition in section 311(4)(a) of ITEPA 2003 is not met because of the employee's failure to begin the course within the period of one year after ceasing to be employed, or
(b) the condition in section 311(4)(b) of ITEPA 2003 is not met because of the employee's continued employment or re-employment,
an assessment of an amount or further amount of tax due as a result of the condition not being met may be made under section 29(1) of TMA 1970.
(3) Such an assessment must be made before the end of the period of 6 years immediately following the end of the tax year in which the failure to meet the condition occurred.
(4) If subsection (2) applies, the employer must give an officer of Revenue and Customs a notice containing particulars of—
(a) the employee's failure to begin the course,
(b) the employee's continued employment, or
(c) the employee's re-employment,
within 60 days of coming to know of it.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided.
76 Redundancy payments and approved contractual payments
(1) Sections 77 to 79 apply if—
(a) a person (“the employer”) makes a redundancy payment or an approved contractual payment to another person (“the employee”), and
(b) the payment is in respect of the employee's employment wholly in the employer's trade or partly in the employer's trade and partly in one or more other capacities.
(2) For the purposes of this section and sections 77 to 80 “redundancy payment” means a redundancy payment payable under—
(a) Part 11 of the Employment Rights Act 1996 (c. 18), or
(b) Part 12 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
(3) For the purposes of this section and those sections—
“contractual payment” means a payment which, under an agreement, an employer is liable to make to an employee on the termination of the employee's contract of employment, and
a contractual payment is “approved” if, in respect of that agreement, an order is in force under—
section 157 of the Employment Rights Act 1996, or
Article 192 of the Employment Rights (Northern Ireland) Order 1996.
77 Payments in respect of employment wholly in employer's trade
(1) This section applies if—
(a) the payment is in respect of the employee's employment wholly in the employer's trade, and
(b) no deduction would otherwise be allowable for the payment.
(2) In calculating the profits of the trade, a deduction is allowed under this section for the payment.
(3) The deduction under this section for an approved contractual payment must not exceed the amount which would have been due to the employee if a redundancy payment had been payable.
(4) If the payment is made after the employer has permanently ceased to carry on the trade, it is treated as made on the last day on which the employer carried on the trade.
(5) If there is a change in the persons carrying on the trade, subsection (4) does not apply so long as a person carrying on the trade immediately before the change continues to carry it on after the change.
(6) The deduction under this section is allowed for the period of account in which the payment is made (or treated under subsection (4) as made).
78 Payments in respect of employment in more than one capacity
(1) This section applies if the payment is in respect of the employee's employment with the employer—
(a) partly in the employer's trade, and
(b) partly in one or more other capacities.
(2) The amount of the redundancy payment, or the amount which would have been due if a redundancy payment had been payable, is to be apportioned on a just and reasonable basis between—
(a) the employment in the trade, and
(b) the employment in the other capacities.
(3) The part of the payment apportioned to the employment in the trade is treated as a payment in respect of the employee's employment wholly in the trade for the purposes of section 77.
(1) This section applies if the employer permanently ceases to carry on a trade or part of a trade and makes a payment to the employee in addition to—
(a) the redundancy payment, or
(b) if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) If, in calculating the profits of the trade—
(a) no deduction would otherwise be allowable for the additional payment, but
(b) a deduction would be allowable for it if the employer had not permanently ceased to carry on the trade or the part of the trade,
a deduction is allowed under this section for the additional payment.
(4) The deduction under this section is limited to 3 times the amount of—
(a) the redundancy payment, or
(b) if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
(5) If the payment is made after the employer has permanently ceased to carry on the trade or the part of the trade, it is treated as made on the last day on which the employer carried on the trade or the part of the trade.
(6) The deduction under this section is allowed for the period of account in which the payment is made (or treated under subsection (5) as made).
79A Additional payments: change in the persons carrying on the trade
(1) This section deals with the application of section 79 in circumstances where there is a change in the persons carrying on the trade.
(2) The employer is treated for the purposes of section 79 as permanently ceasing to carry on the trade unless a person carrying on the trade immediately before the change continues to carry it on after the change.
(1) This section applies if, in respect of a redundancy payment or an approved contractual payment payable by an employer—
(a) the Secretary of State makes a payment under section 167 of the Employment Rights Act 1996 (c. 18), or
(b) the Department for Employment and Learning makes a payment under Article 202 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
(2) So far as the employer reimburses the Secretary of State or Department for the payment, sections 77 to 79A apply as if the payment were—
(a) a redundancy payment, or
(b) an approved contractual payment,
made by the employer.
(1) This section applies if—
(a) an individual (“the trader”) carries on a trade (alone or in a partnership of individuals),
(b) there is a special threat to the personal physical security of the trader which arises wholly or mainly because of the particular trade,
(c) a service or asset which improves personal security is used by or provided for the trader to meet the threat,
(d) the person incurring expenses in connection with that use or provision does so with the sole object of meeting the threat, and
(e) a deduction for the expenses would not otherwise be allowable in calculating the profits of the trade because (and only because) they were not incurred wholly and exclusively for the purposes of the trade.
(2) In calculating the profits of the trade, a deduction is allowed for the expenses—
(a) in the case of a service, if the benefit resulting to the trader consists wholly or mainly of an improvement of the trader's personal physical security, and
(b) in the case of an asset, if the person incurring the expenses intends the asset to be used to improve personal physical security (whether solely or partly).
(3) If the person incurring the expenses intends the asset to be used solely to improve personal physical security, any use of the asset which is incidental to improving personal physical security is ignored.
(4) If the person incurring the expenses intends the asset to be used partly to improve personal physical security, a deduction is allowed only for the proportion of the expenses which is attributable to the intended use to improve personal physical security.
(5) The fact that a service or asset improves the personal physical security of a member of the trader's family or household (as well as that of the trader) does not prevent a deduction from being allowed.
(6) In determining whether or not this section applies in relation to an asset, it does not matter if—
(a) the asset becomes fixed to land, or
(b) the trader is or becomes entitled to the property in the asset or (if the asset is a fixture) to any estate or interest in the land concerned.
(7) In this section—
“asset” includes equipment and a structure (such as a wall), but does not include a car, ship or aircraft or a dwelling or grounds appurtenant to a dwelling, and
“service” does not include a dwelling or grounds appurtenant to a dwelling.
82 Contributions to local enterprise organisations or urban regeneration companies
(1) This section applies if a person carrying on a trade (“the contributor”) incurs expenses in making a contribution (whether in cash or in kind)—
(a) to a local enterprise organisation (see section 83), or
(b) to an urban regeneration company (see section 86),
and a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
(2) In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
(3) But if, in connection with the making of the contribution, the contributor or a connected person—
(a) receives a disqualifying benefit of any kind, or
(b) is entitled to receive such a benefit,
the amount of the deduction is restricted to the amount of the expenses less the value of the benefit.
(4) For this purpose it does not matter whether a person receives, or is entitled to receive, the benefit —
(a) from the organisation or company concerned, or
(b) from anyone else.
(5) Subsection (6) applies if—
(a) a deduction has been made under this section, and
(b) the contributor or a connected person receives a disqualifying benefit that is in any way attributable to the contribution.
(6) An amount equal to the value of the benefit (so far as not brought into account in determining the amount of the deduction)—
(a) is brought into account in calculating the profits of the trade, as a receipt arising on the date on which the benefit is received, or
(b) if the contributor has permanently ceased to carry on the trade before that date, is treated as a post-cessation receipt (see Chapter 18).
(7) In this section “disqualifying benefit” means a benefit the expenses of obtaining which, if incurred by the contributor directly in a transaction at arm's length, would not be allowable as a deduction in calculating the profits of the trade.
(1) For the purposes of section 82 “local enterprise organisation” means—
(a) a local enterprise agency,
(b) a training and enterprise council,
(c) a Scottish local enterprise company, or
(d) a business link organisation.
(2) “Local enterprise agency” means a body for the time being approved as a local enterprise agency for the purposes of section 82 by the relevant national authority, that is to say by—
(a) the Secretary of State (in relation to England or Northern Ireland),
(b) the Scottish Ministers (in relation to Scotland), or
(c) the National Assembly for Wales (in relation to Wales).
For further provision about approvals by the relevant national authority, see sections 84 and 85.
(3) “Training and enterprise council” means a body with which the Secretary of State has an agreement under which the body is to carry out the functions of a training and enterprise council.
(4) “Scottish local enterprise company” means a company with which—
(a) Scottish Enterprise, or
(b) Highlands and Islands Enterprise,
has an agreement under which the company is to carry out the functions of a local enterprise company.
(5) “Business link organisation” means a person authorised by or on behalf of the Secretary of State to use a trade mark designated by the Secretary of State for the purposes of this subsection.
(1) The relevant national authority may approve a body as a local enterprise agency for the purposes of section 82 only if conditions A and B are met.
(2) But if those conditions are met, the body may be approved—
(a) whatever its status or structure, and
(b) even if it is not described as a local enterprise agency.
(3) Condition A is that the relevant national authority is satisfied—
(a) that the body's sole aim is the promotion or encouragement of local enterprise, or
(b) that one of the body's main aims is the promotion or encouragement of local enterprise and that it has or is about to have a separate fund for the sole purpose of pursuing that aim.
(4) For this purpose “local enterprise” means industrial and commercial activity or enterprise in a particular area in the United Kingdom, with particular reference to encouraging the formation and development of small businesses.
(5) Condition B is that the body is precluded from paying or transferring any of its income or profit directly or indirectly—
(a) to any of its members, or
(b) to any person charged with the control and direction of its affairs.
(6) The payment of—
(a) reasonable remuneration for goods, labour or power supplied or for services provided,
(b) reasonable interest on money lent, or
(c) reasonable rent for premises,
does not count as a payment or transfer of income or profit for the purposes of subsection (5).
85 Supplementary provisions with respect to approvals
(1) This section applies for the purposes of section 84.
(2) The relevant national authority may give a body approval that is conditional on its compliance with such requirements as to—
(a) accounts,
(b) provision of information, and
(c) other matters,
as the relevant national authority considers appropriate
(3) If the relevant national authority approves a body on the basis that it has or is about to have a separate fund (see section 84(3)(b))—
(a) the approval must specify the fund, and
(b) section 82 applies only to a contribution to the body made wholly to or for the purposes of the fund.
(4) The relevant national authority must withdraw the approval of a body as a local enterprise agency if—
(a) condition A or B in section 84 is no longer met, or
(b) the body is failing to comply with a requirement imposed as a condition of its approval.
(5) The relevant national authority must give notice of withdrawal to the body concerned, specifying the date from which the withdrawal takes effect (which may be earlier than the date on which the notice is given).
(1) For the purposes of section 82 “urban regeneration company” means any body of persons which the Treasury by order designates as an urban regeneration company for the purposes of that section.
(2) A body may be so designated only if—
(a) its sole or main function is to co-ordinate the regeneration of a specific urban area in the United Kingdom,
(b) it is expected to seek to perform that function by creating a plan for the development of that area and trying to secure that the plan is carried into effect, and
(c) in co-ordinating the regeneration of that area, it is expected to work together with some or all local or other public authorities which exercise functions in relation to the whole or part of that area.
(3) An order under this section may be framed so as to take effect on a date earlier than the making of the order, but not earlier than three months before the date on which the order is made.
86A Contributions to flood and coastal erosion risk management projects
(1) This section applies if—
(a) a person carrying on a trade (“the contributor”) incurs expenses in making a qualifying contribution to a qualifying flood or coastal erosion risk management project, and
(b) a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
(2) In determining whether the condition in subsection (1)(b) is satisfied, a deduction giving effect to a capital allowance is to be disregarded.
(3) In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
(4) But if, in connection with the making of the contribution, the contributor or a connected person—
(a) receives a disqualifying benefit, or
(b) is entitled to receive such a benefit,
no deduction is allowed.
(5) For the purposes of subsection (4) it does not matter whether a person receives, or is entitled to receive, the benefit—
(a) from the carrying out of the project, or
(b) from any person.
(6) Subsection (7) applies if—
(a) a deduction has been made under this section in relation to the contribution, and
(b) the contributor or a connected person receives—
(i) a refund of any part of the contribution, if the contribution is a sum of money, or
(ii) compensation for any part of the contribution, if the contribution is the provision of services,
in money or money's worth.
(7) The amount of, or an amount equal to the value of, the refund or compensation (so far as not otherwise brought into account in calculating the profits of the trade or treated as a post-cessation receipt)—
(a) is brought into account in calculating the profits of the trade, as a receipt arising on the date on which the refund or compensation is received, or
(b) if the contributor has permanently ceased to carry on the trade before that date, is treated as a post-cessation receipt (see Chapter 18).
(8) In this section “disqualifying benefit” means a benefit consisting of money or other property, but it does not include—
(a) a refund of the contribution, if the contribution is a sum of money;
(b) compensation for the contribution, if the contribution is the provision of services;
(c) a structure that—
(i) is or is to be used for the purposes of flood or coastal erosion risk management, and
(ii) is put in place in carrying out the project;
(d) an addition to a structure where—
(i) the structure is or is to be used for the purposes of flood or coastal erosion risk management, and
(ii) the addition is made in carrying out the project;
(e) land, plant or machinery that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management;
(f) a right over land that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management.
(9) In subsection (8) “structure” includes road, path, pipe, earthwork, plant and machinery.
(1) This section applies for the purposes of section 86A.
(2) A flood or coastal erosion risk management project is a qualifying project if—
(a) an English risk management authority has applied to the Environment Agency for a grant under section 16 of the Flood and Water Management Act 2010 in order to fund the project, or
(b) the Environment Agency has determined that it will carry out the project,
and the Environment Agency has allocated funding by way of grant-in-aid to the project.
(3) A contribution to a flood or coastal erosion risk management project is a qualifying contribution if the contribution is made—
(a) for the purposes of the project, and
(b) under an agreement between—
(i) the person making the contribution, and
(ii) the applicant authority or (as the case may be) the Environment Agency,
or between those two persons and other persons.
(4) References to a flood risk management project or a coastal erosion risk management project are to be interpreted in accordance with sections 1 to 3 of the Flood and Water Management Act 2010.
(5) In section 86A and this section—
“contribution”, in relation to a period of account, means—
a sum of money paid in that period of account, or
any services provided in that period of account;
“English risk management authority” has the meaning given by section 6(14) of the Flood and Water Management Act 2010.
(1) If a person carrying on a trade incurs expenses of a revenue nature on research and development—
(a) related to the trade, and
(b) directly undertaken by or on behalf of the person,
a deduction is allowed for the expenses in calculating the profits of the trade.
(2) For this purpose expenses incurred on research and development—
(a) do not include expenses incurred in the acquisition of rights in, or arising out of, research and development, but
(b) subject to that, include all expenses incurred in carrying out, or providing facilities for carrying out, research and development.
(3) The reference in this section to research and development related to a trade includes—
(a) research and development which may lead to or facilitate an extension of the trade, and
(b) research and development of a medical nature which has a special relation to the welfare of workers employed in the trade.
(4) The same expenses may not be brought into account under this section in relation to more than one trade.
(5) In this section “research and development” has the meaning given by section 1006 of ITA 2007 and includes oil and gas exploration and appraisal.
(6) This section does not apply to professions or vocations.
88 Payments to research associations, universities etc.
(1) If a person carrying on a trade—
(a) pays any sum to an Association in the case of which exemption may be claimed under section 508 of ICTA and which has as its object the undertaking of research and development which may lead to or facilitate an extension of the class of trade to which the trade carried on by the person belongs, or
(b) pays any sum to be used for scientific research related to that class of trade to an approved university, college research institute or other similar institution,
a deduction is allowed for the sum in calculating the profits of the trade.
(2) The deduction is allowed for the period of account in which the payment is made.
(3) “Scientific research” means any activities in the fields of natural or applied science for the extension of knowledge.
(4) For the purposes of this section—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) a university, college research institute or other similar institution,
is approved if it is for the time being approved for the purposes of this section by the Secretary of State.
(5) The reference in subsection (1)(b) to scientific research related to a class of trade include—
(a) scientific research which may lead to or facilitate an extension of trades of the class, and
(b) scientific research of a medical nature which has a special relation to the welfare of workers employed in trades of the class.
(6) If a question arises as to—
(a) whether, or
(b) to what extent,
any activities constitute or constituted scientific research, the Inland Revenue must refer the question for decision to the Secretary of State, whose decision is final.
(7) The same expenses may not be brought into account under this section in relation to more than one trade.
(8) This section does not apply to professions or vocations.
(1) In calculating the profits of a trade, a deduction is allowed for expenses incurred—
(a) in obtaining for the purposes of the trade the grant of a patent or the extension of a patent's term, or
(b) in connection with a rejected or abandoned application for a patent made for the purposes of the trade.
(2) This section does not apply to professions or vocations.
(1) In calculating the profits of a trade, a deduction is allowed for expenses incurred in obtaining for the purposes of the trade—
(a) the registration of a design or trade mark,
(b) the extension of a period for which the right in a registered design subsists, or
(c) the renewal of registration of a trade mark.
(2) This section does not apply to professions or vocations.
91 Payments to Export Credits Guarantee Department
In calculating the profits of a trade, a deduction is allowed for a sum payable by the person carrying on the trade to the Export Credits Guarantee Department—
(a) under an agreement entered into as a result of arrangements made under section 2 of the Export and Investment Guarantees Act 1991 (c. 67) (insurance in connection with overseas investment), or
(b) with a view to entering into such an agreement.
(1) This section applies if—
(a) an individual (“the trader”) carries on a foreign trade (alone or in partnership),
(b) the trader is absent from the United Kingdom wholly and exclusively for the purpose of carrying on the foreign trade or the foreign trade and one or more other trades (whether or not foreign trades),
(c) qualifying expenses are incurred in connection with the foreign trade, and
(d) a deduction for the expenses would not otherwise be allowable in calculating the profits of the foreign trade because (and only because) they were not incurred wholly and exclusively for the purposes of the foreign trade.
(2) In calculating any profits of the foreign trade which are not charged in accordance with section 832 (relevant foreign income charged on the remittance basis), a deduction is allowed for the expenses.
(3) Any of the following expenses are qualifying expenses incurred in connection with the foreign trade—
(a) expenses incurred by the trader in travelling between a place in the United Kingdom and a place where the foreign trade is carried on,
(b) expenses incurred by the trader on board and lodging at a place where the foreign trade is carried on,
(c) if the trader's absence from the United Kingdom is for a continuous period of 60 days or more, family expenses (as defined in section 94), and
(d) if the trader also carries on another trade outside the United Kingdom (whether or not a foreign trade), expenses incurred by the trader in travelling between a place where the foreign trade is carried on and a place outside the United Kingdom where the other trade is carried on.
(4) In this section and section 93 “foreign trade” means a trade carried on wholly outside the United Kingdom.
(1) Expenses within section 92(3)(a), (b) or (c) are allocated to the foreign trade.
(2) If—
(a) the expenses are within section 92(3)(a) or (b), and
(b) the trader carries on more than one foreign trade at the place in question outside the United Kingdom,
those expenses are allocated between the foreign trades on a just and reasonable basis.
(3) If—
(a) the expenses are within section 92(3)(c), and
(b) the trader's absence is for the purpose of carrying on more than one foreign trade,
those expenses are allocated between the foreign trades on a just and reasonable basis.
(4) Expenses within section 92(3)(d) are allocated—
(a) to the trade carried on at the trader's place of destination, if that trade is a foreign trade, and
(b) in any other case, to the foreign trade carried on at the trader's place of departure.
(5) If the trader carries on more than one foreign trade at—
(a) the place of destination (in a case falling within subsection (4)(a)), or
(b) the place of departure (in a case falling within subsection (4)(b)),
the expenses are allocated between the foreign trades on a just and reasonable basis.
(1) In section 92(3)(c) “family expenses” means expenses of a journey made by the trader's spouse or civil partner or child if the journey—
(a) is between a place in the United Kingdom and a place outside the United Kingdom where any of the trades is carried on, and
(b) is made in order to accompany the trader at the beginning of the period of absence or to visit the trader during that period or to return after a journey made for either purpose.
(2) But no more than two outward and two return journeys made by the same person in a tax year fall within subsection (1).
(3) In this section “child” includes a stepchild but does not include a person who is aged 18 or over at the start of the outward journey.
94A Costs of setting up SAYE option scheme or CSOP scheme
(1) This section applies if—
(a) a company incurs expenses in setting up a scheme within subsection (2) ... and
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) The schemes within this subsection are—
(a) Schedule 3 SAYE option schemes within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), and
(b) Schedule 4 CSOP schemes within the meaning of the CSOP code (see section 521(4) of ITEPA 2003).
...
(3) A deduction for the expenses is to be made in calculating the profits of a trade carried on by the company.
(4) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred, for the purposes of subsection (3) the deduction is to be made for the period of account in which the relevant date falls .
(4A) In subsection (4) “the relevant date”—
(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and
(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.
(5) But subsection (4) does not apply in calculating the profits of a trade on the cash basis.
(1) This section applies in relation to a limited liability partnership if section 863A(2) (limited liability partnerships: salaried members) applies in the case of a member of the partnership (“M”).
(2) In calculating for a period of account under section 849 (calculation of firm's profits and losses) the profits of a trade carried on by the limited liability partnership, a deduction is allowed for expenses paid by the partnership in respect of M's employment under section 863A(2) if no deduction would otherwise be allowed for the payment.
(3) This section is subject to section 33 (capital expenditure), section 34 (expenses not wholly and exclusively for trade etc), section 45 (business entertainment and gifts) and section 53 (social security contributions).
The provisions of this Chapter do not apply in calculating the profits of a trade carried on by a firm for a period if one or more of the persons who have been partners in the firm at any time during the period was not an individual at that time.
(1) This section applies if, in calculating the profits of a trade of a person for a period—
(a) a deduction would otherwise be allowable for the period in respect of qualifying expenditure incurred in relation to a relevant vehicle (see subsection (2)), or
(b) a deduction would be so allowable in respect of such expenditure but for the fact it is capital expenditure.
(2) In this section “relevant vehicle” means a car, motor cycle or goods vehicle that—
(a) is used for the purposes of the trade, and
(b) is not an excluded vehicle (see section 94E).
(3) The person may make a deduction under this section for the period in respect of the qualifying expenditure.
(4) If a deduction for a period is made under this section—
(a) no other deduction is allowed (for that or any other period) in respect of the qualifying expenditure, and
(b) this section applies in relation to the relevant vehicle for every subsequent period for which the vehicle is used for the purposes of the trade.
(5) The amount of the deduction is the appropriate mileage amount in relation to the relevant vehicle for the period (see section 94F).
(6) In this section “qualifying expenditure”, in relation to a vehicle, means any expenditure incurred in respect of the acquisition, ownership, hire, leasing or use of the vehicle, other than incidental expenses incurred in connection with a particular journey.
(7) For provision preventing capital allowances from being claimed in respect of qualifying expenditure incurred in relation to a relevant vehicle, see section 38ZA of CAA 2001.
(1) A car, motor cycle or goods vehicle that is used for the purposes of a trade is an “excluded vehicle” for the purposes of section 94D if condition A or B is met in relation to the vehicle.
(2) Condition A is that the person who is or has been carrying on the trade has at any time claimed any capital allowances under Part 2 of CAA 2001 in respect of any expenditure incurred on the provision of the vehicle.
(3) Condition B is that—
(a) the vehicle is a goods vehicle or a motor cycle, and
(b) any of the expenditure incurred on acquiring the vehicle has been deducted in calculating the profits of any relevant trade or business for a period on the cash basis (see sections 24A and 271D).
(4) In this section “any relevant trade or business” means any trade or property business carried on by the person carrying on the trade mentioned in subsection (1).
(1) In calculating the profits of a trade for a period, the appropriate mileage amount in relation to a relevant vehicle for the period is—
M × R
where—
M is the number of miles of business journeys made by a person (other than as a passenger) using that vehicle in the period, and
R is the rate applicable to that kind of vehicle.
(2) The rates applicable are as follows—
Table
Kind of vehicle | Rate per mile
Car or goods vehicle | 55p for the first 10,000 miles
25p after that
Motor cycle | 24p
(3) In a case where the total number of miles of relevant business journeys made in the period is greater than 10,000, the rate of 55p per mile is available only in relation to 10,000 of those miles.
(4) “Relevant business journey” means any business journey made in the period by a car or goods vehicle—
(a) that is used for the purposes of the trade, and
(b) in relation to which section 94D applies for the period.
(5) In this section—
“business journey”, in relation to a vehicle used for the purposes of a trade, means any journey, or any identifiable part or proportion of a journey, that is made wholly and exclusively for the purposes of the trade, and
“relevant vehicle” has the same meaning as in section 94D.
(6) The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.
Regulations under this subsection may also make consequential amendments to subsection (3).
(1) This section applies for the purposes of sections 94D to 94F (and this section).
(2) “Car” means a mechanically propelled road vehicle which is not—
(a) a goods vehicle,
(b) a motor cycle,
(c) an invalid carriage, or
(d) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
(3) “Goods vehicle” means a mechanically propelled road vehicle which—
(a) is of a construction primarily suited for the conveyance of goods or burden of any description, and
(b) is not a motor cycle.
(4) “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.
(5) For the purposes of this section “invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988.
(1) This section applies if, in calculating the profits of a trade of a person for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of—
(a) the use of the person's home for the purposes of the trade, or
(b) where the person is a firm, the use of a partner's home for those purposes.
(2) The person may, instead of making the standard deduction, make a deduction for the period under this section.
(3) The amount of the deduction allowable for the period is the sum of the applicable amounts for each month, or part of a month, falling within the period.
(4) The applicable amount for a month, or part of a month, is given by the following Table—
Table
Number of hours worked | Applicable amount
25 or more | £10.00
51 or more | £18.00
101 or more | £26.00
where the “number of hours worked” in a month (or part of a month) is the number of hours spent wholly and exclusively on qualifying work.
(4A) Qualifying work” means—
(a) work done by the person, or any employee of the person, in the person's home wholly and exclusively for the purposes of the trade, or
(b) where the person is a firm, work done by a partner, or any employee of the firm, in the partner's home wholly and exclusively for those purposes.
(4B) Where more than one person does qualifying work in the same home at the same time, any hour spent wholly and exclusively on that work is to be taken into account only once for the purposes of subsection (4).
(5) If the person, or, where the person is a firm, a partner of the firm, has more than one home, this section has effect as if those homes were a single home.
(5A) Where a firm makes a deduction for a period under this section in respect of the use of a partner's home for the purposes of a trade, the only deduction which the firm may make for the period in respect of the use of any other partner's home for those purposes is a deduction under this section.
(6) The Treasury may by regulations amend subsection (4) so as to alter the rates or rate bands.
94I Premises used both as a home and as business premises
(1) This section applies if—
(a) a person carries on a trade at any premises,
(b) the premises are used mainly for the purposes of carrying on the trade, but are also used as a home by—
(i) the person carrying on the trade, or
(ii) where that person is a firm, a partner of the firm,
(c) the person incurs expenses in relation to the premises,
(d) the expenses are incurred mainly (but not wholly and exclusively) for the purposes of the trade, and
(e) in calculating the profits of the trade for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of a part or proportion of the expenses in accordance with section 34(2).
(2) The person may, instead of making the standard deduction, make a deduction for the period under this section.
(3) The amount of the deduction allowable for the period is the amount of the expenses less the non-business use amount.
(4) The non-business use amount is the sum of the applicable amounts for each month, or part of a month, falling within the period.
(5) The applicable amount for a month, or part of a month, is given by the following Table—
Table
Number of relevant occupants | Applicable amount
1 | £350
2 | £500
3 or more | £650
(6) For the purposes of subsection (5) “relevant occupant”, in relation to a month (or part of a month), means an individual who, at any time during that month (or that part of a month)—
(a) occupies the premises as a home, or
(b) stays at the premises otherwise than in the course of the trade.
(6A) Where a person makes a deduction for a period under this section in respect of expenses incurred in relation to premises falling within subsection (1)(b), the only deduction which the person may make for the period in respect of expenses incurred in relation to any other premises falling within subsection (1)(b) is a deduction under this section.
(7) The Treasury may by regulations amend subsection (5) so as to alter the rates or rate bands.
(1) For rules about receipts that apply only for the purpose of calculating profits on the cash basis, see the following—
...
section 97A (cash basis: value of trading stock on cessation of trade),
section 97B (cash basis: value of work in progress on cessation of profession or vocation).
(2) Section 96A makes provision about capital receipts in certain cases where the profits of a trade are calculated on the cash basis or have previously been calculated on the cash basis (and see also section 96B).
(1) Items of a capital nature must not be brought into account as receipts in calculating the profits of a trade.
(2) But this does not apply to items which, as a result of any provision of this Part, are brought into account as receipts in calculating the profits of the trade.
96A Capital receipts under, or after leaving, cash basis
(1) This section applies in relation to a trade carried on by a person in two cases—
(a) Case 1 (see subsections (2) to (3A)), and
(b) Case 2 (see subsections (3B) to (3E)).
(2) Case 1 is a case in which conditions A and B are met.
(3) Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset at a time when the cash basis applies in relation to the trade.
For the meaning of “disposal proceeds” and “capital refund” see subsections (3F) and (3G).
(3A) Condition B is that—
(a) an amount of capital expenditure (see subsection (3H)) relating to the asset has been brought into account in calculating the profits of the trade on the cash basis, or
(b) an amount of capital expenditure relating to the asset which—
(i) has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and
(ii) is cash basis deductible in relation to that tax year (see section 96B(4)),
has been brought into account in calculating the profits of the trade for a tax year in which the cash basis did not apply in relation to the trade.
(3B) Case 2 is a case in which—
(a) condition C is met, and
(b) condition D or E is met.
(3C) Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset at a time—
(a) when the cash basis does not apply in relation to the trade, and
(b) which is after a time when the cash basis did apply in relation to the trade.
(3D) Condition D is that an amount of capital expenditure relating to the asset—
(a) has been paid at a time when the cash basis applied in relation to the trade,
(b) has been brought into account in calculating the profits of the trade on the cash basis, and
(c) on the assumption that the cash basis had not applied at the time the expenditure was paid, would not have been qualifying expenditure.
(3E) Condition E is that an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the trade for a tax year—
(a) in which the cash basis did not apply in relation to the trade, and
(b) which is before the tax year for which the person last entered the cash basis.
The reference in this subsection to expenditure brought into account does not include a reference to expenditure brought into account under CAA 2001 (see section 96B(5)) except to the extent that it is expenditure in respect of which a capital allowance is made under Part 2A of that Act.
(3F) “Disposal proceeds” means—
(a) any proceeds arising from the disposal of an asset or any part of it,
(b) any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or
(c) any amount of damages, proceeds of insurance or other compensation received in respect of the asset.
See also subsections (4) and (5) for circumstances in which a person is to be regarded as disposing of an asset.
(3G) “Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.
(3H) “Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—
(a) the provision, alteration or disposal of an asset, or
(b) the potential provision, alteration or disposal of an asset.
(3I) The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the trade.
(3J) In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the trade (whether or not on the cash basis), the amount brought into account under subsection (3I) is proportionately reduced.
The reference in this subsection to expenditure brought into account includes a reference to expenditure brought into account under CAA 2001 (see section 96B(5)).
(3K) Subsection (3I) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—
(a) has already been brought into account as a receipt in calculating the profits of the trade under this section,
(b) is brought into account as a receipt in calculating the profits of the trade under any other provision of this Part (except section 240D(3) (assets not fully paid for)), or
(c) is brought into account under any Part of CAA 2001 as a disposal value.
(3L) If part of the amount which would otherwise be brought into account under subsection (3I) has already been or is brought into account as mentioned in subsection (3K), subsection (3I) applies in relation to the remainder of that amount.
(4) If—
(a) at any time the person ceases to use the asset or any part of it for the purposes of the trade, but
(b) the person does not dispose of the asset (or that part) at that time,
the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the market value amount.
(5) If at any time there is a material increase in the person's non-business use of the asset or any part of it, the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the relevant proportion of the market value amount.
(6) For the purposes of subsection (5)—
(a) there is an increase in a person's non-business use of an asset (or part of an asset) if—
(i) the proportion of the person's use of the asset (or that part) that is for the purposes of the trade decreases, and
(ii) the proportion of the person's use of the asset (or that part) that is for other purposes (the “non-business use”) increases;
(b) “the relevant proportion” is the difference between—
(i) the proportion of the person's use of the asset (or part of the asset) that is non-business use, and
(ii) the proportion of the person's use of the asset (or that part) that was non-business use before the increase mentioned in subsection (5).
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .