746 Deductions and reliefs where individual charged under section 720 or 727
(1) This section applies for the purpose of calculating the liability to income tax of an individual charged under section 720 or 727.
(2) For the purpose of determining the deductions and reliefs allowed to the individual, the individual is to be treated as if the individual had actually received the amount by reference to which the income treated as arising to the individual under section 721 or 728 is determined.
747 Amounts corresponding to accrued income profits and related interest
(1) This subsection applies if a person—
(a) would have been treated as—
(i) making qualifying accrued income profits, or
(ii) making qualifying accrued income profits of a greater amount,
in an interest period, but
(b) is not so treated because of being resident ... outside the United Kingdom throughout any tax year in which the interest period (or part of it) falls.
(2) If subsection (1) applies, this Chapter applies as if the amount which the person would be treated as making or, as the case may be, the additional amount were income becoming payable to the person.
(3) Accordingly, any reference in this Chapter to income of (or payable or arising to) a person abroad must be read as including a reference to such an amount.
(4) This subsection applies if income consisting of interest which falls due at the end of an interest period—
(a) would have been income as respects which a person is entitled to an exemption, or an exemption of a greater amount, from liability to income tax under section 679 (interest on securities involving accrued income losses: general), but
(b) is not such income because it is income of a person who is resident ... outside the United Kingdom throughout any tax year in which the interest period (or part of it) falls.
(5) If subsection (4) applies, for the purposes of this Chapter the interest is treated as reduced by the amount of the exemption or, as the case may be, the additional exemption.
(6) In this section—
(a) expressions which are also used in Chapter 2 of Part 12 (accrued income profits) have the same meaning as in that Chapter (but see subsection (7)), and
(b) “qualifying accrued income profits” means accrued income profits which are treated as made—
(i) under section 628(5), or
(ii) under section 630(2) in respect of a transfer of variable rate securities.
(7) In the case of qualifying accrued income profits within sub-paragraph (ii) of the definition of that expression in subsection (6)(b)—
(a) references in subsection (1)(a) to making qualifying accrued income profits in an interest period are to be read as making them in the tax year in which the settlement day falls, and
(b) the reference in subsection (1)(b) to the interest period is to the period—
(i) beginning with the day after the last day of the only or last interest period of the securities, and
(ii) ending with the settlement day.
(1) An officer of Revenue and Customs may by notice require any person to provide the officer with such particulars as the officer may reasonably require for the purposes of this Chapter.
(2) The officer may direct the time within which the particulars must be provided and that time must be at least 30 days.
(3) The particulars which a person must provide under this section, if required to do so by a notice under subsection (1), include particulars about—
(a) transactions with respect to which the person is or was acting on behalf of others,
(b) transactions which in the opinion of the officer should properly be investigated for the purposes of this Chapter even though in the person's opinion no liability to income tax arises under this Chapter, and
(c) whether the person has taken or is taking any part and, if so, what part in transactions of a description specified in the notice.
(4) A relevant lawyer is not treated as having taken part in a transaction for the purposes of subsection (3)(c) merely because of giving professional advice to a client about it.
(4A) In this section “relevant lawyer” means a barrister, advocate, solicitor or other legal representative communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication.
(5) This section is subject to—
section 749 (restrictions on particulars to be provided by relevant lawyers), and
section 750 (restrictions on particulars to be provided by banks).
749 Restrictions on particulars to be provided by relevant lawyers
(1) In relation to anything done by a relevant lawyer on behalf of a client who does not consent to the information otherwise required from the relevant lawyer under section 748 being provided, the relevant lawyer may not be compelled under that section to do more than—
(a) state that the relevant lawyer is or was acting on behalf of a client, and
(b) give the name and address of the client and any relevant person.
(2) In the case of anything done by the relevant lawyer in connection with the transfer of any asset by or to an individual who is ... UK resident to or by a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades, the transferor and the transferee are relevant persons.
(3) In the case of anything done by the relevant lawyer in connection with any associated operation in relation to any such transfer, the persons concerned in the associated operations are relevant persons.
(4) In the case of anything done by the relevant lawyer in connection with the formation or management of a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades, the body corporate is a relevant person.
(5) In the case of anything done by the relevant lawyer in connection with—
(a) the creation of any settlement as a result of which income becomes payable to a person abroad, or
(b) the execution of the trusts of any such settlement,
the settlor and that person are relevant persons.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) In this section—
“relevant lawyer” means a barrister, advocate, solicitor or other legal representative communications with whom may be the subject of a claim to professional privilege or, in Scotland, protected from disclosure in legal proceedings on grounds of confidentiality of communication;
“settlement” and “settlor” have the meanings given by section 620 of ITTOIA 2005.
(8) In the application of this section to Scotland, any reference to the trusts of a settlement is a reference to the purposes of the settlement.
750 Restrictions on particulars to be provided by banks
(1) Section 748 does not oblige a bank to provide any particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business, unless subsection (2) or (3) applies.
(2) This subsection applies if the bank has acted or is acting on behalf of the customer in connection with—
(a) the creation of any settlement as a result of which income becomes payable to a person abroad, or
(b) the execution of the trusts of any such settlement.
(3) This subsection applies if the bank has acted or is acting on behalf of the customer in connection with the formation or management of a closely-held company whose business does not consist wholly or mainly of the carrying on of a trade or trades.
(4) In this section—
“bank” has the meaning given by section 991, and
“settlement” has the meaning given by section 620 of ITTOIA 2005.
(5) In the application of this section to Scotland, any reference to the trusts of a settlement is a reference to the purposes of the settlement.
On any appeal that is notified to the tribunal, the jurisdiction of the tribunal includes jurisdiction to affirm or replace any decision taken by an officer of Revenue and Customs in exercise of the officer's functions under—
(za) section 720A(4) or 727A(4) (whether individual treated as involved in closely-held companies),
(a) section 737 (exemption: all relevant transactions post-4 December 2005 transactions),
(b) section 738 (meaning of “commercial transaction”),
(c) section 739 (exemption: all relevant transactions pre-5 December 2005 transactions),
(d) section 742 (partial exemption where later associated operations fail conditions),
(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) section 743(2) (no duplication of charges: choice of persons in relation to whom income is taken into account).
(1) This Chapter imposes a charge to income tax—
(a) on individuals to whom income is treated as arising under section 778 (income arising where capital amount other than derivative property or right obtained), and
(b) on individuals to whom income is treated as arising under section 779 (income arising where derivative property or right obtained).
(2) Income is treated as arising under those sections only if—
(a) transactions are effected or arrangements made to exploit the earning capacity of an individual in an occupation, and
(b) the main object or one of the main objects of the transactions or arrangements is the avoidance or reduction of liability to income tax.
In this Chapter references to an occupation, in relation to an individual, are references to any activities of a kind undertaken in a profession or vocation, regardless of whether the individual—
(a) is carrying on a profession or vocation on the individual's own account, or
(b) is an employee or office-holder.
This Chapter has effect subject to—
(a) Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor), and
(b) any other provision of the Tax Acts treating income as belonging to a particular person.
(1) Income tax is charged on income treated as arising under—
(a) section 778 (income arising where capital amount other than derivative property or right obtained), or
(b) section 779 (income arising where derivative property or right obtained).
(2) Tax is charged under this section on the full amount of income treated as arising in the tax year.
(3) The person liable for any tax charged under this section is the individual to whom the income is treated as arising.
(4) This section is subject to section 784 (exemption for sales of going concerns).
(1) Sections 778 and 779 apply only if conditions A to C are met in respect of an individual.
(2) Condition A is that the individual carries on an occupation wholly or partly in the United Kingdom.
(3) Condition B is that transactions are effected or arrangements made to exploit the individual's earning capacity in the occupation by putting another person (see section 782) in a position to enjoy—
(a) all or part of the income or receipts derived from the individual's activities in the occupation, or
(b) anything derived directly or indirectly from such income or receipts.
(4) The reference in subsection (3) to income or receipts derived from the individual's activities includes a reference to payments for any description of copyright or licence or franchise or other right deriving its value from the individual's activities (including past activities).
(5) Condition C is that as part of, or in connection with, or in consequence of, the transactions or arrangements a capital amount is obtained by the individual for the individual or another person.
(6) For the purposes of subsection (5), the cases where an individual (“A”) obtains a capital amount for another person (“B”) include cases where A has put B in a position to receive the capital amount by providing B with something of value derived, directly or indirectly, from A's activities in the occupation.
(7) In this Chapter “capital amount” means an amount in money or money's worth which does not fall to be included in a calculation of income for purposes of the Tax Acts otherwise than as a result of this Chapter.
778 Income arising where capital amount other than derivative property or right obtained
(1) This section applies if the capital amount obtained as mentioned in section 777(5) does not consist of—
(a) property which derives substantially the whole of its value from the individual's activities, or
(b) a right which does so.
(2) The capital amount is treated for income tax purposes as income arising to the individual.
(3) The income is treated as arising in the tax year in which the capital amount is receivable.
(4) A capital amount is not regarded as having become receivable by a person for the purposes of this section until the person can effectively enjoy or dispose of it.
779 Income arising where derivative property or right obtained
(1) This section applies if—
(a) the capital amount obtained as mentioned in section 777(5) consists of—
(i) property which derives substantially the whole of its value from the activities of an individual, or
(ii) a right which does so, and
(b) the property or right is sold or otherwise realised.
(2) For the purposes of subsection (1), it does not matter whether the capital amount is obtained on one occasion or on two or more occasions (for example, because the individual acquires a stock option and subsequently exercises it).
(3) Income of an amount equal to the proceeds of sale or the realised value is treated for income tax purposes as income arising to the individual.
(4) The income is treated as arising in the tax year in which the property or right is sold or otherwise realised.
780 Transactions, arrangements, sales and realisations relevant for Chapter
(1) For the purposes of this Chapter, account is to be taken of any method, however indirect, by which—
(a) any property or right is transferred or transmitted, or
(b) the value of any property or right is enhanced or diminished.
(2) Accordingly—
(a) the occasion of the transfer or transmission of any property or right however indirect, and
(b) the occasion when the value of any property or right is enhanced,
may be an occasion when tax is charged under this Chapter.
(3) Subsections (1) and (2) apply in particular—
(a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,
(b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning—
(i) share capital or other rights in a company,
(ii) rights in a partnership, or
(iii) an interest in settled property,
(c) to the creation of an option and the giving of consideration for granting it,
(d) to the creation of a requirement for consent and the giving of consideration for granting it,
(e) to the creation of an embargo affecting the disposition of any property or right and the giving of consideration for releasing it, and
(f) to the disposal of any property or right on the winding up, dissolution or termination of a company, partnership or trust.
(1) This section applies if it is necessary to determine the extent to which the value of any property or right is derived from any other property or right for the purposes of this Chapter.
(2) Value may be traced through any number of companies, partnerships and trusts.
(3) The property held by a company, partnership or trust must be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is appropriate in the circumstances.
(1) For the purposes of this Chapter references to other persons are to be read in accordance with subsections (2) to (4).
(2) A partnership or partners in a partnership may be regarded as a person or persons distinct from the individuals or other persons who are for the time being partners.
(3) The trustees of settled property may be regarded as persons distinct from the individuals or other persons who are for the time being trustees.
(4) Personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being personal representatives.
(1) All such valuations are to be made as are appropriate to give effect to this Chapter.
(2) For the purposes of this Chapter, any expenditure, receipt, consideration or other amount may be apportioned by such method as is just and reasonable in the circumstances.
(1) This section applies if a capital amount is obtained from the disposal—
(a) of assets (including any goodwill) of a profession or vocation,
(b) of a share in a partnership which is carrying on a profession or vocation, or
(c) of shares in a company.
(2) An individual is not liable to income tax under this Chapter in respect of the capital amount so far as the going concern condition is met (see subsections (4) and (5)).
(3) Subsection (2) is subject to section 785 (restriction on exemption: sales of future earnings).
(4) In the case of a disposal within subsection (1)(a) or (b), the going concern condition is that the value of what is disposed of at the time of disposal is attributable to the value of the profession or vocation as a going concern.
(5) In the case of a disposal within subsection (1)(c), the going concern condition is that the value of what is disposed of at the time of disposal is attributable to the value of the company's business as a going concern.
(6) In subsection (5) the reference to the company's business includes a reference to the business of any other company in which it holds shares directly or indirectly.
785 Restriction on exemption: sales of future earnings
(1) This section applies if the value as a going concern mentioned in section 784(4) or (5) is derived to a material extent from prospective income or receipts derived directly or indirectly from the individual's activities in the occupation.
(2) The exemption under section 784 applies to the value so derived only if the future earnings condition is met.
(3) The future earnings condition is met if, ignoring all capital amounts, the individual will receive full consideration for the prospective income or receipts, whether as a partner in a partnership or as an employee or otherwise.
(4) The references in subsections (1) and (3) to income or receipts include references to payments for any description of copyright, licence, franchise or other right deriving its value from the individual's activities (including past activities).
786 Recovery of tax where consideration receivable by person not assessed
(1) This section applies if a person (“A”) is assessed to tax under this Chapter in respect of consideration receivable by another person (“B”).
(2) Consideration is not regarded as having become receivable by B for this purpose until B can effectively enjoy or dispose of it.
(3) A is entitled to recover from B any part of the tax which A has paid.
(4) If any part of the tax remains unpaid at the end of the period of 6 months beginning with the date when it became due and payable, it is recoverable from B as if B were the person assessed.
(5) Subsection (4) does not affect the right to recover the tax from A.
(6) For the purposes of this section, any income which an individual is treated as having as a result of this Chapter (the “occupation income”) is treated as the highest part of the individual's total income.
(7) But if in the tax year—
(a) more than one capital amount is treated as the individual's occupation income, or
(b) the individual is also treated as having income as a result of Chapter 3 (transactions in land),
only a just and reasonable proportion of each capital amount treated as occupation income is to be treated as the highest part of the individual's total income.
(8) See section 1012 for the relationship between—
(a) the rules in subsections (6) and (7), and
(b) other rules requiring particular income to be treated as the highest part of a person's total income.
(1) For the purposes of section 786(3), an officer of Revenue and Customs must, if requested to do so, produce a certificate specifying—
(a) the amount of income in respect of which tax has been paid, and
(b) the amount of tax paid.
(2) The certificate is conclusive evidence of any facts stated in it.
(3) See also section 944 (under which directions may be given for payments within this Chapter to non-UK residents to be subject to a duty to deduct income tax).
(1) This Chapter imposes charges to income tax on—
(a) individuals who are treated as receiving income under section 792 (individuals in partnership claiming excess relief),
(b) individuals who are treated as receiving income under section 797 (individuals claiming relief for film-related trading losses), and
(c) individuals who are treated as receiving income under section 805 (individuals in partnership claiming relief for licence-related trading losses).
(2) The charges apply if (among other things) the individual makes a loss in a trade for which the individual claims sideways relief or capital gains relief.
(3) For the purposes of this Chapter sideways relief is—
(a) trade loss relief against general income (see sections 64 to 70), or
(b) early trade losses relief (see sections 72 to 74).
(4) For the purposes of this Chapter—
(a) capital gains relief is, in relation to a loss, the treatment of the loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and
(b) capital gains relief is claimed for a loss when a claim under that section is made in relation to the loss.
(5) References in this Chapter to a firm are to be read in the same way as references to a firm in Part 9 of ITTOIA 2005 (which contains special provision about partnerships).
791 Charge to tax on income treated as received under section 792
(1) Income tax is charged on income treated as received by an individual under section 792.
(2) Tax is charged under this section on the amount of the income treated as received in the tax year.
(3) The person liable for any tax charged under this section is the individual treated as receiving the income.
792 Partners claiming excess sideways or capital gains relief
(1) This section applies if—
(a) an individual carrying on a trade (“the relevant trade”) as a partner in a firm makes post-1 December 2004 losses in the relevant trade for which the individual claims relief within subsection (2),
(b) any of sections 104, 107 and 110 applies in relation to the relief (whether or not any of those sections restricts the amount of the relief), and
(c) after the individual makes the claim or claims, a chargeable event occurs.
(2) The relief within this subsection is—
(a) sideways relief but only if the whole or part of the relief is claimed against income of the individual apart from profits of the relevant trade, and
(b) capital gains relief.
(3) A chargeable event occurs whenever—
(a) the amount of the individual's contribution to the firm is reduced as a result of the application of regulations made under section 114, and
(b) that reduction in the individual's contribution to the firm immediately results in—
(i) the total amount of trade losses claimed (less any reclaimed relief) becoming greater than the contribution, or
(ii) an increase in the amount by which the total amount of trade losses claimed (less any reclaimed relief) exceeds the contribution.
(4) The individual is treated as receiving an amount of income every time a chargeable event occurs.
The income is treated as arising otherwise than as profits of a trade.
(5) The amount of the income is calculated in accordance with section 793.
(6) If—
(a) the firm is carrying on, or has carried on, more than one trade, and
(b) subsection (1)(a) and (b) applies in relation to losses made by the individual in one or more of those trades as a partner in the firm,
the firm's trades are taken together for the purpose of determining whether a chargeable event occurs at any time after a claim in relation to any of those losses has been made and, if one does occur, the amount of income treated as received by the individual at that time.
See section 794(6) for modifications giving effect to this.
(7) References in this section to an individual being a partner in a firm include a reference to an individual being a limited partner within the meaning of section 103A as a result of subsection (1)(c) of that section.
(8) And, accordingly, in the case of an individual who is such a limited partner, in this section and in sections 793 to 795 references to the individual's firm are references to the relationship between the individual and the other persons mentioned in section 103A(3)(a).
793 Calculating the amount of income treated as received
(1) The amount of income treated as received by the individual under section 792 when the chargeable event occurs is the lowest of amounts A to C.
(2) Amount A is the amount by which the individual's contribution to the firm is reduced as a result of the application of regulations made under section 114.
(3) Amount B is the amount given by—
(a) taking, at the time immediately after the chargeable event occurs, the total amount of trade losses claimed that are post-1 December 2004 losses, and
(b) reducing that amount (but not below nil) by any reclaimed relief.
(4) Amount C is the amount given by—
(a) taking the amount by which, at the time immediately after the chargeable event occurs, the total amount of trade losses claimed exceeds the individual's contribution to the firm, and
(b) reducing that amount (but not below nil) by any reclaimed relief.
794 Meaning of “the total amount of trade losses claimed” etc
(1) In sections 792 and 793 “the total amount of trade losses claimed” means the total amount of losses within subsection (2) for which the individual has claimed sideways relief or capital gains relief.
(2) The losses within this subsection are losses made by the individual in the relevant trade—
(a) in a tax year at a time during which the individual carries on the relevant trade as a limited partner or as a member of an LLP, or
(b) in an early tax year during which the individual carries on the relevant trade as a non-active partner.
Expressions used in this subsection are to be read as if contained in Chapter 3 of Part 4.
(3) In sections 792 and 793 “reclaimed relief” means the total amount of income treated as received by the individual under section 792 as a result of that section being previously applied in relation to claims for relief for losses made by the individual in the relevant trade.
(4) In sections 792 and 793 “the individual's contribution to the firm” at any time means the individual's contribution to the firm or the LLP (as the case may be) at that time as calculated for the purposes of the relevant restriction provision.
(5) The “relevant restriction provision” means—
(a) whichever of sections 104, 107 and 110 applied as mentioned in section 792(1)(b), or
(b) if more than one of those sections applied as mentioned in section 792(1)(b), the section which so applied to the amount of relief which could be given for the loss most recently made by the individual in the relevant trade.
(6) In a case to which section 792(6) applies, for the purpose of determining the total amount of trade losses claimed, the amount of the reclaimed relief and the relevant restriction provision—
(a) apply subsections (1) and (2) in relation to each of the trades that the firm is carrying on, or has carried on, and then add the results together, and
(b) apply subsections (3) and (5)(b) as if references to the relevant trade were references to any of the trades that the firm is carrying on, or has carried on.
But if a trade is of the kind mentioned in section 110(8), do not apply subsection (2)(b) in relation to it.
(1) For the purposes of sections 792 and 793 a “post-1 December 2004 loss” means—
(a) any loss made by an individual in a trade in a tax year ... which begins on or after 2 December 2004, or
(b) the post-1 December 2004 part of any loss made by an individual in a trade in a tax year ... which includes 2 December 2004 (but begins before that date).
(2) The “post-1 December 2004 part” of any loss made by an individual in a trade means the individual's share of any losses made by the relevant firm in the trade in the period—
(a) beginning with 2 December 2004, and
(b) ending with the end of ... the tax year concerned.
(3) For this purpose “the relevant firm” means the firm in which the individual carried on the trade, and—
(a) the losses of that firm are calculated as if that period were one for which profits and losses had to be calculated for the purposes of section 849 of ITTOIA 2005 (calculation of firm's profits or losses), and
(b) the individual's share of the losses is determined in accordance with the individual's interest in the firm during that period.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
796 Charge to tax on income treated as received under section 797
(1) Income tax is charged on income treated as received by an individual under section 797.
(2) Tax is charged under this section on the amount of the income treated as received in the tax year.
(3) The person liable for any tax charged under this section is the individual treated as receiving the income.
797 Individuals claiming sideways or capital gains relief for film-related losses
(1) This section applies if—
(a) an individual makes a film-related loss (see section 800) in a trade for which the individual claims sideways relief or capital gains relief (a “relevant claim”),
(b) there is a disposal of a right of the individual to profits arising from the trade (a “relevant disposal”) (see section 799), and
(c) an exit event occurs.
(2) An exit event occurs whenever—
(a) the individual receives any non-taxable consideration (see section 798) for a relevant disposal, or
(b) an increase in the individual's claimed film-related losses (see section 800) or a decrease in the individual's capital contribution (see section 801) results in—
(i) those losses becoming greater than that contribution, or
(ii) an increase in the amount by which those losses exceed that contribution.
(3) The individual is treated as receiving an amount of income every time a chargeable event occurs.
The income is treated as arising otherwise than as profits of the trade.
(4) A chargeable event occurs whenever—
(a) the individual makes a relevant claim (if by that time a relevant disposal and an exit event have occurred),
(b) a relevant disposal occurs (if by that time an exit event has occurred and the individual has made a relevant claim), or
(c) an exit event occurs (if by that time a relevant disposal has occurred and the individual has made a relevant claim).
(5) The amount of income treated as received when a chargeable event occurs is equal to the sum of—
(a) the total amount or value of all non-taxable consideration received by the individual for relevant disposals, and
(b) the amount (if any) by which the individual's claimed film-related losses exceed the individual's capital contribution.
The calculation in this subsection is made immediately after the chargeable event occurs and is subject to section 803.
(6) For the purposes of this section it does not matter—
(a) if the individual (or anyone else) is still carrying on the trade when a chargeable event occurs, or
(b) if the individual receives both non-taxable and taxable consideration for a relevant disposal.
(1) This section applies for the purposes of section 797.
(2) Consideration is non-taxable if (apart from section 796) it is not chargeable to income tax.
(3) Non-taxable consideration from which a deduction within subsection (4) is made is treated as received free of the deduction.
(4) A deduction is within this subsection if it is in consideration of any person's agreeing to, or facilitating, any relevant disposal or exit event.
799 Meaning of “disposal of a right of the individual to profits” etc
(1) For the purposes of section 797 any reference to a disposal of a right of an individual to profits arising from a trade includes, in particular, any of events A to D.
(2) Event A is the disposal, giving up or loss by—
(a) the individual, or
(b) a firm in which the individual is a partner,
of a right arising from the trade to income (or any part of any income).
It does not matter if the right is disposed of, given up or lost as part of a larger disposal, giving up or loss.
(3) Event B is the disposal, giving up or loss of the individual's interest in a firm that carries on the trade (including the dissolution of the firm).
(4) Event C is a default in the payment of income to which—
(a) the individual, or
(b) a firm in which the individual is a partner,
has a right arising from the trade.
(5) Event D is a change in the individual's entitlement to any profits or losses arising from the trade the effect of which is that—
(a) the individual's share of any profits is reduced (including to nil), or
(b) the individual becomes entitled to a share, or a greater share, of any losses without becoming entitled to a corresponding share of profits.
(6) The changes covered by event D include cases where there is an agreement under which the individual is entitled—
(a) to a particular share of any profits or losses arising from the trade in a period (including a nil share), and
(b) to a different share of any such profits or losses in a succeeding period (including a nil share).
(7) In such cases the change in the individual's entitlement is treated for the purposes of section 797 as occurring at the beginning of the succeeding period.
(1) This section applies for the purposes of sections 797, 801 and 802.
(2) A loss is a “film-related loss” if the calculation of profits or losses that it results from is made in accordance with any provision of Chapter 9 of Part 2 of ITTOIA 2005.
(3) “The individual's claimed film-related losses” means—
(a) the total amount of film-related losses made by the individual in the trade so far as they are losses for which the individual has made a relevant claim, less
(b) the amount of any relevant recovered relief.
(4) “The amount of any relevant recovered relief” means—
(a) amount A, or
(b) if less, amount B.
(5) Amount A is the total amount of income treated as received by the individual under section 792 (recovery of excess relief) as a result of the application of that section in relation to claims for relief for losses made by the individual in the trade.
(6) Amount B is the total amount of film-related losses within subsection (7) for which the individual has made a relevant claim.
(7) A loss is within this subsection if it is made by the individual in the trade—
(a) in a tax year at a time during which the individual carries on the trade as a member of an LLP or as a limited partner, or
(b) in an early tax year during which the individual carries on the trade as a non-active partner.
(8) Expressions used in subsection (7) are to be read as if contained in Chapter 3 of Part 4.
(9) Subsection (10) applies if—
(a) the individual has made a relevant claim for a film-related loss made in the trade as a partner in a firm, and
(b) the firm is carrying on, or has carried on, more than one trade.
(10) For the purpose of determining the individual's claimed film-related losses—
(a) apply subsection (3)(a) in relation to each of the trades and then add the results together,
(b) apply subsection (5) as if the reference to the trade were a reference to any of the trades, and
(c) apply subsections (6) and (7) in relation to each of the trades and then add the results together.
(1) This section applies for the purposes of section 797.
(2) The individual's capital contribution is the amount which the individual has contributed to the trade as capital less so much of that amount (if any) as is within subsection (6).
This is subject to subsection (3).
(3) If the individual has made a relevant claim for a film-related loss made in the trade as a partner in a firm, the individual's capital contribution is the amount which the individual has contributed to the firm as capital less so much of that amount (if any) as is within subsection (6).
(4) In particular, the individual's share of any profits of the firm is to be included for the purposes of subsection (3) in the amount which the individual has contributed to the firm as capital so far as that share has been added to the firm's capital.
(5) In subsection (4) the reference to profits are to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for income tax purposes).
(6) An amount of capital is within this subsection if it is an amount which—
(a) the individual has previously drawn out or received back,
(b) the individual is entitled to draw out or receive back,
(c) another person has reimbursed to the individual, or
(d) the individual is entitled to require another person to reimburse to the individual.
(7) But if a chargeable event occurs, anything treated for the purposes of section 797(5)(a) as consideration received by the individual for a relevant disposal is not to be treated as capital within subsection (6) in calculating the individual's capital contribution for the purposes of section 797(5)(b).
(8) In this section—
(a) any reference to drawing out, receiving back or reimbursing an amount is to doing so directly or indirectly,
(b) any reference to drawing out or receiving back an amount does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to income tax as profits of a trade, and
(c) any reference to reimbursing an amount includes discharging or assuming all or part of a liability of the individual,
but the express provision made by paragraph (c) does not affect what counts as the receipt back or reimbursement of an amount.
(9) This section needs to be read with any regulations made under section 802 (specified amounts to be excluded in calculating a partner's capital contribution for the purposes of section 797).
802 Exclusion of amounts in calculating capital contribution by a partner
(1) This section applies if an individual makes a relevant claim for a film-related loss made by the individual in a trade as a partner in a firm.
(2) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that any amount of a specified description is to be excluded in calculating the individual's capital contribution for the purposes of section 797.
(3) “Specified” means specified in the regulations.
(4) The regulations may—
(a) make provision having retrospective effect,
(b) contain incidental, supplemental, consequential and transitional provision and savings, and
(c) make different provision for different cases or purposes.
(5) The provision which may be made as a result of subsection (4)(b) includes provision amending or repealing any provision of an Act passed before FA 2005.
(6) No regulations may be made under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.
(1) Subsections (2) and (3) apply for the purpose of calculating the amount of income received under section 797 on a chargeable event in respect of the individual and the trade.
(2) If chargeable events have previously occurred in respect of the individual and the trade, any consideration taken into account in calculating the amount of income received on an earlier chargeable event is left out of account.
(3) If chargeable events have previously occurred in respect of the individual and the trade, the amount of income received as a result of section 797(5)(b) is reduced (but not below nil) by the total amount of income received on earlier chargeable events as a result of that provision.
(4) In a case to which section 800(10) (cases in which firm is carrying on, or has carried on, more than one trade) applies—
(a) subsections (2) and (3) of this section have effect as if references to the trade were references to any of the firm's trades, and
(b) if chargeable events in respect of the individual and any of the firm's trades occur at the same time, to find the total amount of income received under section 797 at that time on those chargeable events—
(i) calculate separately the income received on each chargeable event ignoring the other chargeable events,
(ii) add the results from sub-paragraph (i) together, and
(iii) reduce the total amount of income resulting from sub-paragraph (ii) so far as necessary to ensure that no amount is included more than once in that total.
804 Charge to tax on income treated as received under section 805
(1) Income tax is charged on income treated as received by an individual under section 805.
(2) Tax is charged under this section on the amount of the income treated as received in the tax year.
(3) The person liable for any tax charged under this section is the individual treated as receiving the income.
805 Partners claiming relief for licence-related trading losses
(1) This section applies if—
(a) an individual carries on a trade as a non-active partner during an early tax year,
(b) the individual makes a loss in the trade in that tax year for which the individual claims sideways relief or capital gains relief (a “relevant claim”),
(c) the loss derives to any extent from expenditure incurred in the trade in exploiting a licence acquired in carrying on the trade, and
(d) there is a relevant disposal of the licence.
(2) For the purposes of this section and section 806 there is a relevant disposal of the licence whenever the individual receives non-taxable consideration for—
(a) a disposal of the licence, or
(b) a disposal of a right to income under an agreement related to or containing the licence.
(3) If one or more chargeable events occur in any tax year, the individual is treated as receiving an amount of income in the tax year.
The income is treated as arising otherwise than as profits of the trade.
(4) For the purposes of this section and section 806 a chargeable event occurs whenever—
(a) there is a relevant disposal of the licence (if by that time the individual has made a relevant claim), or
(b) the individual makes a relevant claim (if by that time there has been a relevant disposal of the licence).
(5) For the purposes of this section and section 806 consideration is non-taxable if—
(a) (apart from section 804) it is not chargeable to income tax, and
(b) its receipt is not an exit event for the purposes of section 797.
(6) For the purposes of this section and section 806 it does not matter—
(a) if the individual (or anyone else) is still carrying on the trade when a chargeable event occurs,
(b) if the individual receives both non-taxable and taxable consideration for a relevant disposal of the licence, or
(c) if a relevant disposal of the licence is part of a larger disposal.
806 Calculation of amount of income treated as received by the individual
The amount of income treated under section 805 as received by the individual in the tax year is calculated by taking the following steps. Step 1
Calculate, at the end of the tax year, the total amount of the claimed losses (so far as relating to the licence) made by the individual in the trade in any early tax year during which the individual carried on the trade as a non-active partner.
Step 2
Calculate, at the end of the tax year, the total amount of the profits (so far as relating to the licence) made by the individual in the trade in any tax year.
Step 3
Deduct the total calculated at Step 2 from the total calculated at Step 1.
The result is “the net licence-related loss”.
If the net licence-related loss is nil or a negative figure—
(a) the income treated as received in the tax year is nil, and
(b) ignore Steps 4 and 5.
Step 4
Calculate, at the end of the tax year, the total amount or value of all non-taxable consideration received by the individual for relevant disposals (including consideration received in previous tax years).
Step 5
Deduct from—
(a) the net licence-related loss, or
(b) if less, the total calculated at Step 4,
the total amount of all income treated under section 805 as received by the individual in previous tax years as a result of chargeable events.
The result is the amount of the income treated as received in the tax year.
(If the result is a negative figure, the income is nil.)