Income and Corporation Taxes Act 1988

74 General rules as to deductions not allowable. U.K.

[F1 (1)] M1 Subject to the provisions of the Tax Acts, in computing the amount of the [F2 profits] to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of—

(a) any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation;

(b) any disbursements or expenses of maintenance of the parties, their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of the trade, profession or vocation;

(c) the rent of the whole or any part of any dwelling-house or domestic offices, except any such part as is used for the purposes of the trade, profession or vocation, and where any such part is so used, the sum so deducted shall not, unless in any particular case it appears that having regard to all the circumstances some greater sum ought to be deducted, exceed two-thirds of the rent bona fide paid for that dwelling-house or those offices;

(d) any sum expended for repairs of premises occupied, or for the supply, repairs or alterations of any implements, utensils or articles employed, for the purposes of the trade, profession or vocation, beyond the sum actually expended for those purposes;

(e) any loss not connected with or arising out of the trade, profession or vocation;

(f) any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade, profession or vocation, but so that this paragraph shall not be treated as disallowing the deduction of any interest;

(g) any capital employed in improvements of premises occupied for the purposes of the trade, profession or vocation;

(h) any interest which might have been made if any such sums as aforesaid had been laid out at interest;

[F3 (j) any debts except—

(i) a bad debt F4 . . . ;

(ii) a debt or part of a debt released by the creditor wholly and exclusively for the purposes of his trade, profession or vocation as part of a relevant arrangement or compromise; and

(iii) a doubtful debt to the extent estimated to be bad, meaning, in the case of the bankruptcy or insolvency of the debtor, the debt except to the extent that any amount may reasonably be expected to be received on the debt;]

(k) any average loss beyond the actual amount of loss after adjustment;

(l) any sum recoverable under an insurance or contract of indemnity;

(m) any annuity or other annual payment (other than interest) payable out of the [F5 profits];

(n) any interest paid to a person not resident in the United Kingdom if and so far as it is interest at more than a reasonable commercial rate;

[F6 (o) any interest in so far as the payment of that interest is or would be, otherwise than by virtue of section 375(2), either—

(i) a payment of interest to which section 369 applies, or

(ii) a payment of interest to which that section would apply but for section 373(5);]

(p) M2 any royalty or other sum paid in respect of the user of a patent;

(q) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F8 (2) In paragraph (j) of subsection (1) above “relevant arrangement or compromise” means—

(a) a voluntary arrangement which has taken effect under or by virtue of the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989; or

(b) a compromise or arrangement which has taken effect under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986.]

Textual Amendments

F1 S. 74 renumbered as s. 74(1) (3.5.1994) by virtue of Finance Act 1994 (c. 9), s. 144(2)

F2 Words in s. 74(1) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a)(b), Sch. 7 para. 1

F3 S. 74(1)(j) substituted (with effect in accordance with s. 144(6) of the amending Act) by Finance Act 1994 (c. 9), s. 144(1)

F4 Words in s. 74(1)(j)(i) repealed (with effect in accordance with s. 134(2) of the repealing Act) by Finance Act 1996 (c. 8), Sch. 20 para. 4, Sch. 41 Pt. 5(10), Note

F5 Words in s. 74(1)(m) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a)(b), Sch. 7 para. 1

F6 S. 74(1)(o) substituted (with effect in accordance with s. 81(6) of the amending Act) by Finance Act 1994 (c. 9), Sch. 9 para. 1

F7 S. 74(1)(q) repealed (with effect in accordance with Sch. 18 Pt. 6(2) Note of the repealing Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(2)

F8 S. 74(2) inserted (3.5.1994) by Finance Act 1994 (c. 9) {s. 144(2)}

Modifications etc. (not altering text)

C1 S. 74 excluded (3.5.1994) by Finance Act 1994 (c. 9), s. 159(4) (with Sch. 18 paras. 1(3), 2(3)(4), 3(3))

C2 S. 74 excluded (with effect in accordance with s. 105(1) of the excluding Act) by Finance Act 1996 (c. 8), s. 82(7) (with ss. 98, 99, Schs. 10, 11, 15)

C3 S. 74 excluded (with effect in accordance with s. 83(3) of the excluding Act) by Finance Act 2002 (c. 23), Sch. 26 Para. 14(4) (with Sch. 28)

C4 See 1989 ss.112-113—expenditure on security on or after 6April 1989.

C5 S. 74(1)(a) extended (1.1.1999) by The European Single Currency (Taxes) Regulations 1998 (S.I. 1998/3177), regs. 1, 5

C6 S. 74(1)(m)(p) restricted (with effect in accordance with Sch. 29 Pt. 14 of the affecting Act) by Finance Act 2002 (c. 23), Sch. 29 para. 8(3) (with Sch. 29 para. 8(4))

Marginal Citations

M1 SOURCE-1970 s. 130(a)–(m); 1987 Sch. 15para. 2(9)

M2 SOURCE-1970 s. 130(n), (o)