Income Tax (Trading and Other Income) Act 2005

Calculation of profits [F1 : application of trading income rules] U.K.

Textual Amendments

F1 Words in s. 272 cross-heading inserted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 14

[F2 271E Profits of a property business: application of trading income rules U.K.

(1) The profits of a property business are calculated in the same way as the profits of a trade.

(2) But this is subject to—

(a) section 272, which limits the rule in subsection (1) in relation to a property business whose profits are calculated in accordance with GAAP, and

(b) section 272ZA, which limits that rule in relation to a property business whose profits are calculated on the cash basis.]

Textual Amendments

F2 S. 271E inserted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 15

272 [F3 Application of trading income rules: GAAP] U.K.

F4 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) [F5 In relation to a property business whose profits are calculated in accordance with GAAP, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following—]

In Chapter 3 (basic rules)—
F6 . . .	F6 . . .
section 26	losses calculated on same basis as profits
section 27	receipts and expenses
section 28	items treated under CAA 2001 as receipts and expenses
[F7 section 28A	money's worth]
section 29	interest
In Chapter 4 (rules restricting deductions)—
section 33	capital expenditure
section 34	expenses not wholly and exclusively for trade and unconnected losses
section 35	bad and doubtful debts
sections 36 and 37	unpaid remuneration
sections 38 to 44	employee benefit contributions
sections 45 to 47	business entertainment and gifts
sections 48 to [F8 50B]	car F9 ... hire
F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
section 52	exclusion of double relief for interest
section 53	social security contributions
section 54	penalties, interest and VAT surcharges
section 55	crime-related payments
[F11 section 55A	expenditure on integral features]
In Chapter 5 (rules allowing deductions)—
section 57	pre-trading expenses
sections 58 and 59	incidental costs of obtaining finance
F12 . . .	F12 . . .
section 69	payments for restrictive undertakings
sections 70 and 71	seconded employees
section 72	payroll deduction schemes: contributions to agents' expenses
sections 73 to 75	counselling and retraining expenses
sections 76 to 80	redundancy payments etc.
section 81	personal security expenses
sections 82 to 86	contributions to local enterprise organisations or urban regeneration companies
[F13 sections 86A and 86B	contributions to flood and coastal erosion risk management projects]
sections 87 and 88	scientific research
sections 89 and 90	expenses connected with patents, designs and trade marks
section 91	payments to Export Credits Guarantee Department
[F14 section 94A	costs of setting up SAYE option scheme or CSOP scheme]
[F15 section 94AA	deductions in relation to salaried members of limited liability partnerships]
[F16 In Chapter 5A (deductions allowable at a fixed rate)
section 94C	exclusion of provisions of Chapter 5A for firms with partner who is not an individual
sections 94D to 94G	expenditure on vehicles]
In Chapter 6 (receipts)—
section 96	capital receipts
section 97	debts incurred and later released
section 104	distribution of assets of mutual concerns
section 105	industrial development grants
section 106	sums recovered under insurance policies etc.
In Chapter 7 (gifts to charities etc.)—
section 109	receipt by donor or connected person of benefit attributable to certain gifts
[F17 In Chapter 10A (long funding leases)—
Sections 148A to 148J	Leases of plant or machinery: special rules for long funding leases]
In Chapter 11 (other specific trades)—
section 155	levies and repayments under FISMA 2000
In Chapter 13 (deductions from profits)—
sections 188 to 191	unremittable amounts

(3) In those provisions the expression “this Part” is to be read as a reference to those provisions as applied by subsection (2) and to the other provisions of Part 3.

Textual Amendments

F3 S. 272 heading substituted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 16(2)

F4 S. 272(1) omitted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 16(3)

F5 Words in s. 272(2) substituted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 16(4)

F6 S. 272(2) entry omitted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 16(5)

F7 Words in s. 272(2) Table inserted (with effect in accordance with s. 71(7) of the amending Act) by Finance Act 2016 (c. 24), s. 71(3)

F8 Word in s. 272(2) Table substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 41(a)

F9 Words in s. 272(2) Table omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 41(b)

F10 S. 272(2) Table: entry repealed (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss, 1027, 1031, 1034, Sch. 1 para. 507, {Sch. 3 Pt. 1} (with transitional provisions and savings in Sch. 2)

F11 Words in s. 272(2) Table inserted (with effect in accordance with s. 73(6) of the amending Act) by Finance Act 2008 (c. 9), s. 73(5)

F12 Words in s. 272(2) Table omitted (with effect in accordance with s. 72(4) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 72(2)(b)

F13 Words in s. 272(2) Table inserted (with effect in accordance with Sch. 5 para. 9 of the amending Act) by Finance Act 2015 (c. 11), Sch. 5 para. 2

F14 Words in s. 272(2) Table inserted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 29 (with Sch. 9 paras. 1-9, 22)

F15 Words in s. 272(2) Table inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 17 paras. 3(3), 6

F16 Words in s. 272(2) Table inserted (with effect in accordance with s. 36(8) of the amending Act) by Finance Act 2018 (c. 3), s. 36(4)

F17 S. 272(2) Table: entry relating to Ch. 10A (long funding leases) inserted (with effect as mentioned in Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 14(2)

[F18 272ZA Application of trading income rules: cash basis U.K.

(1) In relation to a property business whose profits are calculated on the cash basis, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following—

“In Chapter 3 (basic rules)—
section 26	losses calculated on same basis as profits
section 28A	money's worth
section 29	interest
In Chapter 4 (rules restricting deductions)—
section 34	expenses not wholly and exclusively for trade and unconnected losses
sections 38 to 42 and 44	employee benefit contributions
sections 45 to 47	business entertainment and gifts
section 52	exclusion of double relief for interest
section 53	social security contributions
section 54	penalties, interest and VAT surcharges
section 55	crime-related payments
section 55A	expenditure on integral features
In Chapter 5 (rules allowing deductions)—
section 57	pre-trading expenses
sections 58 and 59	incidental costs of obtaining finance
section 69	payments for restrictive undertakings
sections 70 and 71	seconded employees
section 72	payroll deduction schemes: contributions to agents' expenses
sections 73 to 75	counselling and retraining expenses
sections 76 to 80	redundancy payments etc
section 81	personal security expenses
sections 82 to 86	contributions to local enterprise organisations or urban regeneration companies
sections 86A and 86B	contributions to flood and coastal erosion risk management projects
sections 87 and 88	scientific research
sections 89 and 90	expenses connected with patents, designs and trade marks
section 91	payments to Export Credits Guarantee Department
[F19 In Chapter 5A (deductions allowable at a fixed rate)—
section 94C	exclusion of provisions of Chapter 5A for firms with partner who is not an individual
sections 94D to 94G	expenditure on vehicles]
In Chapter 6 (receipts)—
section 96	capital receipts
section 97	debts incurred and later released
section 104	distribution of assets of mutual concerns
section 105(1) and (2)(b) and (c)	industrial development grants
section 106	sums recovered under insurance policies etc
In Chapter 6A (amounts not reflecting commercial transactions)—
section 106C	amounts not reflecting commercial transactions
section 106D	capital receipts
section 106E	gifts to charities etc
In Chapter 7 (gifts to charities etc)—
section 109	receipt by donor or connected person of benefit attributable to certain gifts”

(2) In those provisions, the expression “this Part” is to be read as a reference to those provisions as applied by subsection (1) and to the other provisions of Part 3.

(3) In section 106D, the reference to subsection (4) or (5) of section 96A is to be read as a reference to subsection (2), (3) or (5) of section 307F (deemed capital receipts under, or after leaving, cash basis).]

Textual Amendments

F18 S. 272ZA inserted (16.11.2017) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 17

F19 Words in s. 272ZA(1) Table inserted (with effect in accordance with s. 36(8) of the amending Act) by Finance Act 2018 (c. 3), s. 36(5)