Income Tax (Trading and Other Income) Act 2005

Alternative calculation of profits if amount exceeds limit

815 Alternative calculation of profits: introduction

Sections 816 and 817 (which provide for an alternative method of calculating profits) apply if—

(a) an individual qualifies for foster-care relief for a tax year,

(b) the individual’s total foster-care receipts for the tax year exceed the individual’s limit for the tax year,

(c) sections 822 and 823 do not apply (accounting date for trade not 5th April), and

(d) an election by the individual has effect to apply the alternative method of calculating profits for the tax year (see sections 818 and 819).

816 Alternative calculation of profits: trading income

(1) This section applies if the individual’s foster-care receipts for the tax year are the receipts of a trade.

(2) The profits of the trade for the tax year are—

(a) the individual’s total foster-care receipts for the tax year, less

(b) the individual’s limit for the tax year.

817 Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

(1) This section applies if the individual has foster-care receipts for the tax year which are chargeable to income tax under Chapter 8 of Part 5 (income not otherwise charged).

(2) The amount charged for the tax year arising from all the arrangements from which the receipts are derived is—

(a) the individual’s total foster-care receipts for the tax year, less

(b) the individual’s limit for the year.

818 Election for alternative methodof calculating profits

(1) An individual may elect for the alternative method of calculating profits given in sections 816 and 817 to apply if—

(a) the individual qualifies for foster-care relief for a tax year,

(b) the individual’s total foster-care receipts for the tax year exceed the individual’s limit for the tax year, and

(c) sections 822 and 823 do not apply (accounting date for trade not 5th April).

(2) An election under this section—

(a) must specify the tax year for which it is made, and

(b) has effect for that year (unless withdrawn by notice given by the individual).

(3) An election or notice of withdrawal under this section must be made or given to the Inland Revenue on or before—

(a) the first anniversary of the normal self-assessment filing date for the tax year for which the election is made, or

(b) such later date as the Inland Revenue may, in a particular case, allow.

819 Adjustment of assessment

(1) This section applies if—

(a) an individual does not make an election under section 818 for a tax year on or before the date for making the election, and

(b) an adjustment is made after that date to the profits from the individual’s provision of foster care on which the individual is liable to tax for the tax year.

(2) The individual may make an election under this section to apply the alternative method of calculating profits given in sections 816 and 817 for the tax year.

(3) The election—

(a) must specify that tax year, and

(b) has effect for that tax year (unless withdrawn by notice given by the individual).

(4) An election or notice of withdrawal under this section must be made or given to the Inland Revenue on or before—

(a) the first anniversary of the normal self-assessment filing date for the tax year in which the adjustment is made, or

(b) such later date as the Inland Revenue may, in a particular case, allow.