Part 21: Other general provisions
Section 1310: Orders and regulations
3354.This section sets out how orders and regulations are to be made or may be annulled. It is based on section 828 of ICTA. The corresponding rule for income tax is in section 873 of ITTOIA.
Section 1311: Apportionment to different periods
3355.This section sets out how apportionments to different periods are to be made. It is based on section 834 of ICTA.
Section 1312: Abbreviated references to Acts
3356.This section provides details of abbreviations used in this Act. The corresponding list for income tax is in Part 1 of Schedule 4 to ITTOIA.
Section 1313: Activities in UK sector of continental shelf
3357.This section sets out how certain activities carried on in the UK sector of the continental shelf are treated for corporation tax purposes. It is based on section 830 of ICTA. The corresponding rule for income tax is in section 874 of ITTOIA.
Section 1314: Meaning of “caravan”
3358.This section defines “caravan”. It is based on sections 15 and 70A of ICTA, section 29 of the Caravan Sites and Control of Development Act 1960, section 13 of the Caravan Sites Act 1968 and section 8 of the Mobile Homes Act 1975. The corresponding rule for income tax is in section 875 of ITTOIA.
3359.It effects a change in the law in two ways. First it provides a uniform definition of “caravan” for the whole of the United Kingdom. Second it applies that definition to all occurrences of “caravan” in this Act. See Change 96 in Annex 1.
Section 1315: Claims and elections
3360.This section provides that references to a claim or election are to claims or elections in writing. It is based on paragraphs 57, 58 and 59 of Schedule 18 to FA 1998.
Section 1316: Meaning of “connected” persons and “control”
3361.This section defines “connected” persons and “control” by reference to definitions in ICTA.
Section 1317: Meaning of “farming” and related expressions
3362.This section defines “farming” and “market gardening” and clarifies the meaning of “forestry” and “woodlands”. It is based on section 832 of ICTA and section 154 of FA 1995. The corresponding rules for income tax are in section 996 of ITA.
3363.Section 832(1) of ICTA defines “farm land” and “market garden land”. It then goes on to say that “farming” and “market gardening” “shall be construed accordingly”. The reasons for this approach are largely historic and date from the time when the charge on farming and market gardening was under Schedule B. “Farm land” and “market garden land” are no longer terms used in the rules concerned with farming and market gardening; they remain only in the definition in section 832(1) of ICTA.
3364.The definitions in this section take a different approach. They define “farming” and “market gardening” by reference to the nature of the activity, not the land on which the activity is carried out. Farming excludes market gardening.
3365.Farming is an activity which is given differing taxation treatment depending on whether or not the land is situated in the United Kingdom. Section 832(1) of ICTA provides that the definitions of “farm land” and “market garden land” are confined to land occupied in the United Kingdom.
3366.There is no territorial restriction in the definitions in this Act. Instead the territorial restriction is included in the rewrite of section 53(1) and (2) of ICTA as section 36 of this Act and not in the definitions.
3367.Subsection (1) provides the definition of “farming”. It requires the land to be occupied wholly or mainly for the purposes of husbandry. This reflects a long-standing distinction in tax law between profits resulting from the taxpayer’s occupation of the land and profits from an activity in which occupation of the land is merely incidental.
3368.In the first case the trader exploits or uses the land, for example, by growing crops or grazing animals. In the second case the trader occupies the land only because a physical location, such as a shop or factory, is needed from which to carry on the trade. Factory farming, that is the intensive rearing of fish or livestock, is not farming for tax purposes. This is because the animals do not live or draw their sustenance from the land.
3369.Husbandry is a fairly old-fashioned term but one that is the subject of a considerable body of case law. The status of any marginal case must be determined in the light of that case law subject to the clarification given in subsection (2).
3370.The definition of “farm land” in section 832 of ICTA excludes “any dwelling or domestic offices”. This section does not repeat this exclusion of farmhouses.
3371.As originally enacted, the definition of farm land in section 832(1) of ICTA specifically included the farmhouse and farm buildings as part of the farm land. The House of Lords in IRC v Korner and Others (1969), 45 TC 287 HL, held that the effect of this provision was that a farmhouse was an asset of the trade for which a 100% deduction could be obtained. This applies even if the farmhouse is used as a private residence. An amendment was introduced in FA 1969 to reverse the effect of that decision. This is why the definition of “farm land” in section 832(1) of ICTA excludes “any dwelling or domestic offices”.
3372.In practice a farming company is allowed to make deductions in respect of expenditure of a revenue nature on office buildings used purely for business purposes. Such expenditure has always been treated as being incurred wholly and exclusively for the purposes of the trade and not prohibited from being deducted under section 74(1)(a) of ICTA.
3373.Section 74(1)(c) of ICTA deals with the deduction of rent where only part of a dwelling house or domestic offices are used for trade purposes. Again, in practice, a company whose trade is farming is permitted to make deductions in respect of such houses and offices.
3374.In the case of any other expenses of a residential property which is subject to dual private and business use a company is permitted to apportion these and the proportion attributable to trade use is allowed as a deduction. Again this treatment applies to farming companies. See section 54 of this Act (expenses not wholly and exclusively for trade and unconnected losses).
3375.A company which wishes to claim a deduction for the proportion of expenses of a farmhouse attributable to trade rather than private purposes can do so through section 54. Omitting the exclusion of farmhouses and domestic offices from the definition of farming gives statutory effect to what occurs in practice.
3376.Subsection (2) identifies two specific types of activity as “husbandry” and therefore farming.
3377.Paragraph (a) is based on the definition of market garden land in section 832(1) of ICTA. Hop growing is generally recognised to be farming but is often spoken of as taking place in a garden. This could bring it within the definition of “market garden land” in section 832(1) of ICTA but for the fact that hop growing is excluded from that definition. Subsection (2)(a) makes clear that hop growing is farming.
3378.Paragraph (b) is based on the ordinary meaning of the word farming. Stud farming has generally been assumed to be farming for income tax purposes. The reference to “the breeding and rearing of horses and the grazing of horses in connection with those activities” makes clear what that activity encompasses for the purposes of this Act.
3379.Subsection (5) defines “market gardening”. It makes it clear that the produce sold must have been grown on the relevant land rather than being bought in for resale.
Section 1318: Meaning of grossing up
3380.This section explains what is meant by “grossing up” for the purposes of this Act and provides a formula for calculating the gross amount to be taxed. It is new. The corresponding rule for income tax is in section 998 of ITA.
Section 1319: Other definitions
3381.This section defines various terms.
Section 1320: Interpretation: Scotland
3382.This section deals with the application to Scotland of certain terms used in the Act. It is based on section 24 of ICTA. The corresponding rule for income tax is in section 879 of ITTOIA.
3383.Subsection (2) is based on Change 15 in Annex 1 and gives certainty to the meaning of “enactment”.
Section 1321: Interpretation: Northern Ireland
3384.This section deals with the application to Northern Ireland of certain terms used in the Act. It is new. The corresponding rule for income tax is in section 880 of ITTOIA.
3385.It clarifies the meaning of “enactment”. See Change 15 in Annex 1.
Section 1322: Minor and consequential amendments
3386.This section introduces Schedule 1. It is new.
Section 1323: Power to make consequential provision
3387.This section provides a power for the Treasury to make by order consequential amendments additional to those contained in Schedule 1. It is new.
3388.The power is in substance the same as that in section 1028 of ITA. As with that power, it will not be exercised without the agreement of the Tax Law Rewrite Project’s Consultative and Steering Committees to the proposed modifications.
3389.Subsection (2) provides that the power may not be used after 31 March 2012. It is sensible to enable additional consequential amendments to be made in this way only over a limited period, and it would in any case become progressively more difficult to do so accurately as subsequent Finance Bills are enacted. The date of 31 March 2012 takes account of this while giving a reasonable amount of time for missed consequential amendments to come to light.
3390.Subsection (4) provides that the power may contain provision having retrospective effect. Whether that would be appropriate would need to be considered on a case-by-case basis. As the power can be used only to make provision in consequence of this Act, any retrospective effect is limited to provision having effect from the date the Act comes into force.
Section 1324: Power to undo changes
3391.This section provides a power for the Treasury to undo changes in the law made by the Act for the purpose of restoring the effect of the law to what it was immediately before 1 April 2009. It is new. A corresponding provision is in section 1029 of ITA.
3392.The power will not be exercised without the agreement of the Tax Law Rewrite Project’s Consultative and Steering Committees to the proposed modifications. It will make it possible for any errors made in rewriting the source legislation, or in making consequential amendments, to be corrected without recourse to a Finance Bill.
3393.Subsection (2) provides that the power may not be exercised after 31 March 2010. As with section 1029 of ITA, it is considered sensible to time-limit the power in this way, especially as successive Finance Acts may make it progressively more difficult to make such amendments. The time limit will provide a reasonable period for missed consequential amendments to come to light.
3394.Subsection (4) provides that the power may contain provision having retrospective effect. Whether that would be appropriate would need to be considered on a case-by-case basis.
Section 1325: Transitional provisions and savings
3395.This section introduces Schedule 2 and provides for the Treasury to make transitional or savings provisions additional to those contained within the Schedule. It is new. A corresponding provision is in section 1030 of ITA.
3396.The power will not be exercised without the agreement of the Tax Law Rewrite Project’s Consultative and Steering Committees.
3397.Subsection (3) provides that the power may contain provision having retrospective effect.
Section 1326: Repeals and revocations
3398.This section introduces Schedule 3.
Section 1327: Index of defined expressions
3399.This section introduces Schedule 4.
Section 1328: Extent
3400.This section provides for the Act to form part of the law of each part of the United Kingdom.
Section 1329: Commencement
3401.This section provides for the commencement of the Act.
3402.This Act deals for the most part only with corporation tax. However, it does amend legislation relating to income tax and capital gains tax, mostly consequentially. Separate provision is made about commencement in relation to those amendments.
Section 1330: Short title
3403.This section specifies the short title for the Act.
