Corporation Tax Act 2009 (c. 4)

Part 3 Trading income

Chapter 4 Trade profits: rules restricting deductions

53 Capital expenditure

(1) In calculating the profits of a trade, no deduction is allowed for items of a capital nature.

(2) Subsection (1) is subject to provision to the contrary in the Corporation Tax Acts.

54 Expenses not wholly and exclusively for trade and unconnected losses

(1) In calculating the profits of a trade, no deduction is allowed for—

(a) expenses not incurred wholly and exclusively for the purposes of the trade, or

(b) losses not connected with or arising out of the trade.

(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.

55 Bad debts

(1) This section applies to non-money debts to which neither Part 7 (derivative contracts) nor Part 8 (intangible fixed assets) applies.

(2) In calculating the profits of a company’s trade, no deduction is allowed in respect of a non-money debt owed to the company, except—

(a) by way of impairment loss, or

(b) so far as the debt is released wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement.

(3) In this section “non-money debt” means a debt which is not a money debt for the purposes of Part 5 (loan relationships).

56 Car or motor cycle hire

(1) Subsection (2) applies if, in calculating the profits of a trade, a deduction is allowed for expenses incurred on the hiring of a car or motor cycle—

(a) which is not a qualifying hire car or motor cycle (see section 57(2)), and

(b) the retail price of which when new exceeds £12,000.

(2) The amount of the deduction which would otherwise be allowable is reduced by multiplying the amount by the fraction—

where RP is the retail price of the car or motor cycle when new.

(3) Subsection (4) applies if a deduction is reduced as a result of subsection (2), or a corresponding provision, and subsequently—

(a) there is a rebate (however described) of the hire charges, or

(b) a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency arrangement.

(4) The amount that, as a result of the rebate or release—

(a) is brought into account as a receipt of the trade, or

(b) is treated as a post-cessation receipt under section 193 (debts released after cessation),

is reduced by multiplying it by the fraction in subsection (2).

(5) In this section “corresponding provision” means—

(a) section 1251(2) (car or motor cycle hire: expenses of management),

(b) section 48(2) of ITTOIA 2005 (car or motor cycle hire: trade profits and property income), or

(c) section 76ZN(2) of ICTA (car or motor cycle hire: expenses of insurance companies).

(6) The power under section 74(4) of CAA 2001 to increase or further increase the sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power to increase or further increase the sum of money specified in subsection (1)(b) or (2).

57 Car or motor cycle hire: supplementary

(1) In section 56 “car or motor cycle” means a mechanically propelled road vehicle other than one—

(a) of a construction primarily suited for the conveyance of goods or burden of any description, or

(b) of a type not commonly used as a private vehicle and unsuitable for such use.

(2) In section 56 “a qualifying hire car or motor cycle” means a car or motor cycle which—

(a) is hired under a hire-purchase agreement (see subsection (3)) under which there is no option to purchase,

(b) is hired under a hire-purchase agreement under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1% of the retail price of the car or motor cycle when new, or

(c) is a qualifying hire car for the purposes of Part 2 of CAA 2001 (under section 82 of CAA 2001).

(3) For this purpose “hire-purchase agreement” means an agreement under which—

(a) goods are bailed (or in Scotland hired) in return for periodical payments by the person to whom they are bailed or hired, and

(b) the property in the goods will pass to that person if the terms of the agreement are complied with and one or more of the following events occurs,

but does not include a conditional sale agreement (see subsection (5)).

(4) The events are—

(a) the exercise of an option to purchase by that person,

(b) the doing of any other specified act by any party to the agreement, and

(c) the happening of any other specified event.

(5) A “conditional sale agreement” means an agreement for the sale of goods under which—

(a) the purchase price or part of it is payable by instalments, and

(b) the goods are to remain the property of the seller (even though they are to be in the possession of the buyer) until specified conditions as to the payment of instalments or otherwise are met.

(6) In this section and section 56 “new” means unused and not second-hand.

58 Hiring cars (but not motor cycles) with low CO₂ emissions before 1 April 2013

(1) Section 56 does not apply to expenses incurred on the hiring of—

(a) a car with low CO₂ emissions, or

(b) an electrically-propelled car,

if the period of hire began before 1 April 2013 under a contract entered into before that date.

(2) For this purpose—

• “car with low CO₂ emissions” has the meaning given by section 45D of CAA 2001, and

• “electrically-propelled car” has the meaning given by that section.

59 Patent royalties

In calculating the profits of a trade, no deduction is allowed for royalties or other sums paid for the use of patents.

60 Expenditure on integral features

Section 33A(3) of CAA 2001 provides that no deduction is allowed in respect of certain expenditure on an integral feature of a building or structure (within the meaning of that section).