Finance Act 2022

PART 7 Transitional provision: notional businesses

Application of this Part of this Schedule

77 This Part of this Schedule applies in relation to a partner in a firm who—

(a) is treated, in accordance with sections 854 to 855A of ITTOIA 2005, as carrying on a notional business in the tax year 2023-24, and

(b) is not treated as having started or permanently ceased to carry on the notional business in that tax year.

Basis period for tax year 2023-24

78 The basis period for the partner’s notional business for the tax year 2023-24 is the same as the basis period for the partner’s notional trade for that tax year given by paragraph 65(1)(a) of this Schedule.

Deductions for overlap profit allowed under this Part of this Schedule

79 (1) In calculating the profits of the notional business of the tax year 2023-24 for the purposes of Part 3, 4 or 5 of ITTOIA 2005—

(a) ignore section 220 of that Act,

(b) make any deduction for overlap profit that would be allowed under section 205 of that Act (deduction for overlap profit in final tax year), were the partner treated as having permanently ceased to carry on the notional business on 5 April 2024, and

(c) make any deduction for overlap profit allowed under section 220 of that Act (deduction for overlap profit on change of accounting date) for a tax year before the tax year 2023-24 but not made for that earlier tax year (or any amount of such a deduction not made).

Deducted overlap profits in excess of other profits of tax year 2023-24

80 (1) Sub-paragraph (2) applies where—

(a) a deduction is to be made under paragraph 79, and

(b) the amount to be deducted (or the sum of the amounts to be deducted) exceeds the amount which would otherwise be the amount of the profits of the notional business of the tax year 2023-24.

(2) The amount of the excess is to be deducted in calculating the partner’s income for the tax year 2023-24.