Part 2

Trading income
Chapter 6

Trade profits: receipts

Capital receipts

Section 96A: supplementary provision
96B
1
This section has effect for the purposes of section 96A.
2
Any question as to whether or to what extent expenditure is brought into account in calculating the profits of a trade is to be determined on such basis as is just and reasonable in all the circumstances.
3
A person carrying on a trade “enters the cash basis” for a tax year if—
a
the cash basis applies
in relation to the trade for the tax year, and
b
the cash basis did not apply
in relation to the trade for the previous tax year.
4
Expenditure is “
cash basis deductible
” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the trade on the cash basis for that tax year.
5
Expenditure is “brought into account under
CAA
2001” in calculating the profits of a trade if and to the extent that—
a
a capital allowance made under Part 2,
2A,
5, 6, 7 or 8 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see, for example, section 247 of that Act), or
b
qualifying expenditure (within the meaning of Part 2, 7 or 8 of
CAA
2001) is allocated to a pool for the trade and is set-off against different disposal receipts.
6
An amount of qualifying expenditure is “set-off against different disposal receipts” if—
a
the amount would have been unrelieved qualifying expenditure carried forward in the pool for the trade, but
b
the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.
7
For the purposes of subsection (6), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.
8
In this section and in section 96A—
- “
disposal value
” means—
  1. in section 96A(3K)(c)—
    1. a disposal value for the purposes of Part 2, 4A, 5, 6, 7 8 or 10 of
CAA
2001 (for example, in relation to Part 2 of that Act, see (in particular) section 61 of that Act), or
    2. proceeds from a balancing event for the purposes of Part 3 or 3A of that Act (see sections 316 and 360O of that Act), and
  2. in subsection (6), a disposal value for the purposes of—
    1. Part 2 of that Act (see, in particular, section 61 of that Act),
    2. Part 7 of that Act (see section 462 of that Act), or
    3. Part 8 of that Act (see sections 476 and 477 of that Act);
- “
market value amount
” means the amount that would be regarded as normal and reasonable—
  1. in the market conditions then prevailing, and
  2. between persons dealing with each other at arm's length in the open market;
- “
pool
” means—
  1. the main pool or a class pool to which qualifying expenditure is allocated under Part 2 of
CAA
2001 (see section 54 of that Act),
  2. a pool to which qualifying expenditure is allocated under Part 7 of that Act (see section 456 of that Act), or
  3. a pool to which qualifying expenditure is allocated under Part 8 of that Act (see section 470 of that Act);
- “
provision
” includes creation, construction or acquisition;
- “
qualifying expenditure
” means—
  1. qualifying expenditure within the meaning of Part 2 of
CAA
2001 (see section 11(4) of that Act for the general rule),
  2. qualifying expenditure within the meaning of Part 5 of that Act (see section 395 of that Act),
  3. qualifying expenditure within the meaning of Part 6 of that Act (see section 439 of that Act),
  4. qualifying expenditure within the meaning of Part 7 of that Act (see section 454 of that Act), or
  5. qualifying trade expenditure within the meaning of Part 8 of that Act (see section 468 of that Act);
- “
unrelieved qualifying expenditure
” means unrelieved qualifying expenditure for the purposes of—
  1. Part 2 of
CAA
2001 (see section 59(1) and (2) of that Act),
  2. Part 7 of that Act (see section 461 of that Act), or
  3. Part 8 of that Act (see section 475 of that Act).
Word in s. 96B(5)(a) inserted (5.7.2019) by The Capital Allowances (Structures and Buildings Allowances) Regulations 2019 (S.I. 2019/1087), regs. 1, 5(3)
S. 96B 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. 5
Words in s. 96B(3)(a) substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 22(a), 47 (with Sch. 10 paras. 48-50)
Words in s. 96B(3)(b) substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 22(b), 47 (with Sch. 10 paras. 48-50)