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Royal ArmsIncome Tax (Trading and Other Income) Act 2005

2005 Chapter 5


 

© Crown Copyright 2005

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Income Tax (Trading and Other Income) Act 2005

2005 Chapter 5

 
 
 
CONTENTS

PART 1
OVERVIEW
Section 
1Overview of Act
2Overview of priority rules

PART 2
TRADING INCOME
CHAPTER 1
INTRODUCTION
3Overview of Part 2
4Provisions which must be given priority over Part 2

CHAPTER 2
INCOME TAXED AS TRADE PROFITS
Charge to tax on trade profits
5Charge to tax on trade profits
6Territorial scope of charge to tax
7Income charged
8Person liable

Trades and trade profits
9Farming and market gardening
10Commercial occupation of land other than woodlands
11Commercial occupation of woodlands
12Profits of mines, quarries and other concerns
13Visiting performers
14Visiting performers: supplementary
15Divers and diving supervisors
16Oil extraction and related activities

Starting and ceasing to trade
17Effect of becoming or ceasing to be a UK resident
18Effect of company starting or ceasing to be within charge to income tax

Trading income and property income
19Tied premises
20Caravan sites where trade carried on
21Surplus business accommodation
22Payments for wayleaves

Rent-a-room and foster-care relief
23Rent-a-room and foster-care relief

CHAPTER 3
TRADE PROFITS: BASIC RULES
24Professions and vocations
25Generally accepted accounting practice
26Losses calculated on same basis as profits
27Receipts and expenses
28Items treated under CAA 2001 as receipts and expenses
29Interest
30Animals kept for trade purposes
31Relationship between rules prohibiting and allowing deductions

CHAPTER 4
TRADE PROFITS: RULES RESTRICTING DEDUCTIONS
Introduction
32Professions and vocations

Capital expenditure
33Capital expenditure

Wholly and exclusively and losses rules
34Expenses not wholly and exclusively for trade and unconnected losses

Bad and doubtful debts
35Bad and doubtful debts

Unpaid remuneration
36Unpaid remuneration
37Unpaid remuneration: supplementary

Employee benefit contributions
38Restriction of deductions
39Making of "employee benefit contributions"
40Provision of qualifying benefits
41Timing and amount of certain qualifying benefits
42Provision or payment out of employee benefit contributions
43Profits calculated before end of 9 month period
44Interpretation of sections 38 to 44

Business entertainment and gifts
45Business entertainment and gifts: general rule
46Business entertainment: exceptions
47Business gifts: exceptions

Car or motor cycle hire
48Car or motor cycle hire
49Car or motor cycle hire: supplementary
50Hiring cars (but not motor cycles) with low carbon dioxide emissions

Patent royalties
51Patent royalties

Interest payments
52Exclusion of double relief for interest

Social security contributions
53Social security contributions

Penalties, interest and VAT surcharges
54Penalties, interest and VAT surcharges

Crime-related payments
55Crime-related payments

CHAPTER 5
TRADE PROFITS: RULES ALLOWING DEDUCTIONS
Introduction
56Professions and vocations

Pre-trading expenses
57Pre-trading expenses

Incidental costs of obtaining finance
58Incidental costs of obtaining finance
59Convertible loans and loan stock etc.

Tenants under taxed leases
60Tenants under taxed leases: introduction
61Tenants occupying land for purposes of trade treated as incurring expenses
62Limit on deductions if tenant entitled to mineral extraction allowance
63Tenants dealing with land as property employed for purposes of trade
64Restrictions on section 61 expenses: lease premium receipts
65Restrictions on section 61 expenses: lease of part of premises
66Corporation tax receipts treated as taxed receipts
67Restrictions on section 61 expenses: corporation tax receipts

Renewals
68Replacement and alteration of trade tools

Payments for restrictive undertakings
69Payments for restrictive undertakings

Seconded employees
70Employees seconded to charities and educational establishments
71Educational establishments

Contributions to agents' expenses
72Payroll deduction schemes: contributions to agents' expenses

Counselling and retraining expenses
73Counselling and other outplacement services
74Retraining courses
75Retraining courses: recovery of tax

Redundancy payments etc.
76Redundancy payments and approved contractual payments
77Payments in respect of employment wholly in employer's trade
78Payments in respect of employment in more than one capacity
79Additional payments
80Payments made by the Government

Personal security expenses
81Personal security expenses

Contributions to local enterprise organisations or urban regeneration companies
82Contributions to local enterprise organisations or urban regeneration companies
83Meaning of "local enterprise organisation"
84Approval of local enterprise agencies
85Supplementary provisions with respect to approvals
86Meaning of "urban regeneration company"

Scientific research
87Expenses of research and development
88Payments to research associations, universities etc.

Expenses connected with patents, designs and trade marks
89Expenses connected with patents
90Expenses connected with designs or trade marks

Export Credits Guarantee Department
91Payments to Export Credits Guarantee Department

Expenses connected with foreign trades
92Expenses connected with foreign trades
93Allocation of expenses
94Family expenses

CHAPTER 6
TRADE PROFITS: RECEIPTS
Introduction
95Professions and vocations

Capital receipts
96Capital receipts

Debts released
97Debts incurred and later released

Amounts received following earlier cessation
98Acquisition of trade: receipts from transferor's trade

Reverse premiums
99Reverse premiums
100Excluded cases
101Tax treatment of reverse premiums
102Arrangements not at arm's length
103Connected persons and property arrangements

Assets of mutual concerns
104Distribution of assets of mutual concerns

Industrial development grants
105Industrial development grants

Proceeds of insurance etc.
106Sums recovered under insurance policies etc.

CHAPTER 7
TRADE PROFITS: GIFTS TO CHARITIES ETC.
107Professions and vocations
108Gifts of trading stock to charities etc.
109Receipt by donor or connected person of benefit attributable to certain gifts
110Meaning of "designated educational establishment"

CHAPTER 8
TRADE PROFITS: HERD BASIS RULES
Introduction
111Election for application of herd basis rules
112Meaning of "animal", "herd", "production herd" etc.
113Other interpretative provisions

The herd basis rules
114Initial cost of herd and value of herd
115Addition of animals to herd
116Replacement of animals in herd
117Amount of receipt if old animal slaughtered under disease control order
118Sale of animals from herd
119Sale of whole or substantial part of herd
120Acquisition of new herd begun within 5 years of sale
121Section 120: sale for reasons outside farmer's control
122Replacement of part sold begun within 5 years of sale
123Section 122: sale for reasons outside farmer's control

Elections
124Herd basis elections
125Five year gap in which no production herd kept
126Slaughter under disease control order

Preventing abuse of the herd basis rules
127Preventing abuse of the herd basis rules

Supplementary
128Information if election made
129Further assessment etc. if herd basis rules apply

CHAPTER 9
TRADE PROFITS: FILMS AND SOUND RECORDINGS
Introduction
130Expenditure to which this Chapter applies
131Meaning of "film" and related expressions
132Meaning of "original master version" and "certified master version"
133Meaning of "relevant period"

Expenditure treated as revenue in nature
134Expenditure treated as revenue in nature

Films and sound recordings: normal rules for allocating expenditure
135Films and sound recordings: production or acquisition expenditure

Certified master versions: special rules for allocating expenditure
136Application of provisions about certified master versions
137Certified master versions: preliminary expenditure
138Certified master versions: production or acquisition expenditure

Certified master versions: limited-budget films
139Certified master versions: production expenditure on limited-budget films
140Certified master versions: acquisition expenditure on limited-budget films
141"Total production expenditure in respect of the original master version"
142When expenditure is incurred

Election for sections 134 to 140 not to apply
143Election for sections 134 to 140 not to apply

Supplementary
144Meaning of "genuinely intended for theatrical release"

CHAPTER 10
TRADE PROFITS: CERTAIN TELECOMMUNICATION RIGHTS
145Professions and vocations
146Meaning of "relevant telecommunication right"
147Expenditure and receipts treated as revenue in nature
148Credits or debits arising from revaluation

CHAPTER 11
TRADE PROFITS: OTHER SPECIFIC TRADES
Dealers in securities etc.
149Taxation of amounts taken to reserves
150Conversion etc. of securities held as circulating capital
151Exchanges of gilts for gilt strips
152Consolidation of gilt strips
153Meaning of "gilt-edged security" and "strip"
154Regulations for determining market value of securities or strips

Persons authorised for purposes of FISMA 2000
155Levies and repayments under FISMA 2000

Dealers in land etc.
156Purchase or sale of woodlands
157Relief in respect of mineral royalties
158Lease premiums etc: reduction of receipts

Ministers of religion
159Ministers of religion

Barristers and advocates
160Alternative basis of calculation in early years of practice

Mineral exploration and access
161Mineral exploration and access

Persons liable to pool betting duty
162Payments by persons liable to pool betting duty

Intermediaries treated as making employment payments
163Deduction for deemed employment payment
164Special rules for partnerships

Waste disposal
165Deduction for site preparation expenditure
166Allocation of site preparation expenditure
167Site preparation expenditure: supplementary
168Site restoration payments

Cemeteries and crematoria
169Cemeteries and crematoria: introduction
170Deduction for capital expenditure
171Allocation of ancillary capital expenditure
172Exclusion of expenditure met by subsidies

CHAPTER 12
TRADE PROFITS: VALUATION OF STOCK AND WORK IN PROGRESS
Valuation of trading stock
173Valuation of trading stock on cessation
174Meaning of "trading stock"
175Basis of valuation of trading stock
176Sale basis of valuation: sale to unconnected person
177Sale basis of valuation: sale to connected person
178Sale basis of valuation: election by connected persons
179Connected persons
180Cost to buyer of stock valued on sale basis of valuation
181Meaning of "sale" and related expressions

Valuation of work in progress
182Valuation of work in progress on cessation
183Meaning of "work in progress"
184Basis of valuation of work in progress
185Election for valuation at cost

Supplementary
186Determination of questions by Commissioners

CHAPTER 13
DEDUCTIONS FROM PROFITS: UNREMITTABLE AMOUNTS
187Professions and vocations
188Application of Chapter
189Relief for unremittable amounts
190Restrictions on relief
191Withdrawal of relief

CHAPTER 14
DISPOSAL AND ACQUISITION OF KNOW-HOW
192Meaning of "know-how" etc.
193Disposal of know-how if trade continues to be carried on
194Disposal of know-how as part of disposal of all or part of a trade
195Seller controlled by buyer etc.

CHAPTER 15
BASIS PERIODS
Introduction
196Professions and vocations

Accounting date
197Meaning of "accounting date"

The normal rules
198General rule
199First tax year
200Second tax year
201Tax year in which there is no accounting date
202Final tax year

Apportionment of profits
203Apportionment etc. of profits to basis periods

Overlap profits and losses
204Meaning of "overlap period" and "overlap profit"
205Deduction for overlap profit in final tax year
206Restriction on bringing losses into account twice
207Treatment of business start-up payments received in an overlap period

Rules where first accounting date shortly before end of tax year
208When the late accounting date rules apply
209Rule if there is an accounting date
210Rules if there is no accounting date

Slight variations in accounting date
211Treating middle date as accounting date
212Consequence of treating middle date as accounting date
213Circumstances in which middle date not treated as accounting date

Special rules if accounting date changes
214When a change of accounting date occurs
215Change of accounting date in third tax year
216Change of accounting date in later tax year
217Conditions for basis period to end with new accounting date
218Commercial reasons for change of accounting date
219The year after an ineffective change of accounting date
220Deduction for overlap profit on change of accounting date

CHAPTER 16
AVERAGING PROFITS OF FARMERS AND CREATIVE ARTISTS
221Claim for averaging of fluctuating profits
222Circumstances in which claim may be made
223Adjustment of profits
224Effect of adjustment
225Effect of later adjustment of profits

CHAPTER 17
ADJUSTMENT INCOME
Introduction
226Professions and vocations

Adjustment on change of basis
227Application of Chapter
228Adjustment income and adjustment expense
229Income charged
230Person liable
231Calculation of the adjustment

Treatment of adjustment income and adjustment expense
232Treatment of adjustment income
233Treatment of adjustment expense

Expenses previously brought into account
234No adjustment for certain expenses previously brought into account

Realising or writing off assets
235Cases where adjustment not required until assets realised or written off

Mark to market
236Change from realisation basis to mark to market
237Election for spreading if section 236 applies

Spreading of adjustment income: barristers and advocates
238Spreading on ending of exemption for barristers and advocates
239Election to accelerate charge under section 238

Supplementary
240Liability of personal representatives if person liable dies

CHAPTER 18
POST-CESSATION RECEIPTS
Introduction
241Professions and vocations

Charge to tax on post-cessation receipts
242Charge to tax on post-cessation receipts
243Extent of charge to tax
244Income charged
245Person liable

Meaning of "post-cessation receipts"
246Basic meaning of "post-cessation receipt"
247Other rules about what counts as post-cessation receipts

Sums treated as post-cessation receipts
248Debts paid after cessation
249Debts released after cessation
250Receipts relating to post-cessation expenditure
251Transfer of rights if transferee does not carry on trade

Sums that are not post-cessation receipts
252Transfer of trading stock or work in progress
253Lump sums paid to personal representatives for copyright etc.

Deductions
254Allowable deductions
255Further rules about allowable deductions

Reliefs
256Treatment of post-cessation receipts
257Election to carry back

CHAPTER 19
SUPPLEMENTARY
258Changes in trustees and personal representatives
259Meaning of "statutory insolvency arrangement"

PART 3
PROPERTY INCOME
CHAPTER 1
INTRODUCTION
260Overview of Part 3
261Provisions which must be given priority over Part 3
262Priority between Chapters within Part 3

CHAPTER 2
PROPERTY BUSINESSES
Introduction
263Introduction

Basic meaning of UK and overseas property business
264UK property business
265Overseas property business

Generating income from land
266Meaning of "generating income from land"
267Activities not for generating income from land

CHAPTER 3
PROFITS OF PROPERTY BUSINESSES: BASIC RULES
Charge to tax on profits of a property business
268Charge to tax on profits of a property business
269Territorial scope of charge to tax
270Income charged
271Person liable

Calculation of profits
272Profits of a property business: application of trading income rules
273Amounts not brought into account as part of a property business
274Relationship between rules prohibiting and allowing deductions

Apportionment of profits
275Apportionment etc. of profits to tax year

CHAPTER 4
PROFITS OF PROPERTY BUSINESSES: LEASE PREMIUMS ETC.
Introduction
276Introduction

Amounts treated as receipts: leases
277Lease premiums
278Amount treated as lease premium where work required
279Sums payable instead of rent
280Sums payable for surrender of lease
281Sums payable for variation or waiver of term of lease
282Assignments for profit of lease granted at undervalue
283Provisions supplementary to section 282

Other amounts treated as receipts
284Sales with right to reconveyance
285Sale and leaseback transactions
286Provisions supplementary to sections 284 and 285

Additional calculation rule for reducing certain receipts
287Circumstances in which additional calculation rule applies
288The additional calculation rule
289The additional calculation rule: special cases
290Meaning of "unused amount" and "unreduced amount"

Deductions in relation to certain receipts
291Deductions for expenses under section 292
292Tenants under taxed leases treated as incurring expenses
293Restrictions on section 292 expenses: the additional calculation rule
294Restrictions on section 292 expenses: lease of part of premises

Limit on effect of additional calculation rule and deductions
295Limit on reductions and deductions

Relationship with ICTA
296Corporation tax receipts treated as taxed receipts
297Taking account of reductions in corporation tax receipts
298Taking account of deductions for rent as a result of section 37(4) or 87(2) of ICTA

Certain administrative provisions
299Payment of tax by instalments
300Statement of accuracy for purposes of section 282
301Claim for repayment of tax payable by virtue of section 284
302Claim for repayment of tax payable by virtue of section 285

Effective duration of lease
303Rules for determining effective duration of lease
304Applying the rules in section 303
305Information about effective duration of lease

Other interpretative provisions
306Provisions about premiums
307Interpretation

CHAPTER 5
PROFITS OF PROPERTY BUSINESSES: OTHER RULES ABOUT RECEIPTS AND DEDUCTIONS
Furnished accommodation: receipts and deductions
308Furnished lettings
309Rent-a-room relief

Treatment of receipts on acquisition of business
310Acquisition of business: receipts from transferor's UK property business

Reverse premiums as receipts
311Reverse premiums

Deductions for expenditure on energy-saving items
312Deduction for expenditure on energy-saving items
313Restrictions on relief
314Regulations

Deductions for expenditure on sea walls
315Deduction for expenditure on sea walls
316Transfer of interest in premises
317Ending of lease of premises
318Transfer involving company within the charge to corporation tax

Mineral royalties
319Relief in respect of mineral royalties

Apportionments on sale of land
320Nature of item apportioned on sale of estate or interest in land

Mutual business
321Mutual business

CHAPTER 6
COMMERCIAL LETTING OF FURNISHED HOLIDAY ACCOMMODATION
Introduction
322Introduction

Definition
323Meaning of "commercial letting of furnished holiday accommodation"
324Meaning of "relevant period" in sections 325 and 326
325Meaning of "qualifying holiday accommodation"
326Under-used holiday accommodation: averaging elections

Separate profit calculations
327Capital allowances and loss relief
328Earned income and relevant UK earnings for pension purposes

CHAPTER 7
ADJUSTMENT INCOME
Adjustment on change of basis
329Application of Chapter
330Adjustment income and adjustment expense
331Income charged
332Person liable

Treatment of adjustment income and adjustment expense
333Treatment of adjustment income
334Treatment of adjustment expense

CHAPTER 8
RENT RECEIVABLE IN CONNECTION WITH A UK SECTION 12(4) CONCERN
Charge to tax on rent receivable in connection with a UK section 12(4) concern
335Charge to tax on rent receivable in connection with a UK section 12(4) concern
336Meaning of "rent receivable in connection with a UK section 12(4) concern"
337Income charged
338Person liable

Management expenses of owner of mineral rights
339Deduction for management expenses of owner of mineral rights

Mineral royalties
340Relief in respect of mineral royalties
341Meaning of "mineral lease or agreement" and "mineral royalties"
342Extended meaning of "mineral royalties" etc. in Northern Ireland
343Power of Board to determine what counts as "mineral royalties"

CHAPTER 9
RENT RECEIVABLE FOR UK ELECTRIC-LINE WAYLEAVES
Charge to tax on rent receivable for UK electric-line wayleaves
344Charge to tax on rent receivable for a UK electric-line wayleave
345Meaning of "rent receivable for a UK electric-line wayleave"
346Extent of charge to tax
347Income charged
348Person liable

CHAPTER 10
POST-CESSATION RECEIPTS
Charge to tax on post-cessation receipts
349Charge to tax on post-cessation receipts
350Extent of charge to tax
351Income charged
352Person liable

Meaning of "post-cessation receipts"
353Basic meaning of "post-cessation receipt"
354Other rules about what counts as a "post-cessation receipt"
355Transfer of rights if transferee does not carry on UK property business

Supplementary
356Application to Schedule A businesses

CHAPTER 11
OVERSEAS PROPERTY INCOME
357Charge to tax on overseas property income
358Meaning of "overseas property income"
359Income charged
360Person liable

CHAPTER 12
SUPPLEMENTARY
361Changes in trustees and personal representatives
362Effect of company starting or ceasing to be within charge to income tax
363Overseas property businesses and overseas land: adaptation of rules
364Meaning of "lease" and "premises"

PART 4
SAVINGS AND INVESTMENT INCOME
CHAPTER 1
INTRODUCTION
365Overview of Part 4
366Provisions which must be given priority over Part 4
367Priority between Chapters within Part 4
368Territorial scope of Part 4 charges

CHAPTER 2
INTEREST
Charge to tax on interest
369Charge to tax on interest
370Income charged
371Person liable

Other income taxed as interest
372Building society dividends
373Open-ended investment company interest distributions
374Date when interest payments under section 373 made
375Interpretation of sections 373 and 374
376Authorised unit trust interest distributions
377Date when interest payments under section 376 made
378Interpretation of sections 376 and 377
379Industrial and provident society payments
380Funding bonds
381Discounts

CHAPTER 3
DIVIDENDS ETC. FROM UK RESIDENT COMPANIES ETC.
Introduction
382Contents of Chapter

Charge to tax on dividends and other distributions
383Charge to tax on dividends and other distributions
384Income charged
385Person liable

Amounts treated as dividends
386Open-ended investment company dividend distributions
387Date when dividends paid under section 386
388Interpretation of sections 386 and 387
389Authorised unit trust dividend distributions
390Date when dividends paid under section 389
391Interpretation of sections 389 and 390

Shares in approved share incentive plans ("SIPs")
392SIP shares: introduction
393Later charge where cash dividends retained in SIPs are paid over
394Distribution when dividend shares cease to be subject to SIP
395Reduction in tax due in cases within section 394
396Interpretation of sections 392 to 395

Tax credits and payment and deduction of tax
397Tax credits for qualifying distributions: UK residents and eligible non-UK residents
398Increase in amount or value of dividends where tax credit available
399Qualifying distributions received by persons not entitled to tax credits
400Non-qualifying distributions
401Relief: qualifying distribution after linked non-qualifying distribution

CHAPTER 4
DIVIDENDS FROM NON-UK RESIDENT COMPANIES
Charge to tax on dividends from non-UK resident companies
402Charge to tax on dividends from non-UK resident companies
403Income charged
404Person liable

Shares in approved share incentive plans ("SIPs")
405SIP shares: introduction
406Later charge where cash dividends retained in SIPs are paid over
407Dividend payment when dividend shares cease to be subject to SIP
408Reduction in tax due in cases within section 407

CHAPTER 5
STOCK DIVIDENDS FROM UK RESIDENT COMPANIES
409Charge to tax on stock dividend income
410When stock dividend income arises
411Income charged
412Cash equivalent of share capital
413Person liable
414Income tax treated as paid

CHAPTER 6
RELEASE OF LOAN TO PARTICIPATOR IN CLOSE COMPANY
415Charge to tax under Chapter 6
416Income charged
417Person liable
418Relief where borrowers liable as settlors
419Loans and advances to persons who die
420Loans and advances to trustees of trusts that have ended
421Income tax treated as paid

CHAPTER 7
PURCHASED LIFE ANNUITY PAYMENTS
422Charge to tax on purchased life annuity payments
423Meaning of "purchased life annuity"
424Income charged
425Person liable
426Annuity payments received after deduction of tax

CHAPTER 8
PROFITS FROM DEEPLY DISCOUNTED SECURITIES
Charge to tax under Chapter 8
427Charge to tax on profits from deeply discounted securities
428Income charged
429Person liable

Deeply discounted securities
430Meaning of "deeply discounted security"
431Excluded occasions of redemption
432Securities which are not deeply discounted securities
433Meaning of "excluded indexed security"
434Securities issued in separate tranches: preliminary
435Securities issued in separate tranches: basic rule
436Deeply discounted securities issued in separate tranches: nominal value rule

Disposals
437Transactions which are disposals
438Timing of transfers and acquisitions

Calculating profits
439Calculating the profit from disposals
440Market value disposals
441Market value acquisitions
442Securities issued in accordance with qualifying earn-out right

Special rules for strips of government securities
443Application of this Chapter to strips of government securities
444Meaning of "strip" in Chapter 8
445Strips of government securities: acquisitions and disposals
446Strips of government securities: relief for losses
447Restriction of profits on strips by reference to original acquisition cost
448Restriction of losses on strips by reference to original acquisition cost
449Strips of government securities: manipulation of acquisition, transfer or redemption payments
450Market value of strips etc.
451Market value of strips etc. quoted in foreign stock exchange lists
452Power to modify this Chapter for strips

Special rules for listed securities held since 26th March 2003
453Application of sections 454 to 456
454Listed securities held since 26th March 2003: relief for losses
455Listed securities held since 26th March 2003: calculating the profit or loss on disposals
456Securities issued to connected persons etc. at excessive price: subsequent transfers to connected persons

Trustees
457Trustees
458Non-UK resident trustees

Miscellaneous and supplementary
459Transfer of assets abroad
460Minor definitions

CHAPTER 9
GAINS FROM CONTRACTS FOR LIFE INSURANCE ETC.
Charge to tax under Chapter 9
461Charge to tax under Chapter 9
462When gains arise from policies and contracts
463Income charged

Person liable etc.
464Person liable for tax: introduction
465Person liable: individuals
466Person liable: personal representatives
467Person liable: UK resident trustees
468Non-UK resident trustees and foreign institutions
469Two or more persons interested in policy or contract
470Interests in rights under a policy or contract for section 469
471Determination of shares etc.
472Trusts created by two or more persons

Policies and contracts to which Chapter 9 applies
473Policies and contracts to which Chapter 9 applies: general
474Special rules: qualifying policies
475Special rules: personal portfolio bonds
476Special rules: foreign policies
477Special rules: certain older policies and contracts
478Exclusion of mortgage repayment policies
479Exclusion of pension policies
480Exclusion of excepted group life policies
481Excepted group life policies: conditions about benefits
482Excepted group life policies: conditions about persons intended to benefit
483Exclusion of credit union group life policies

When chargeable events occur: general
484When chargeable events occur
485Disregard of certain events in relation to qualifying policies
486Exclusion of maturity of capital redemption policies in certain circumstances
487Disregard of certain assignments
488Disregard of some events after alterations of life insurance policy terms
489Conditions applicable to alterations of life insurance policy terms
490Last payment under guaranteed income bonds etc. treated as total surrender

Calculating gains: general
491Calculating gains: general rules
492The total benefit value of a policy or contract
493The value of a policy or contract
494The total allowable deductions for a policy or contract
495Disregard of certain amounts in calculating gains under section 491
496Modification of section 494: qualifying endowment policies held as security for company debts
497Disregard of trivial inducement benefits

Part surrenders and assignments: periodic calculations and excess events
498Requirement for periodic calculations in part surrender or assignment cases
499Meaning of "insurance year" and "final insurance year"
500Events treated as part surrenders
501Part surrenders: loans
502Exception from section 501 for loans to buy life annuities
503Exception from section 501 for certain loans under qualifying policies
504Part surrenders: payments under guaranteed income bonds etc.
505Assignments etc. involving co-ownership
506Assignments occurring when there is a co-ownership transaction
507Method for making periodic calculations under section 498
508The value of rights partially surrendered or assigned
509Chargeable events in certain cases where periodic calculations show gains

Transaction-related calculations and part surrender or assignment events
510Requirement for transaction-related calculations in certain part surrender and assignment cases
511Method for making transaction-related calculations under section 510
512Available premium left for relevant transaction
513Special rules for part surrenders and assignments in final insurance year
514Chargeable events where transaction-related calculations show gains

Personal portfolio bonds
515Requirement for annual calculations in relation to personal portfolio bonds
516Meaning of "personal portfolio bond"
517Policies and contracts which are not personal portfolio bonds
518The index categories
519The index selection conditions
520The property categories
521The property selection conditions
522Method for making annual calculations under section 515
523The total amount of personal portfolio bond excesses
524The total amount of part surrender gains
525Chargeable events where annual calculations show gains
526Power to make regulations about personal portfolio bonds

Reductions from gains
527Reduction for sums taken into account otherwise than under Chapter 9
528Reduction in amount charged: non-UK resident policy holders
529Exceptions to section 528

Income tax treated as paid and reliefs
530Income tax treated as paid etc.
531Exceptions to section 530
532Relief for policies and contracts with European Economic Area insurers
533Meaning of "comparable EEA tax charge"
534Regulations providing for relief in other cases where foreign tax chargeable
535Top slicing relief
536Top slicing relieved liability: one chargeable event
537Top slicing relieved liability: two or more chargeable events
538Recovery of tax from trustees

Deficiencies
539Relief for deficiencies
540When deficiencies arise: events following calculation events
541Calculation of deficiencies

Supplementary
542Replacement of qualifying policies
543Issue time of qualifying policy replacing foreign policy
544Application of Chapter to policies and contracts in which companies interested
545Minor definitions
546Table of provisions subject to special rules for older policies and contracts

CHAPTER 10
DISTRIBUTIONS FROM UNAUTHORISED UNIT TRUSTS
547Charge to tax under Chapter 10
548Income charged
549Person liable
550Income tax treated as paid

CHAPTER 11
TRANSACTIONS IN DEPOSITS
551Charge to tax on profits from disposal of deposit rights
552Meaning of "deposit rights"
553Income charged
554Person liable

CHAPTER 12
DISPOSALS OF FUTURES AND OPTIONS INVOLVING GUARANTEED RETURNS
Charge to tax under Chapter 12
555Charge to tax under Chapter 12
556Income charged
557Person liable
558Meaning of "future", "option" etc.

When disposals involve guaranteed returns
559When disposals involve guaranteed returns
560Production of guaranteed returns
561The return from one or more disposals

When disposals of futures and options occur
562When disposals of futures and options occur: general
563Timing of certain grants of options where related disposals occur later
564Deemed disposal where futures run to delivery or options are exercised
565Interpretation of section 564
566When transactions are related

Losses
567Losses

Trustees
568Special rule for certain income of trustees

Transfer of assets abroad
569Anti-avoidance: transfer of assets abroad

CHAPTER 13
SALES OF FOREIGN DIVIDEND COUPONS
570Charge to tax under Chapter 13
571Meaning of "foreign holdings" etc.
572Income charged
573Person liable

PART 5
MISCELLANEOUS INCOME
CHAPTER 1
INTRODUCTION
574Overview of Part 5
575Provisions which must be given priority over Part 5
576Priority between Chapters within Part 5
577Territorial scope of Part 5 charges

CHAPTER 2
RECEIPTS FROM INTELLECTUAL PROPERTY
Introduction
578Contents of Chapter

Charge to tax on non-trading income from intellectual property
579Charge to tax on royalties and other income from intellectual property
580Income charged under section 579
581Person liable for tax under section 579
582Deductions in calculating certain income charged under section 579

Disposals of know-how
583Charge to tax on income from disposals of know-how
584Exceptions to charge under section 583
585Income charged under section 583
586Person liable for tax under section 583

Sales of patent rights
587Charge to tax on income from sales of patent rights
588Income charged under section 587
589Person liable for tax under section 587
590UK resident sellers: spreading rules
591Non-UK resident sellers: election for spreading
592Further provision about elections for spreading: instalments
593Death of seller
594Winding up of a body corporate
595Deduction of tax from payments to non-UK residents
596Adjustments where tax has been deducted
597Licences connected with patents
598Rights to acquire future patent rights
599Sums paid for Crown use etc. treated as paid under licence

Relief from income tax on patent income
600Relief for expenses: patent income
601How relief is given under section 600

Payments received after deduction of tax
602Payments received after deduction of tax

Supplementary
603Contributions to expenditure
604Contributions not made by public bodies nor eligible for tax relief
605Exchanges
606Apportionment where property sold together
607Questions about apportionments affecting two or more persons
608Meaning of "capital sums" etc.

CHAPTER 3
FILMS AND SOUND RECORDINGS: NON-TRADE BUSINESSES
609Charge to tax on films and sound recordings businesses
610Income charged
611Person liable
612Calculation of income
613Application of trading income rules to non-trade businesses

CHAPTER 4
CERTAIN TELECOMMUNICATION RIGHTS: NON-TRADING INCOME
614Charge to tax on certain telecommunication rights of a non-trader
615Income charged
616Person liable
617Deductions in calculating certain income charged
618Payments received after deduction of tax

CHAPTER 5
SETTLEMENTS: AMOUNTS TREATED AS INCOME OF SETTLOR
Charge to tax under Chapter 5
619Charge to tax under Chapter 5
620Meaning of "settlement" and "settlor"

Income charged and person liable
621Income charged
622Person liable

Rules for calculating income
623Calculation of income

Income treated as income of settlor: retained interests
624Income where settlor retains an interest
625Settlor's retained interest
626Exception for outright gifts between spouses
627Exceptions for certain types of income
628Exception for gifts to charities

Income treated as income of settlor: unmarried children
629Income paid to unmarried minor children of settlor
630Exception for gifts to charities
631Retained and accumulated income
632Offshore income gains

Capital sums treated as income of settlor: trustees' payments
633Capital sums paid to settlor by trustees of settlement
634Meaning of "capital sum" and "sums paid to settlor"
635Amount of available income
636Calculation of undistributed income
637Qualifications to section 636

Trustees' payments: further provisions
638Capital sums paid by way of loan or repayment of loan
639Loans to participators in close companies
640Grossing-up of deemed income

Capital sums treated as income of settlor: connected bodies
641Capital sums paid to settlor by body connected with settlement
642Exception for certain loans or repayments of loans
643Interpretation of sections 641 and 642

Settlements by two or more settlors
644Application to settlements by two or more settlors
645Property or income originating from settlor

Other supplementary provisions
646Adjustments between settlor and trustees etc.
647Power to obtain information
648Income arising under a settlement

CHAPTER 6
BENEFICIARIES' INCOME FROM ESTATES IN ADMINISTRATION
Charge to tax on estate income
649Charge to tax on estate income
650Absolute, limited and discretionary interests
651Meaning of "UK estate" and "foreign estate"

Types of estate income
652Estate income: absolute interests in residue
653Meaning of "the administration period" and "the final tax year"
654Estate income: limited interests in residue
655Estate income: discretionary interests in residue

Income charged and person liable
656Income charged: UK estates
657Income charged: foreign estates
658Special rules for foreign income
659Person liable

Basic amount of estate income: general calculation rules
660Basic amount of estate income: absolute interests
661Basic amount of estate income: limited interests
662Basic amount of estate income: discretionary interests
663The applicable rate for grossing up basic amounts of estate income
664The aggregate income of the estate

Further provisions for calculating estate income relating to absolute interests
665Assumed income entitlement
666The residuary income of the estate
667Shares of residuary income of estate
668Reduction in share of residuary income of estate
669Reduction in residuary income: inheritance tax on accrued income
670Applicable rate for determining assumed income entitlement (UK estates)

Special rules for successive interests
671Successive absolute interests
672Successive interests: assumed income entitlement of holder of absolute interest following limited interest
673Successive interests: payments in respect of limited interests followed by absolute interests
674Successive interests: holders of limited interests
675Basic amount of estate income: successive limited interests
676Apportionments

Relief where foreign estates have borne UK income tax
677Relief where UK income tax borne by foreign estate: absolute interests
678Relief where UK income tax borne by foreign estate: limited and discretionary interests

General
679Income from which basic amounts are treated as paid
680Income treated as bearing income tax
681Transfers of assets etc. treated as payments
682Assessments, adjustments and claims after the administration period

CHAPTER 7
ANNUAL PAYMENTS NOT OTHERWISE CHARGED
683Charge to tax on annual payments not otherwise charged
684Income charged
685Person liable
686Payments received after deduction of tax

CHAPTER 8
INCOME NOT OTHERWISE CHARGED
687Charge to tax on income not otherwise charged
688Income charged
689Person liable

PART 6
EXEMPT INCOME
CHAPTER 1
INTRODUCTION
690Overview of Part 6

CHAPTER 2
NATIONAL SAVINGS INCOME
691National Savings Bank ordinary account interest
692Income from savings certificates
693Income from Ulster Savings Certificates

CHAPTER 3
INCOME FROM INDIVIDUAL INVESTMENT PLANS
694Income from individual investment plans
695Investment plans
696Plan managers
697Special requirements for certain foreign managers
698Requirements for discharge of foreign institution's duties
699Non-entitlement to exemption
700Information
701General and supplementary powers

CHAPTER 4
SAYE INTEREST
702Interest under certified SAYE savings arrangements
703Meaning of "certified SAYE savings arrangement"
704Types of arrangements and providers
705Certification of arrangements
706Withdrawal and variation of certifications and connected requirements
707Authorisation of providers
708Withdrawal and variation of authorisations

CHAPTER 5
VENTURE CAPITAL TRUST DIVIDENDS
709Venture capital trust dividends
710Treatment of shares where annual acquisition limit exceeded
711Identification of shares after disposals
712Identification of shares after reorganisations etc.

CHAPTER 6
INCOME FROM FOTRA SECURITIES
713Introduction: securities free of tax to residents abroad ("FOTRA securities")
714Exemption of profits from FOTRA securities
715Interest from FOTRA securities held on trust
716Restriction on deductions etc. relating to FOTRA securities

CHAPTER 7
PURCHASED LIFE ANNUITY PAYMENTS
Partial exemption for purchased life annuity payments
717Exemption for part of purchased life annuity payments
718Excluded annuities
719Extent of exemption under section 717
720Exempt proportion: term dependent solely on duration of life
721Exempt sum: term dependent solely on duration of life
722Consideration for the grant of annuities
723Determinations
724Regulations

Immediate needs annuities
725Annual payments under immediate needs annuities
726Meaning of "care provider"

CHAPTER 8
OTHER ANNUAL PAYMENTS
Certain annual payments by individuals
727Certain annual payments by individuals
728Commercial payments
729Payments for non-taxable consideration
730Foreign maintenance payments

Periodical payments of personal injury damages etc.
731Periodical payments of personal injury damages
732Compensation awards
733Persons entitled to exemptions for personal injury payments etc.
734Payments from trusts for injured persons

Health and employment insurance payments
735Health and employment insurance payments
736Health and employment risks and benefits
737Period for which payments may be made
738Risk of significant loss
739Conditions to be met by policies also providing other benefits
740Conditions to be met where policies are linked
741Aggregation of policies where employment ends for health reasons
742Meaning of "the insured"
743Policies for the benefit of others who contribute to premiums

Payments to adopters
744Payments to adopters: England and Wales
745Payments to adopters: Scotland
746Payments to adopters: Northern Ireland
747Power to amend sections 744 to 746

Payments by persons liable to pool betting duty
748Payments by persons liable to pool betting duty

CHAPTER 9
OTHER INCOME
Interest only income
749Interest paid under repayment supplements
750Interest from tax reserve certificates
751Interest on damages for personal injury
752Interest under employees' share schemes
753Interest on repayment of student loan
754Redemption of funding bonds
755Interest on foreign currency securities etc. owned by non-UK residents
756Which securities and loans are foreign currency ones for section 755

Interest and royalty payments
757Interest and royalty payments: introduction
758Exemption for certain interest and royalty payments
759The person making the payment
760The person beneficially entitled to the payment
761Meaning of "25% associates"
762Interest payments: exemption notices
763Special relationships
764Application of ICTA provisions about special relationships
765Anti-avoidance
766Interest and royalty payments: interpretation
767Power to amend references to the Directive by order

Income from commercial occupation of woodlands
768Commercial occupation of woodlands

Housing grants
769Housing grants

Approved share incentive plan distributions
770Amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment

Foreign income of consular officers and employees
771Relevant foreign income of consular officers and employees
772Further provisions about Orders under section 771

Income of non-UK residents from certain securities
773Income from Inter-American Development Bank securities
774Income from securities issued by designated international organisations

Other
775Income towards reducing the national debt
776Scholarship income
777VAT repayment supplements
778Incentives to use electronic communications
779Gains on commodity and financial futures
780Disabled person's vehicle maintenance grant
781Payments under New Deal 50plus
782Payments under employment zone programme

CHAPTER 10
GENERAL
783General disregard of exempt income for income tax purposes

PART 7
INCOME CHARGED UNDER THIS ACT: RENT-A -ROOm ANd FOSTEr-CARe RELIEf
CHAPTER 1
RENT-A -ROOm RELIEf
Introduction
784Overview of Chapter 1
785Person who qualifies for relief

Basic definitions
786Meaning of "rent-a-room receipts"
787Meaning of "residence"
788Meaning of "total rent-a-room amount"

Individual's limit
789The individual's limit
790Exclusive receipts condition

Relief if amount does not exceed limit
791Full rent-a-room relief: introduction
792Full rent-a-room relief: trading income
793Full rent-a-room relief: property income
794Full rent-a-room relief: income chargeable under Chapter 8 of Part 5

Alternative calculation of profits if amount exceeds limit
795Alternative calculation of profits: introduction
796Alternative calculation of profits: trading income
797Alternative calculation of profits: property income
798Alternative calculation of profits: income chargeable under Chapter 8 of Part 5

Elections
799Election not to apply full relief
800Election for alternative method of calculating profits
801Time limit on adjustment of assessment

Interpretation
802Minor definitions

CHAPTER 2
FOSTER-CARE RELIEF
Introduction
803Overview of Chapter 2
804Person who qualifies for relief

Basic definitions
805Meaning of "foster-care receipts"
806Meaning of providing foster care
807Calculation of "total foster-care receipts"

Individual's limit
808The individual's limit
809Share of fixed amount: residence used by more than one foster carer
810Share of fixed amount: income period not a year
811The amount per child

Relief if amount does not exceed limit
812Full foster-care relief: introduction
813Full foster-care relief: trading income
814Full foster-care relief: income chargeable under Chapter 8 of Part 5

Alternative calculation of profits if amount exceeds limit
815Alternative calculation of profits: introduction
816Alternative calculation of profits: trading income
817Alternative calculation of profits: income chargeable under Chapter 8 of Part 5
818Election for alternative method of calculating profits
819Adjustment of assessment

Periods of account not ending on 5th April
820Periods of account not ending on 5th April
821Meaning of "relevant limit"
822Full relief
823Alternative method of calculating profits

Capital allowances for foster carers carrying on trade
824Capital allowances: introduction
825Carried forward unrelieved qualifying expenditure
826Excluded capital expenditure
827Excluded capital expenditure: subsequent treatment of asset

Overlap profit
828Overlap profit

PART 8
FOREIGN INCOME: SPECIAL RULES
CHAPTER 1
INTRODUCTION
829Overview of Part 8
830Meaning of "relevant foreign income"

CHAPTER 2
RELEVANT FOREIGN INCOME CHARGED ON REMITTANCE BASIS
Remittance basis
831Claims for relevant foreign income to be charged on the remittance basis
832Relevant foreign income charged on the remittance basis
833Income treated as remitted: repayment of UK-linked debts
834Arrangements treated as repayment of UK-linked debts

Relief for delayed remittances
835Relief for delayed remittances
836Relief for delayed remittances: backdated pensions
837Claims for relief on delayed remittances

CHAPTER 3
RELEVANT FOREIGN INCOME CHARGED ON ARISING BASIS: DEDUCTIONS AND RELIEFS
838Expenses attributable to collection or payment of relevant foreign income
839Annual payments payable out of relevant foreign income
840Relief for backdated pensions charged on the arising basis

CHAPTER 4
UNREMITTABLE INCOME
841Unremittable income: introduction
842Claim for relief for unremittable income
843Withdrawal of relief
844Income charged on withdrawal of relief after source ceases
845Valuing unremittable income

PART 9
PARTNERSHIPS
Introduction
846Overview of Part 9
847General provisions
848Assessment of partnerships

Calculation of partners' shares
849Calculation of firm's profits or losses
850Allocation of firm's profits or losses between partners   *
851Calculations etc. where firm has other income or losses

Firms with trading income
852Carrying on by partner of notional trade
853Basis periods for partners' notional trades

Firms with trading and other source income
854Carrying on by partner of notional business
855Basis periods for partners' notional businesses
856Overlap profits from partners' notional businesses

Firms with a foreign element
857Partners to whom the remittance basis may apply
858Resident partners and double taxation agreements

Miscellaneous
859Special provisions about farming and property income
860Adjustment income
861Sale of patent rights: effect of partnership changes
862Sale of patent rights: effect of later cessation of trade
863Limited liability partnerships

PART 10
GENERAL PROVISIONS
CHAPTER 1
INTRODUCTION
864Overview of Part 10

CHAPTER 2
GENERAL CALCULATION RULES ETC.
Unpaid remuneration
865Unpaid remuneration: non-trades and non-property businesses

Employee benefit contributions
866Employee benefit contributions: non-trades and non-property businesses

Business entertainment and gifts
867Business entertainment and gifts: non-trades and non-property businesses

Social security contributions
868Social security contributions: non-trades etc.

Penalties, interest and VAT surcharges
869Penalties, interest and VAT surcharges: non-trades etc.

Crime-related payments
870Crime-related payments: non-trades and non-property businesses

Apportionment of profits
871Apportionment etc. of miscellaneous profits to tax year

Calculation of losses
872Losses calculated on same basis as miscellaneous income

CHAPTER 3
SUPPLEMENTARY AND GENERAL PROVISIONS
Orders and regulations
873Orders and regulations made by Treasury or Board

Interpretation
874Activities in UK sector of continental shelf
875Meaning of "caravan"
876Meaning of "farming" and related expressions
877Meaning of grossing up
878Other definitions
879Interpretation: Scotland
880Interpretation: Northern Ireland

General and final
881Disapplication of corporation tax: section 9 of ICTA
882Consequential amendments
883Commencement and transitional provisions etc.
884Repeals and revocations
885Abbreviations and general index in Schedule 4
886Short title
 

 
    Schedule 1-Consequential amendments
    Part 1-Income and Corporation Taxes Act 1988
    Part 2-Other enactments
    Schedule 2-Transitionals and savings etc.
    Part 1-General provisions
    Part 2-Changes in the law
    Part 3-Trading income
    Part 4-Property income
    Part 5-Savings and investment income: general
    Part 6-Savings and investment income: insurance contracts and policies made before certain dates
    Part 7-Savings and investment income: gains from contracts for life insurance etc. (personal portfolio bonds)
    Part 8-Miscellaneous income
    Part 9-Exempt income
    Part 10-Foster-care relief
    Part 11-Foreign income: special rules
   Part 12-Other provisions    *
    Schedule 3-Repeals and revocations
    Schedule 4-Abbreviations and defined expressions
    Part 1-Abbreviations of Acts
    Part 2-Index of expressions defined in this Act etc.
 
* Amended by correction slip
 


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