Commentary on Sections Overview Chapter 7: Trade profits: gifts to charities etc Section 105: Gifts of trading stock to charities etc
407.This section sets out the main rule for gifts of trading stock. It is based on sections 83A and 84 of ICTA, which give relief for gifts to charities and educational establishments respectively. The corresponding rule for income tax is in section 108 of ITTOIA.
408.When a company disposes of trading stock other than in the course of a trade the general rule is that the market value of the stock is taken into account in calculating the profits of the trade (see Chapter 10 of this Part of this Act). This section sets out an exception to this general rule and applies if the company disposes of trading stock by way of gift to a charity etc.
409.There is a test for gifts to educational establishments in section 84(1)(a) of ICTA concerning the use to which the gift is put in the business of the educational establishment. There is no equivalent test in the rules for the relief for gifts to charities, in section 83A of ICTA. This section does not reproduce the condition in section 84(1)(a) of ICTA. See Change 26 in Annex 1.
410.Subsection (1) combines the ICTA reliefs for gifts to charities and gifts to educational establishments. It includes the extension of the relief to registered clubs in Part 3 of Schedule 18 to FA 2002. The relief covers gifts “for the purposes of” charities etc. See Change 27 in Annex 1.
411.The section does not require a claim by the company. In this respect, the section is different from section 84(3) of ICTA (but not from section 83A). See Change 28 in Annex 1.
412.Subsection (4) does not reproduce the references to the British Museum and the Natural History Museum. These bodies are charities within subsection (1)(a) of the section.