Commentary on Sections Overview Overview Section 12: Profits of mines, quarries and other concerns
81.This section treats the profits and losses of certain concerns as if they were the profits and losses of a trade. It is based on section 55 of ICTA.
82.The feature most of the concerns have in common is that they exploit land for its natural resources. The section applies only if the activity carried on by the concern does not amount to a trade on first principles. If the activity is a trade on first principles the profits and losses will be taxed in accordance with section 5 of this Act.
83.Subsection (1) provides the profits and losses of the concern are calculated as if the concern were a trade. See part (A) Change 2 in Annex 1.
84.The section does not deem the concern to be carrying on a trade. This means the profits will not be liable to Class 4 national insurance contributions as they are not immediately derived from the carrying on or exercise of a trade. Nor will the taxpayer qualify for capital gains tax roll-over relief under section 152 of TCGA. That section requires the taxpayer to be carrying on a trade as defined in section 158(2) of TCGA.
85.Subsection (2) provides that the profits and losses of the concern are charged to tax as if the concern were a trade carried on in the United Kingdom. See part (B) Change 2 in Annex 1.
86.This rule applies even if the activity is carried on outside the United Kingdom. But subsection (2) makes clear that this territorial extension applies only to UK residents.
87.Subsection (3) provides that the normal loss rules apply. See part (C) Change 2 in Annex 1.
88.Subsection (4) lists the concerns to which the section applies. It updates the reference to “fishings” to “rights of fishing”.
89.Subsection (5) makes clear that section 10 of this Act has priority over section 12. This is because section 10 treats the activity as if it were a trade. This contrasts with the approach of this section, which is to the treat the profits and losses as trade profits and losses. Section 10 may be more beneficial for the taxpayer. For example, the activity would qualify as a trade for capital gains tax purposes. See section 158(2) of TCGA.