Introduction Details of the Schedule.
2.Paragraph 2 inserts new Chapter 5A ‘Trade Profits: Flat Rate Expenses’ into the Income Tax (Trading and other Income) Act 2005 (ITTOIA). The new chapter comprises new sections 94C-I.
3.New section 94C excludes a partnership where one of the partners is not an individual (for example a company) from using the fixed rates provided for in new chapter 5A.
4.New section 94D sets out the circumstances in which a fixed rate deduction is allowable for expenditure on vehicles.
5.New section 94D(1) provides that new section 94D applies where a deduction would be allowed under the normal trading income rules for expenditure on a relevant vehicle.
6.New section 94D(4) provides that where a deduction is made under new section 94D then no other deduction can be made and that only a deduction under section 94D is allowed in respect of the relevant vehicle in any later period.
7.New section 94D(6) provides a definition of qualifying expenditure as being amounts incurred on acquisition and ownership of a vehicle.
8.New section 94E(1) provides that a vehicle is an excluded vehicle if either of two conditions are met.
9.New section 94E(2) provides the first condition which is that if the person carrying on the trade has at any time claimed any capital allowances under Part 2 CAA 2001 on the provision of the vehicle then the vehicle is an excluded vehicle.
10.New section 94E(3) provides the second condition which is that if the vehicle is a van or a motorcycle and expenditure incurred on acquiring the van or motorcycle has been deducted in calculating profits of the trade on a cash basis the vehicle is an excluded vehicle.
11.New section 94F provides the means of calculating the ‘appropriate mileage amount’, the amount allowable as an expense of the business. The rate for a vehicle is computed by multiplying the number of miles of business journeys made by a person (other than as a passenger) by the rate appropriate to that vehicle.
12.New section 94H deals with a fixed rate deduction for the business use of a home. Where the section applies (as set out in subsection (1), a person may make a fixed deduction instead of making a deduction under the normal trading income rules.
13.New section 94I provides for a fixed rate adjustment where premises are used both as a home and for business purposes. Where the section applies (as set out in subsection (1)), a person may make a fixed deduction instead of making a deduction under the normal trading income rules.
14.New section 94I(6) provides that for the purposes of the fixed rate deduction, the relevant persons occupying the premises are those who occupy the premises as a home or who stay at the premises otherwise than as part of the trade.
15.Paragraph 4 inserts in section 254 new subsection 2B which provides that where a business has used section 94D fixed rate mileage expenses in respect of a vehicle then post cessation expenses in respect of that vehicle will also be under section 94D.
16.Paragraph 5 amends the Capital Allowances Act 2001 (CAA 2001).
17.New section 38ZA CAA 2001 provides that if expenditure has been deducted under new section 94D ITTOIA 2005 then for capital allowances purposes there is no qualifying expenditure in respect of the vehicle.
18.Paragraph 5 also inserts into section 59 CAA 2001 new subsections (8)-(10) which provide that where a person uses simplified expenses for a vehicle in a tax year then none of the unrelieved qualifying expenditure in respect of that vehicle can be carried forward.