Annex 1: Minor Changes in the Law Change 95: General calculation rules: apportionment etc of miscellaneous profits and losses to accounting period: section 1307
This change modifies the application of section 72 of ICTA so that it applies to certain income within Schedule D Case V as well as Case VI. The corresponding change was made by for income tax by section 871 of ITTOIA (see Change 147 in Annex 1 to the explanatory notes for that Act).
This change brings the income tax and corporation tax codes back into line.
Section 72(1) of ICTA permits the apportionment of profits or losses for the purposes of Schedule D Cases I, II or VI if accounts have been made up for a period which is not coterminous with the accounting period. Section 72 of ICTA is applied by section 21A of ICTA for the purpose of calculating the profits of a Schedule A business.
Although section 72 of ICTA is expressed to apply in the case of profits or gains chargeable under Schedule D Cases I, II and VI only, it applies also to income from a trade chargeable to tax under Schedule D Case V. Section 70(2) of ICTA applies the rules applicable to Schedule D Case I in computing such Schedule D Case V income. Section 52 of this Act (apportionment etc. of profits and losses to accounting period) applies the rule in section 72 of ICTA to all trades, whether income from the trade falls within Schedule D Case I or Case V.
Section 1307 of this Act applies the rule in section 72 of ICTA for the purpose of calculating income charged under provisions listed in section 834A of ICTA (inserted by Schedule 1 to this Act). Subsection (2) of section 1307 disapplies section 834A(3) of ICTA, which excludes income chargeable under Chapter 8 of Part 10 of this Act from the tables in that section so far as the income arises from a source outside the United Kingdom. This ensures that section 1307 extends to income within Schedule D Case V as well as income within Case VI.
This change increases the range of income to which the apportionment provisions may apply.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.