Schedule 4: Supplemental taxation provisions for exempt activities
485.Under section 27, trading income from exempt activities of the NDA or a relevant site licensee is not taxed, nor can the exempt activities give rise to tax losses. Subsection (2) of that section gives effect to this Schedule, which makes further, detailed provisions for the exemption.
486.Schedule 4 comprises supplemental provisions concerning the exempt activities which provide machinery to enable the exemption to work more easily in practice and safeguards to ensure that no unintended tax advantage arises from the tax exemption.
487.The aim of paragraphs 1 and 2 is to ensure that income and expenditure associated with exempt activities is kept separate for tax purposes from taxable income and expenditure and to clarify the treatment of accounting periods when companies begin or cease to carry on exempt activities. Paragraph 1 ensures that exempt activities are treated as a separate trade from non-exempt activities. Paragraph 2 ensures that accounting periods end for tax purposes when any entity becomes an NDA company, is no longer an NDA company or begins or ceases to carry on exempt activities.
488.Paragraphs 3 and 4 are also concerned with ensuring expenditure and allowances associated with exempt activities do not qualify to be tax deductible. Paragraph 4 prevents capital allowances being claimed by the NDA or an NDA company in respect of assets used in exempt activities through finance leasing the assets to the NDA or an NDA company.
489.Paragraph 5 ensures that where an industrial building has an identifiable part that is used by the NDA or an NDA company for exempt activities and part for a taxable trade, then no industrial buildings allowances may be claimed in computing the profits of the taxable trade in respect of the part of the building used for exempt activities.
490.Paragraph 6 ensures that the purchaser does not obtain a tax benefit from the fact that the NDA or NDA company has not been able to claim industrial buildings allowances by reason of the fact it has been engaged in exempt activities. Accordingly, where an industrial building is disposed of by the NDA or an NDA company to a company which is neither the NDA nor an NDA company, the amount of qualifying expenditure in respect of which industrial allowances may be claimed by the purchaser is calculated as if the activities that the NDA or the NDA company had been engaged in were not exempt activities and all writing down allowances had been claimed by the NDA or the NDA company on the basis that the activities were not exempt activities.