Commentary on Sections Overview Overview Section 44: Credit against tax on trade income
136.This section supplements section 42 in its application to trade income. It is based on section 798A of ICTA.
137.Section 798A(2) of ICTA applies for the interpretation of “the relevant income or gain” in section 797(1) of that Act. Section 798A(2) refers to “income arising or gains accruing”, and section 798A(3) has “income or gain” (three times). But “the relevant income or gain” in section 797(1) harks back to “any income or chargeable gain”, and it follows from the definition of “trade income” in section 798A(4) that section 798A does not affect credit relief against corporation tax on chargeable gains. Subsections (2) and (3) therefore omit as otiose the references to gains in section 798A(2) and (3).
138.In section 798A(3)(a) of ICTA, “deductions” is apt to include expenses. Subsection (3)(a) therefore omits “or expenses” as otiose.
139.Subsection (4) requires apportionments to be not only reasonable but also just. See Change 5 in Annex 1 and the commentary on section 37.
140.Before its amendment by paragraph 249 of Schedule 1 to CTA 2009, section 798A(4) of ICTA referred to section 104 of that Act and not to section 103 of that Act. Sections 103 and 104 of ICTA were rewritten for the purposes of corporation tax and repealed by CTA 2009. Most post-cessation receipts are charged under what used to be section 103 of ICTA, leaving what used to be section 104 of ICTA to pick up the “change of basis” adjustments. See section 104(3) of ICTA (repealed), which made it clear that section 103 of ICTA (repealed) had priority. Subsection (7) is based on section 798A(5) of ICTA, which was inserted by paragraph 249 of Schedule 1 to CTA 2009 in order to preserve the distinction between post-cessation receipts charged to tax by section 103 (to which section 798A does not apply) and those charged to tax by section 104 (to which section 798A does apply).