Commentary on Sections Structure of Chapters Overview
2369.This Chapter imposes a charge on profits derived from certain telecommunication rights not held for trading purposes. It also sets out how the profits are to be calculated. The Chapter is based on Schedule D Cases III, V and VI of ICTA and Schedule 23 to FA 2000. The rights dealt with in the Chapter are certain telecommunications licences and capacity on telecommunications cable systems, known as indefeasible rights to use (IRU).
2370.Schedule 23 to FA 2000 does not impose a charge to tax on the income derived from the rights. The main purpose of Schedule 23 to FA 2000 is to allow a taxpayer who acquires qualifying rights a revenue deduction for expenditure that would otherwise be treated as capital for tax purposes. It does this by providing that the income tax treatment follows the treatment in the accounts provided the accounts are prepared in accordance with generally accepted accounting practice. This rule applies not only to the acquisition but also to revaluations and disposals.
2371.In most cases it is likely that the rights will be acquired for use in a trade. For this reason Schedule 23 to FA 2000 is rewritten as Chapter 10 of Part 2 of this Act. But the Schedule applies for all income tax purposes. This Chapter rewrites the charge if the assets are not acquired for the purposes of a trade.
2372.The Chapter applies only to IRUs acquired on or after 21 March 2000. See the transitional rules in paragraphs 130 and 131 of Schedule 2 to this Act. No telecommunications licences to which this Chapter applies were acquired before that date.