Tax information and impact note on Income and Corporation Tax: trading income received in non-monetary form
Published 16 March 2016
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Who is likely to be affected
Businesses receiving trading or property income in non-monetary form.
General description of the measure
The measure will ensure that trading or property income received in non-monetary form is fully brought into account in calculating taxable profits for Income Tax and Corporation Tax (CT) purposes.
The measure is not intended to alter existing principles, but to put beyond doubt the current position.
Policy objective
This measure ensures that the tax rules provide fairness and consistency by confirming that trading and property income received in non-monetary form is fully taxable.
Background to the measure
The measure was announced at Budget 2016.
HM Revenue and Customs (HMRC) considers that existing law already requires that trading and property income received in non-monetary form is brought into account fully in calculating taxable profits.
However, this has been challenged in some instances and the legislation is intended to confirm that such income is taxable in full.
Detailed proposal
Operative date
The measure will have effect in relation to trading and property business transactions occurring on or after 16 March 2016.
Current law
Current law in relation to the calculation of taxable trading profits comprises legislation contained in Part 2 of Income Tax Trading and Other Income Act 2005 (ITTOIA 2005) and Part 3 of the Corporation Tax Act 2009 (CTA 2009), and case law (for example, the 1948 House of Lords decision in Gold Coast Selection Trust Ltd v Humphrey (30TC209))
The same basic rules apply for the purposes of calculating taxable property income by virtue of section 272 of ITTOIA.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to confirm that trading income received in non-monetary form is fully brought into account in calculating taxable profits for Income Tax and CT purposes. This will also apply to the calculation of taxable property income.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 20120 | 2020 to 2021 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact. The measure supports the Exchequer in its commitment to protect revenue.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure is not expected to have any impact on households and families.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
The measure is not expected to have any impact on groups with particular protected characteristics.
Impact on business including civil society organisations
This measure will have no impact on businesses. The proposed measure is not intended to alter the legal position, but to confirm it.
Operational impact (£m) (HMRC or other)
This measure is not expected to have any operational impact.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, please contact Mark Bingham on Telephone: 03000 511496 or email: mark.bingham@hmrc.gsi.gov.uk.