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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Sale of income by an individual in exchange for capital: tax year

S777, S778, S786 Income Tax Act 2007

The charge to Income Tax under the sale of income legislation generally arises in the tax year in which the capital amount is receivable.

A capital amount is not regarded as having become receivable by some person for this purpose until that person can effectively enjoy or dispose of it.

If the capital amount consists of property or a right the value of which derives substantially the whole of its value from the individual’s own activities, the charge to Income Tax under the sale of income legislation arises in the tax year in which the property or right is sold or realised.

Recovery of tax

Where an individual is assessed by reason of the sale of income legislation in respect of a capital amount receivable by another person, he has power to recover the tax charged from that other person. The tax recoverable is calculated as if the occupation income treated as arising under these provisions is the highest part of the individual’s total income.

HMRC has alternative powers to collect tax from either the individual or the other person.