INCOME TAX INTRODUCED: FOCUS ON BUSINESS (THAT IS: SELF-EMPLOYED TAXPAYERS) - L5

Question 1

What are the main statutes for income tax?

Answer 1

ITEPA 2003, ITTOIA 2005, ITA 2007

Question 2

What does s. 3 ITA 2007 list?

Answer 2

The main income tax charges

Question 3

What are key statutory exemptions from income tax?

Answer 3

s.727 (maintenance), s.731 & s.751 (personal injury), s.776 (scholarships), s.403 & s.309 ITEPA (termination payments), Part 10 ITA (charities)

Question 4

When does the tax year run?

Answer 4

6th April to 5th April of the following year

Question 5

What changed about the tax year in 2024?

Answer 5

Businesses must calculate income based on exact tax year dates

Question 6

What did Lord MacNaghten say in London CC v A-G (1901)?

Answer 6

Income tax is only a tax on income, not capital

Question 7

Is “income” defined in statute?

Answer 7

No – Van den Berghs v Clark (1935)

Question 8

What counts as income in Tennant v Smith (1892)?

Answer 8

Money or “money’s worth” – must be convertible to cash

Question 9

Are gifts, winnings, or bets income?

Answer 9

No – Graham v Green (1925), Down v Compton (1937)

Question 10

When do betting profits count as income?

Answer 10

If it’s run as a business – Partridge v Mallandaine, Burdge v Pyne

Question 11

Is prize money taxable?

Answer 11

Yes, if won in a business or career context – Norman v Evans (1965)

Question 12

What are “sources” of income?

Answer 12

Types of income taxed under different rules (e.g. wages, rent)

Question 13

Can rules from one source apply to another?

Answer 13

No – Mitchell v Ross (1962)

Question 14

Can HMRC issue multiple assessments if unsure of source?

Answer 14

Yes – R v Inspector of Taxes, ex p Clarke (1974)

Question 15

What does s. 5 ITTOIA 2005 cover?

Answer 15

Profits from trade, profession, or vocation

Question 16

What is a “trade” under s. 989 ITA 2007?

Answer 16

Any venture in the nature of trade

Question 17

What activities are deemed to be trades?

Answer 17

Farming (s.9), commercial land use (s.10), land concerns (s.12) – ITTOIA 2005

Question 18

How is “trade” interpreted by courts?

Answer 18

As an ordinary English word – Griffiths v JP Harrison

Question 19

What distinction did Ransom v Higgs (1974) explain?

Answer 19

Trade vs employment vs profession vs vocation

Question 20

Can a one-off sale be trading income?

Answer 20

Yes – Edwards v Bairstow (1956)

Question 21

What makes a case borderline between trade and investment?

Answer 21

Short-term resale may be trade; long-term is likely investment

Question 22

What is a “profession” in IRC v Maxse (1919)?

Answer 22

Intellectual or mentally-controlled manual services

Question 23

When is a trader not a professional?

Answer 23

If the main activity is buying/selling – Christopher Barker & Sons v IRC (1919)

Question 24

What is a “vocation”?

Answer 24

A residual category for self-employed roles not trade or profession

Question 25

What case classed bookmakers as a vocation?

Answer 25

Partridge v Mallandaine (1886)

Question 26

How are sportspeople/artists classified?

Answer 26

Either profession or vocation – terms are used interchangeably

Question 27

What’s the difference between profession and vocation?

Answer 27

A profession can be part-time; vocation may mean casual/dabbling

Question 28

What case supports this?

Answer 28

Billam v Griffith (1941) – part-time playwright held to have a vocation

Question 29

Does the label (trade/profession/vocation) affect the tax rules?

Answer 29

No – the rules applied are nearly identical