special business receipts (1) for income tax purposes - L10 Flashcards
L10
What does s. 96 ITTOIA 2005 say about business receipts?
Only receipts of an income nature should be included when calculating trade income profits.
Can a deposit become the taxpayer’s property?
Yes, Elson v Prices Tailors Ltd held that deposits can be income receipts.
Are security deposits taxable business receipts?
No, Total Mauritius Ltd – they remain customer property unless forfeited.
What if the taxpayer holds money for someone else?
Not income – Morley v Tattersall: even if unclaimed, it’s not the taxpayer’s.
When does held money become taxable income?
When rights to claim expire – Jay’s The Jeweller Ltd.
Are mistaken overpayments business income?
Yes, unless repaid – Pertemps Recruitment Partnership Ltd.
What are the two conditions for compensation to be business income?
It must be a business receipt and of an income (not capital) nature.
What is the general rule for compensation for lost income?
It is taxable business income – London & Thames Haven Oil Wharves v Attwooll.
Is compensation for increased business costs taxable?
Yes – Donald Fisher (Ealing) Ltd v Spencer.
What about compensation for damage to fixed assets?
Capital receipt – Glenboig Union Fireclay Co.
And for circulating capital?
Taxable business income – Gliksten & Son v Green.
When is compensation for giving up a contract income?
If the contract is an “ordinary commercial contract” – Van den Berghs v Clark.
When is it a capital receipt instead?
If the contract is “structural” – forms the business framework.
Examples of compensation as business income?
Short Bros Ltd (shipbuilding), Kelsall Parsons (sales agency).
Examples of compensation as capital receipts?
Barr, Crombie & Co; Sabine v Lookers Ltd.
What makes a contract “structural”?
Long-term, dominant part of business, its loss disrupts the business.
Can one major contract still be non-structural?
Yes – Fleming v Bellow Machine: 85% of business but not the entire framework.
Is a payment for not doing business always income?
Not always – see contrast in Thompson v Magnesium Elektron (income) vs Higgs v Olivier (capital).
What did White v G and M Davies decide?
Compensation for changing how business is done = business receipt, not capital.
What is the general treatment of exclusivity tie payments?
Business income – Evans v Wheatley.
When can exclusivity compensation be capital?
If contract requires spending it on capital investment – IRC v Coia.
