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Concession and practice: business tax 1 to 10

​B1: foreign tax on trading profits

Where a trader carries on a trade outside of Jersey and the profits of that trade bear the tax of that foreign country, the tax borne will be allowed as an expense although it is not strictly an expense incurred in earning the profits of the trade.
 
Foreign tax for the purpose of this paragraph does not include any tax paid in a country which has a double taxation arrangement with Jersey which includes specific provisions regarding relief for tax suffered on trading profits as, in these cases, relief should be determined in accordance with those provisions. 

B2: replacement allowances

Capital expenditure is not deductible in arriving at chargeable profits. However, by long-established concession, relief is granted for the cost of the replacement of machinery or plant, provided that no deduction of any kind was claimed for the original asset. This practical treatment is an alternative to capital allowances. A switch from the statutory to the non-statutory basis is not permitted.
 
The concession is conditional upon all of the plant and machinery used in the trade being subject to replacement allowances. In other words no plant and machinery used in the trade shall be subject to a claim for capital allowances.
 
For avoidance of doubt, the cost of replacing articles, other than machinery or plant, employed in the trade etc. is permitted by Article 70(d) of the Income Tax Law. 

B3: transfer of all machinery and plant to successor

Where all machinery or plant is transferred by a trader to his successor, the capital allowances will be calculated as if the trade had continued, provided that both parties agree. 

B4: capital allowances: commencement of trade

If the first financial period of the trade ends within the year of assessment in which it is started up (the first year), the trade will be assessed for that year on the profits or gains of that first financial period.
 
Capital allowances may be claimed on plant and machinery purchased and used in the trade in that first financial period subject to appropriate time apportionment.
 
Example 1
 
Trade commences 1 July 2012
First financial period 1 July 2012 to 31 December 2012 (6 months)
Plant and machinery purchased in first financial period = £50,000
 
​Capital allowances for the year of assessment 2012​£
​£50,000 x 25% =​12,500
​£12,500 x 6/12 =​6,250
Capital allowances due =
​6,250
 
Where the first financial period ends in the year following the year of assessment (the second year) the trade is assessed to tax for the first time in the second year on the profits or gains of the first financial period. Capital allowances claimed on plant and machinery used in the trade in that first financial period will be time apportioned in accordance with the financial period.

Example 2
 
Trade commences 1 July 2012
First financial period 1 July 2012 to 31 January 2013 (7 months)
Plant and machinery purchased in first financial period = £50,000
 
​Capital allowances for the year of assessment 2013​£
​£50,000 x 25% =​12,500
​£12,500 x 7/12 =​7,292
Capital allowances due =
​7,292
 
Example 3
 
Trade commences 1 October 2012
First financial period 1 October 2012 to 31 December 2013 (15 months)
Plant and machinery purchased in first financial period = £50,000
 
​Capital allowances for year of assessment 2013​£
​£50,000 x 25% =​12,500
​£12,500 x 15/12 =​15,625
Capital allowances due =
​15,625

B5: schedule A: machinery and plant used for the maintenance, repair or management of property

Where expenditure is incurred on plant and machinery in order to generate income which is taxable under Schedule A, relief will be available either by way of replacement allowances or, if a permanent choice is made, by way of capital allowances.

B6: capital allowances: investment holding companies

Relief for capital allowances is by concession extended to investment holding companies.

B7: fully furnished letting: 10% deduction in lieu of claims to capital allowances / replacement allowances

In the case of profits from fully furnished letting, a sum equal to 10% of the gross letting income may be deducted in arriving at the balance of profits assessable to income tax. This deduction is in lieu of claims to capital allowances computed in the conventional way and claims to the replacement allowance.
 
For such a claim to be granted, it would be expected that, to be classed as fully furnished, the following items would be supplied:
  • moveable furniture (beds, chairs, tables, sofas etc.)
  • television
  • fridges and freezers
  • oven
  • washing machine and dryer
  • carpets and other floor coverings
  • curtains
  • linen
  • crockery and cutlery
The list is not meant to be exhaustive but gives an indication of the assets which would be expected to be included in the property in order to justify a claim under this concession.
 
Entitlement to the 10% deduction does not depend on the provision of each and every item in the list. But the deduction is only due if fully furnished accommodation is genuinely provided. The provision of nominal furnishings will not meet this requirement. If the accommodation is not fully furnished, or only partly furnished, the 10% deduction of the gross letting income is not due. 

B8: enhancement of article 107 / 107A loss by capital allowances

The amount of capital allowances due to a trader for the year of assessment for which article 107 or 107A relief is claimed, so far as they have not been allowed against the assessment for that year, may be added to the loss or may be used to create a loss for article 107 or 107A relief purposes, if so claimed by the trader.
 
The concession applies only to capital allowances of the year of loss and does not extend to allowances which may have been carried forward from earlier years.
 

This concession does not apply to a company incorporated on or after 3rd June 2008 and all companies (other than utility companies taxed at 20%) from the year of assessment 2009.

B9: succession to trade by spouse / civil partner

Where, on the death of a husband or wife / civil partner, a business passed from the deceased to the surviving spouse / civil partner a succession to the trade has strictly occurred, necessitating the application of the cessation and commencement provisions.
 
However, these provisions will not be applied upon request by the executors or the surviving spouse / civil partner.
 

In that event the assessment for the year of death, computed on a continuing basis, will be time-apportioned between the deceased and the surviving spouse / civil partner.​

From the year of assessment 2013 the carry forward of losses or capital allowances of the period prior to the date of death will be allowed to the surviving spouse / civil partner.

B10: removal of a farmer to a new farm

If a farmer moves from one farm to another within a period of 12 months, his trade will be treated as having continued.​

However, a farmer who gives up some land but retains a part which is very different in size or character from his former land can have cessation and commencement provisions applied if he so wishes.

 
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