Income Tax Act 2007 section 805–807

Individuals in partnership: exit charge

Sections 805 to 807, read together with these transitional rules in Schedule 2 paragraphs 150 to 153, deal with the exit charge that applies when an individual partner has claimed relief for licence-related trading losses and a chargeable event subsequently occurs, such as a disposal of the licence or a right to income derived from it.

• The exit charge rules in sections 805 to 807 restate and continue earlier anti-avoidance provisions from Finance Act 2004 (sections 126 to 128), so losses claimed under the older legislation are also caught.
• Disposals made before 10 February 2004 are excluded from the charge, and any non-taxable consideration received before that date is left out of the income calculation at Step 4 of section 806.
• Where the individual carried on the trade before 26 March 2004, expenditure incurred before 10 February 2004 in exploiting the licence is disregarded for the purposes of sections 805 to 807.
• Earlier charges already triggered under Finance Act 2004 section 127 are taken into account at Step 5 of section 806 to prevent a double charge on the same amounts.