Income Tax (Trading and Other Income) Act 2005 section 869

Penalties, interest and VAT surcharges and interest: non-trades etc.

Section 869 prevents tax penalties, statutory interest charges, and VAT surcharges from being deducted when calculating non-trade, non-property income chargeable to income tax.

• When calculating income tax on sources other than trades, professions, vocations, or property businesses, no deduction is permitted for statutory tax penalties or interest charges
• The prohibition covers a wide range of taxes including income tax, capital gains tax, corporation tax, VAT, excise duties, insurance premium tax, landfill tax, climate change levy, aggregates levy, customs duties, and stamp duty land tax
• VAT default surcharges under section 59 of the VAT Act 1994 are also specifically blocked from being deducted
• Equivalent rules for trades, professions, and vocations are found in section 54, while sections 272 and 272ZA apply the same restriction to property businesses