Income Tax Act 2007

Charge on sale of occupation incomeU.K.

776Charge to tax on sale of occupation incomeU.K.

(1)Income tax is charged on income treated as arising under—

(a)section 778 (income arising where capital amount other than derivative property or right obtained), or

(b)section 779 (income arising where derivative property or right obtained).

(2)Tax is charged under this section on the full amount of income treated as arising in the tax year.

(3)The person liable for any tax charged under this section is the individual to whom the income is treated as arising.

(4)This section is subject to section 784 (exemption for sales of going concerns).

777Conditions for sections 778 and 779 to applyU.K.

(1)Sections 778 and 779 apply only if conditions A to C are met in respect of an individual.

(2)Condition A is that the individual carries on an occupation wholly or partly in the United Kingdom.

(3)Condition B is that transactions are effected or arrangements made to exploit the individual's earning capacity in the occupation by putting another person (see section 782) in a position to enjoy—

(a)all or part of the income or receipts derived from the individual's activities in the occupation, or

(b)anything derived directly or indirectly from such income or receipts.

(4)The reference in subsection (3) to income or receipts derived from the individual's activities includes a reference to payments for any description of copyright or licence or franchise or other right deriving its value from the individual's activities (including past activities).

(5)Condition C is that as part of, or in connection with, or in consequence of, the transactions or arrangements a capital amount is obtained by the individual for the individual or another person.

(6)For the purposes of subsection (5), the cases where an individual (“A”) obtains a capital amount for another person (“B”) include cases where A has put B in a position to receive the capital amount by providing B with something of value derived, directly or indirectly, from A's activities in the occupation.

(7)In this Chapter “capital amount” means an amount in money or money's worth which does not fall to be included in a calculation of income for [F1purposes of the Tax Acts otherwise than as a result of] this Chapter.

778Income arising where capital amount other than derivative property or right obtainedU.K.

(1)This section applies if the capital amount obtained as mentioned in section 777(5) does not consist of—

(a)property which derives substantially the whole of its value from the individual's activities, or

(b)a right which does so.

(2)The capital amount is treated for income tax purposes as income arising to the individual.

(3)The income is treated as arising in the tax year in which the capital amount is receivable.

(4)A capital amount is not regarded as having become receivable by a person for the purposes of this section until the person can effectively enjoy or dispose of it.

779Income arising where derivative property or right obtainedU.K.

(1)This section applies if—

(a)the capital amount obtained as mentioned in section 777(5) consists of—

(i)property which derives substantially the whole of its value from the activities of an individual, or

(ii)a right which does so, and

(b)the property or right is sold or otherwise realised.

(2)For the purposes of subsection (1), it does not matter whether the capital amount is obtained on one occasion or on two or more occasions (for example, because the individual acquires a stock option and subsequently exercises it).

(3)Income of an amount equal to the proceeds of sale or the realised value is treated for income tax purposes as income arising to the individual.

(4)The income is treated as arising in the tax year in which the property or right is sold or otherwise realised.