Commentary

Computation of Profits

Part XI Taxation
| Commentary

Computation of Profits

| Commentary

Computation of Profits

The schedular system

In the UK there is no general tax on income. It is only charged in respect of particular types of income: CTA 2009, s 2. This is because the UK largely retains a schedular system of income taxation.

A schedular (analytic) system of income tax distinguishes different types of income, eg interest, dividends, trading profits, rents. It also distinguishes between income and capital gains.

The schedular system introduced in 1806 had two purposes: (a) to prevent the Surveyor of Taxes from knowing what the total income of a taxpayer was; (b) to ensure that the bulk of tax was collected by deduction at source by the payer. Only Schedule D Case I (trading profits and emoluments of private employments) was not collected by deduction at source. This was because profits are a net figure, ie income minus expenses.

In the UK each type of income was classified in a different schedule to the income tax legislation. A pure schedular system identifies separate types of income and applies different computational rules and rates of tax to each and allows no set off between different schedules.

The schedular system was abolished by the Tax Law Rewrite. However, different types of income are distinguished and separate rules applied to each.

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