Income Tax Act 2007 section 806

Calculation of amount of income treated as received by the individual

Section 806 sets out a five-step calculation for determining the amount of income that an individual is treated as receiving in a tax year under the licence-related trading loss anti-avoidance rules.

• The starting point is the total claimed losses relating to a licence made in early tax years when the individual was a non-active partner, reduced by any licence-related profits made in any tax year, giving the "net licence-related loss".
• If the net licence-related loss is nil or negative, no income is treated as received and the calculation stops.
• Where a positive net licence-related loss exists, it is capped at the total non-taxable consideration received for relevant disposals (including amounts from previous tax years).
• The lower of the net licence-related loss and the non-taxable consideration is then reduced by any income already treated as received under these rules in earlier years, with the result being the taxable income for the year (or nil if negative).