What does section 27 of ITTOIA 2005 Schedule 2 provide for payments to the Export Credits Guarantee Department?

Section 27 provides transitional rules allowing businesses to claim a deduction for unpaid amounts owed to the Export Credits Guarantee Department that were incurred before the 2005-06 tax year. The deduction is given in the period of account in which the sum is actually paid, preventing businesses from losing relief due to timing mismatches between old and new legislation.

What conditions must be met to claim the transitional deduction under paragraph 27 of Schedule 2 ITTOIA 2005?

Three conditions must be satisfied: the sum must be payable to the Export Credits Guarantee Department under or in anticipation of a qualifying agreement under section 91(1)(a); it must have been incurred in a period of account not overlapping with the basis period for 2005-06 or later; and it must not have already been included in calculating trade profits for any tax year.

Does the transitional relief under section 27 apply only to trades?

No, the transitional relief is not limited to trades. It applies equally to professions and vocations, ensuring that all types of business activity covered by the Income Tax (Trading and Other Income) Act 2005 receive consistent treatment in respect of these transitional unpaid amounts owed to the Export Credits Guarantee Department.

When is the deduction allowed for unpaid ECGD amounts under this transitional provision?

The deduction is allowed in the period of account in which the sum is actually paid. Even though the expense relates to an earlier period predating the current legislation, the business is not denied the deduction. For example, a liability incurred in 2003-04 but paid in the period ending 31 March 2007 is deductible in that later period.

Income Tax (Trading and Other Income) Act 2005 section 27

Payments to Export Credits Guarantee Department

Section 27 provides transitional rules allowing a deduction for certain unpaid amounts owed to the Export Credits Guarantee Department that were incurred before the 2005-06 tax year.

Applies where a sum is payable but not yet paid to the Export Credits Guarantee Department under or in anticipation of a qualifying agreement under section 91(1)(a).
The sum must have been incurred in a period of account that does not overlap with the basis period for 2005-06 or any later tax year.
The sum must not have already been taken into account in calculating the trade profits of any tax year.
Where these conditions are met, the deduction is allowed in the period of account in which the sum is actually paid, and the rule applies equally to professions and vocations.

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