Schedular System of Taxation - The Schedules - Case I of Schedule D and Schedule A

Case I of Schedule D and Schedule A

Subject to specific statute or case law to the contrary, Case I of Schedule D and Schedule A profits are based on profits as calculated using UK Generally Accepted Accounting Practice. The same is true for the deduction for management expenses that are available to companies with investment business. Where a company prepares its accounts under International Financial Reporting Standards, it will use profits computed on that basis instead from 2005 onwards, subject to specific statute or case law to the contrary.

The main exceptions to this rule are that no deductions are allowed under Case I of Schedule D (or Schedule A) for expenses not incurred wholly and exclusively for the trade (or rental business) and that no deductions are available for capital (i.e. deductions are only available for revenue items).

In recent publications, the HM Revenue and Customs has split the various exceptions to the "follow the accounts" rule up into 11 somewhat arbitrary categories, of which 1 is the miscellaneous residual category. The other ten are

• Public policy
• Transfer pricing
• Structural
• Avoidance
• Tax neutrality
• Capital items
• Fiscal incentives
• Symmetry
• Realisability and Tax capacity
• "True reflection"