BIM100125 - Miscellaneous income: scope of the provisions: sweep-up - introduction

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

The scope of the miscellaneous income sweep-up provisions is extremely wide covering any income that:

  • is not otherwise taxable; and
  • is income of the type and nature that falls within the scope of Income Tax or Corporation Tax on income; that is not a gift, gratuity, wager or bet.

By their very nature the provisions apply to unusual situations. For example several of the cases that have been heard by the courts involved income arising under unsuccessful avoidance schemes.

When considering whether particular income is taxable under the provisions, it is important to establish the facts and to apply the principles set out by Viscount Dunedin in Leeming v Jones [1930] 15TC333 and by Rowlatt J in Ryall v Hoare [1923] 8TC521 (see BIM100105). You should be careful not to apply judicial commentary specific to the particular facts of an unusual case to a substantially different fact pattern.

The decided cases are, however, illustrative of the breadth of the scope of the provisions.

The charge to tax under the sweep-up provisions covers income received under an agreement or arrangement. It does not need to be received for any service and can be almost pure income profit (see SAIM8030), provided that it is income of the type and nature that falls within the scope of Income Tax or Corporation Tax on income.

The following examples illustrate some of the types of income that have been found to fall with the scope of the provisions:

Example A

A Ltd enters into a series of agreements; under one of these agreements A Ltd will receive from B Ltd, for a period of six months, a sum equal to the rent payable on a property in England owned by B Ltd.

A Ltd is not taxable under the property income legislation as A Ltd has no interest in the land.

A Ltd is taxable under the miscellaneous income sweep-up provisions as it is receiving income comparable to income taxable under the property income legislation.

This example is based on the case of Property Company v Inspector of Taxes [2004] SpC433. For further details of this case see BIM100130.

Top of page

Example B

B is not a celebrity or figure in the public eye. B becomes involved in a scandal and leaves the UK. B engages the services of P, a publicist. P negotiates a contract for B with a newspaper, under which a journalist from the newspaper visits B, who provides the journalist with information and assistance in return for a substantial fee. As a result, the newspaper publishes a series of ‘exclusive’ articles.

B does not carry on a trade of exploiting their image, so the sum is not otherwise taxable. Although throughout the period when they provided the services, B was not in the UK, as the contract is governed by English Law, B is chargeable under the miscellaneous income provisions.

This example is based on the case of Alloway v Phillips [1980] 53TC372. For further details of this case, see BIM100130.

Where casual income arises from services performed in the United Kingdom and it is claimed that there is no liability under the miscellaneous income provisions because the contract was made abroad, you should refer the case to CTISA (Technical) before the absence of liability is agreed.

Top of page

Example C

Actor A ceases to be self employed and becomes an employee of B Ltd, which enters into contracts to provide the services of A to various film and TV productions. The various contracts are later transferred to C Ltd.

C Ltd does not carry on a trade of exploiting the services of A, it simply receives the income generated under the existing contracts. C Ltd is not taxable under the trading provisions on the income generated by the contracts as it is not trading.

C Ltd is taxable on the income generated by the contracts under the miscellaneous income provisions, as it is receiving income comparable to income taxable under the trading provisions.

This example is based on the case of Black Nominees Ltd v Nicol [1975] 50TC229. For further details of this case, see BIM100130.