Section 799 — Income Tax Act 2007: Meaning of “disposal of a right of the individual to profits” etc

Meaning of “disposal of a right of the individual to profits” etc 799 1 For the purposes of section 797 any reference to a disposal of a right of an individual to profits arising from a trade includes, in particular, any of events A to D.

2 Event A is the disposal, giving up or loss by—

a the individual, or b a firm in which the individual is a partner, of a right arising from the trade to income (or any part of any income). It does not matter if the right is disposed of, given up or lost as part of a larger disposal, giving up or loss.

3 Event B is the disposal, giving up or loss of the individual's interest in a firm that carries on the trade (including the dissolution of the firm).

4 Event C is a default in the payment of income to which—

a the individual, or b a firm in which the individual is a partner, has a right arising from the trade.

5 Event D is a change in the individual's entitlement to any profits or losses arising from the trade the effect of which is that—

a the individual's share of any profits is reduced (including to nil), or b the individual becomes entitled to a share, or a greater share, of any losses without becoming entitled to a corresponding share of profits.

6 The changes covered by event D include cases where there is an agreement under which the individual is entitled—

a to a particular share of any profits or losses arising from the trade in a period (including a nil share),

and b to a different share of any such profits or losses in a succeeding period (including a nil share).

7 In such cases the change in the individual's entitlement is treated for the purposes of section 797 as occurring at the beginning of the succeeding period.