History

Income tax was levied under 5 schedules - income not falling within those schedules was not taxed. The schedules were:

• Schedule A (tax on income from UK land)

• Schedule B (tax on commercial occupation of land)

• Schedule C (tax on income from public securities)

• Schedule D (tax on trading income, income from professions and vocations, interest, overseas income and casual income)

• Schedule E (tax on employment income)

Later a sixth Schedule, Schedule F (tax on UK dividend income) was added.

The Schedules under which tax is levied have changed. Schedule B was abolished in 1988, Schedule C in 1996 and Schedule E in 2003. For income tax purposes, the remaining Schedules were abolished in 2005. Schedules A, D and F remain for corporation tax purposes.

Cases of Schedule d

Schedule D is itself divided into a number of cases:

	Scope
Case I	Profits from trades, including farming
Case II	Profits from professions and vocations
Case III	Interest and annual payments etc., not taxed at source
Case IV	Income from overseas securities (debentures, mortgages etc.)
Case V	Income from overseas possessions (property, shares etc.)
Case VI	Miscellaneous profits not otherwise chargeable under Schedule D or any other Schedule (e.g. income from furnished lettings)

Notes:

1. Income can fall within more than one of Case I, III and V. Where this happens, the income is only taxed under one of the Cases. The HM Revenue and Customs (the UK taxing authority) decides which Case will be applied.

2. Where interest-type income and gains.losses on loans, derivatives, financial instruments and intangibles relate to a trade, they fall within Case I not Case III. The one exception to this is life assurance companies taxed on the I minus E basis, where they always fall within Case III. Overseas interest-type income, etc. falls within Case I or III, as appropriate, and never under Case V.

3. There was a Case II, which applied to income from professions and vocations. It is not believed that a company within the charge to corporation tax can have such income and consequently Case II was effectively abolished when income tax stopped being treated on a schedular basis.

4. There used to be Cases IV, VII and VIII, but these have all been abolished.

Relief for expenses

The computations of income and taxable chargeable gains include deductions for direct expenses. However, not all sources of income have direct expenses (particularly those falling within Cases III and VI of Schedule D, foreign dividend income falling within Case V and income falling within Schedule F). Also a company may incur expenses managing a subsidiary which does not tend to pay dividend income to it.

Relief is therefore given for management expenses incurred by a company with investment business (before 1 April 2003 investment companies), and for certain management expenses of a life assurance company taxed on the I minus E basis. Relief is also given as a deduction from profits chargeable to corporation tax to certain payments to charities, certain royalty payments made by non-traders and some manufactured overseas dividends.