Corporation Tax Act 2009
Part 2 of this Act contains basic provisions about the charge to corporation tax including—
the imposition of the charge to corporation tax on the income and chargeable gains of companies (referred to collectively as “profits”), (see section 2),
the exclusion of income and chargeable gains subject to corporation tax from income tax and capital gains tax (see sections 3 and 4),
provision about the territorial scope of the charge to corporation tax (see section 5 and Chapter 4),
provision about how corporation tax is charged and assessed, in particular its charging and assessment by reference to accounting periods (see section 8),
provision about accounting periods (see Chapter 2), and
rules for determining the residence of companies (see Chapter 3).
Under section 2(4) the charge to corporation tax on income has effect in accordance with the provisions of the Corporation Tax Acts that deal with its application, the main provisions of this Act that do so being—
Part 3 (trading income),
Part 4 (property income),
Parts 5 and 6 (profits arising from loan relationships),
Part 7 (profits arising from derivative contracts),
Part 8 (gains in respect of intangible fixed assets),
Part 9 (profits arising from disposals of know-how and sales of patent rights), and
Part 10 (miscellaneous income).
Part 7 also applies the charge to corporation tax on chargeable gains to certain profits arising from derivative contracts.
Parts 5 to 8 also deal with how deficits or losses arising from, or in respect of, the matters to which they relate are brought into account for corporation tax purposes.
The following Parts provide relief for particular types of expenditure—
Part 11 (relief for particular employee share acquisition schemes),
Part 12 (other relief for employee share acquisitions),
Part 13 (additional relief for expenditure on research and development),
Part 14 (remediation of contaminated land), and
Part 15 (film production).
The following Parts contain special rules for particular cases—
Part 15 (film production),
Part 16 (companies with investment business),
Part 17 (partnerships), and
Part 18 (unremittable income).
The following Parts contain provisions of general application—
Part 19 (general exemptions),
Part 20 (general calculation rules), and
Part 21 (other general provisions, including definitions for the purposes of the Act).
For abbreviations and defined expressions used in this Act, see section 1312 and Schedule 4.
Corporation tax is charged on profits of companies for any financial year for which an Act so provides.
In this Part “profits” means income and chargeable gains, except in so far as the context otherwise requires.
In this Act “the charge to corporation tax on income” means the charge under subsection (1) so far as relating to income.
The charge to corporation tax on income has effect in accordance with the provisions of the Corporation Tax Acts that deal with its application.
The provisions of the Income Tax Acts relating to the charge to income tax do not apply to income of a company if—
the company is UK resident, or
the company is not UK resident and the income is within its chargeable profits as defined by section 19.
Subsection (1) does not apply to income accruing to a company in a fiduciary or representative capacity.
Capital gains tax is not charged on gains accruing to a company in respect of which the company is chargeable to corporation tax, or would be so chargeable but for an exemption.
A UK resident company is chargeable to corporation tax on all its profits wherever arising.
A non-UK resident company is within the charge to corporation tax only if it carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.
A non-UK resident company which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom is chargeable to corporation tax on all its profits wherever arising that are chargeable profits as defined in section 19 (profits attributable to its permanent establishment in the United Kingdom).
Subsections (1) and (3) are subject to any exceptions provided for by the Corporation Tax Acts.
A company is not chargeable to corporation tax on profits which accrue to it in a fiduciary or representative capacity except as respects its own beneficial interest (if any) in the profits.
The exception under subsection (1) from chargeability does not apply to profits arising in the winding up of the company.
Profits that accrue for the benefit of a company under a trust are treated for the purposes of the charge to corporation tax under section 2(1) as accruing directly to the company.
Corporation tax for a financial year is charged on profits arising in the year.
Corporation tax is calculated and chargeable, and assessments to corporation tax are made, by reference to accounting periods.
Corporation tax which is assessed and charged for an accounting period of a company is assessed and charged on the full amount of profits arising in the accounting period.
Subsection (3) is subject to any contrary provision in the Corporation Tax Acts.
If a company’s accounting period falls within more than one financial year, the amount of the profits arising in the accounting period that is chargeable to corporation tax must be apportioned between the financial years in which the accounting period falls.
An accounting period of a company begins—
when the company comes within the charge to corporation tax, or
immediately after the end of the previous accounting period of the company, if the company is still within the charge to corporation tax.
For the purposes of this section a UK resident company is treated as coming within the charge to corporation tax when it starts to carry on business, if it would not otherwise be within the charge to corporation tax.
If a chargeable gain or allowable loss accrues to a company at a time which is not (ignoring this subsection) within an accounting period of the company—
an accounting period of the company begins at that time, and
the gain or loss accrues in that accounting period.
This section does not apply if section 12 (companies being wound up) applies.
This section is subject to any provision of the Corporation Tax Acts which provides for an accounting period of a company to which this section applies to begin at a different time.
An accounting period of a company comes to an end on the first occurrence of any of the following—
the ending of 12 months from the beginning of the accounting period,
an accounting date of the company,
if there is a period for which the company does not make up accounts, the end of that period,
the company starting or ceasing to trade,
if the company carries on only one trade, coming, or ceasing to be, within the charge to corporation tax in respect of that trade,
if the company carries on more than one trade, coming, or ceasing to be, within the charge to corporation tax in respect of all the trades it carries on,
the company becoming, or ceasing to be, UK resident,
the company ceasing to be within the charge to corporation tax,
the company entering administration, and
the company ceasing to be in administration.
If subsection (1)(i) applies, the accounting period is treated as having ended immediately before the day on which the company enters administration.
For the purposes of this section a company enters administration—
when it enters administration under Schedule B1 to the Insolvency Act 1986 (c. 45), or
when it is subject to a corresponding procedure, other than one under that Act.
For the purposes of this section a company ceases to be in administration—
when it ceases to be in administration under Schedule B1 to the Insolvency Act 1986, or
when a corresponding event occurs, other than under that Act.
This section does not apply if section 12 (companies being wound up) applies.
This section is subject to any provision of the Corporation Tax Acts which provides for an accounting period of a company to which this section applies to end at a different time.
This section applies if a company carrying on more than one trade—
does not have the same accounting date for each of the trades, and
does not make up general accounts for the whole of the company’s activities.
The company may choose which of the accounting dates for the trades is to be used for the purpose of section 10(1)(b).
But if an officer of Revenue and Customs thinks, on reasonable grounds, that the date chosen by the company is inappropriate, the officer may give notice to the company directing one of the other accounting dates to be used for that purpose instead.
This section applies if a company is being wound up.
An accounting period of the company ends immediately before the winding up starts.
An accounting period of the company begins when the winding up starts.
After the winding up starts, an accounting period of the company ends—
at the end of the period of 12 months beginning on the first day of the accounting period, or
if earlier, when the winding up is completed.
After the winding up starts, an accounting period of the company begins immediately after the end of the previous accounting period of the company, if the winding up has not been completed.
This section is subject to any provision of the Corporation Tax Acts which provides for an accounting period of a company to which this section applies to begin or end at a different time.
For the purposes of this section a winding up of a company starts—
when the company passes a resolution for the winding up of the company,
when a petition for the winding up of the company is presented, if the company has not already passed such a resolution and a winding up order is made on the petition, or
when an act is done in relation to the company for a similar purpose, if the winding up is not under the Insolvency Act 1986 (c. 45).
This Chapter contains rules for determining the residence of companies.
Section 14 gives the main rule for companies incorporated in the United Kingdom (including SEs and SCEs incorporated in the United Kingdom).
Section 15 deals with companies which have been UK resident under the rules of common law and provides for their continued residence when certain circumstances arise.
Sections 16 and 17 deal with SEs and SCEs which transfer their registered office to the United Kingdom.
Section 18 contains a special rule for companies treated as non-UK resident under double taxation arrangements.
A company which is incorporated in the United Kingdom is UK resident for the purposes of the Corporation Tax Acts.
Accordingly, even if a different place of residence is given by a rule of law, the company is not resident in that place for the purposes of the Corporation Tax Acts.
This section applies to a company which is neither—
incorporated in the United Kingdom, nor
resident in the United Kingdom by virtue of section 16 or 17.
If the company— the company continues to be UK resident for the purposes of the Corporation Tax Acts.
is no longer carrying on a business, and
was UK resident for the purposes of the Corporation Tax Acts immediately before it ceased to carry on business,
If the company— the company continues to be UK resident for the purposes of the Corporation Tax Acts.
is being wound up outside the United Kingdom, and
was UK resident for the purposes of the Corporation Tax Acts immediately before any of its activities came under the control of a foreign liquidator,
In subsection (3) “foreign liquidator” means a person exercising functions which, in the United Kingdom, would be exercisable by a liquidator.
This section applies to an SE which transfers its registered office to the United Kingdom in accordance with Article 8 of Council Regulation (EC) No 2157/2001 on the Statute for a European company (Societas Europaea).
The SE is UK resident for the purposes of the Corporation Tax Acts from the time of its registration in the United Kingdom.
Accordingly, even if a different place of residence is given by a rule of law, the SE is not resident in that place for the purposes of the Corporation Tax Acts.
The SE does not cease to be UK resident merely because it later transfers its registered office from the United Kingdom.
This section applies to an SCE which transfers its registered office to the United Kingdom in accordance with Article 7 of Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society (SCE).
The SCE is UK resident for the purposes of the Corporation Tax Acts from the time of its registration in the United Kingdom.
Accordingly, even if a different place of residence is given by a rule of law, the SCE is not resident in that place for the purposes of the Corporation Tax Acts.
The SCE does not cease to be UK resident merely because it later transfers its registered office from the United Kingdom.
This section applies to a company which is treated as— for the purposes of any double taxation arrangements.
resident in a territory outside the United Kingdom, and
non-UK resident,
For the purposes of the Corporation Tax Acts the company is—
resident outside the United Kingdom, and
non-UK resident.
Subsection (2) applies even if the company would otherwise be UK resident for the purposes of the Corporation Tax Acts by virtue of section 14, 15, 16 or 17 or another rule of law.
To decide whether a company is treated as mentioned in subsection (1)(a) and (b) for the purposes of any double taxation arrangements, assume that—
the company has made a claim for relief under the arrangements, and
in consequence of the claim it falls to be decided whether the company is to be treated as mentioned in subsection (1)(a) and (b) for the purposes of the arrangements.
This section applies if a non-UK resident company carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.
The company’s chargeable profits are its profits that are—
of a type mentioned in subsection (3), and
attributable to the permanent establishment in accordance with sections 20 to 32.
The types of profits referred to in subsection (2)(a) are—
trading income arising directly or indirectly through or from the establishment,
income from property or rights used by, or held by or for, the establishment, and
chargeable gains falling within section 10B of TCGA 1992 (non-resident company with United Kingdom permanent establishment)—
as a result of assets being used in or for the purposes of the trade carried on by the company through the establishment, or
as a result of assets being used or held for the purposes of the establishment or being acquired for use by or for the purposes of the establishment.
Sections 21 to 32 apply for the purpose of determining the amount of profits of a non-UK resident company that are attributable to a permanent establishment of the company in the United Kingdom.
Sections 21 to 28 contain provision about the separate enterprise principle.
See also paragraph 5A of Schedule 26 to FA 2003 (non-resident companies: transactions through broker, investment manager or Lloyd’s agent), which provides for profits of certain investment transactions to be disregarded in determining the amount of profits attributable to a permanent establishment.
The profits of the non-UK resident company that are attributable to the permanent establishment are those that the establishment would have made if it were a distinct and separate enterprise which—
engaged in the same or similar activities under the same or similar conditions, and
dealt wholly independently with the non-UK resident company.
In applying subsection (1) assume that—
the permanent establishment has the same credit rating as the non-UK resident company, and
the permanent establishment has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.
In sections 22 to 28 the principle in subsection (1) (read with subsection (2)) is called “the separate enterprise principle”.
In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-UK resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm’s length.
This section applies if the non-UK resident company provides the permanent establishment with goods or services.
If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm’s length, the matter is dealt with as a transaction to which the separate enterprise principle applies.
If not, the matter is dealt with as an expense incurred by the non-UK resident company for the purposes of the permanent establishment (see section 29).
The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision about the application of section 21(1) to insurance companies.
The regulations may, in particular, make provision in place of section 21(2)(b) as to the basis on which, in the case of insurance companies, capital is to be attributed to a permanent establishment in the United Kingdom.
In this section “insurance company” has the meaning given by section 431(2) of ICTA.
Sections 26 to 28 contain provision in relation to the application of the separate enterprise principle if the non-UK resident company is a bank.
Nothing in sections 26 to 28 is to be read as preventing similar principles to those provided for in those sections from applying when the separate enterprise principle is applied to a non-UK resident company that is not a bank.
In this section and those sections “bank” has the meaning given by section 840A of ICTA.
This section applies if—
the non-UK resident company is a bank, and
there is a transfer of a loan or other financial asset between the permanent establishment and any other part of the company.
In accordance with the separate enterprise principle, the transfer is recognised only if it would have taken place between independent enterprises.
The transfer is not recognised if it cannot reasonably be considered that it is carried out for valid commercial reasons.
For this purpose the obtaining of a tax advantage is not a valid commercial reason.
This section applies if the non-UK resident company—
is a bank, and
makes a loan or has another financial asset.
In accordance with the separate enterprise principle, the loan or other financial asset, and profits arising from it, are attributed to the permanent establishment so far as they can reasonably be regarded as having been generated by the activities of the permanent establishment.
For the purposes of subsection (2), particular account is to be taken of the extent to which the permanent establishment is responsible for—
obtaining the offer of new business,
establishing the potential borrower’s credit rating and the risk involved in providing credit,
negotiating the terms of the loan with the borrower, and
deciding whether, and if so on what conditions, to make or extend the loan.
For those purposes, account may also be taken of the extent to which the permanent establishment is responsible for—
concluding the loan agreement and disbursing the proceeds of the loan, and
administering the loan (including handling and monitoring the service of it) and holding and controlling any securities pledged.
References in this section to a financial asset include any financial risk in relation to a loan, or potential loan, if—
the financial risk is capable of giving rise to fees or other receipts, and
the holding of capital is required for the financial risk (or would be required if the transaction were between parties at arm’s length).
This section applies if—
the non-UK resident company is a bank, and
the permanent establishment borrows funds for the purposes of another part of the company and (in relation to that borrowing) acts only as an agent or intermediary.
In accordance with the separate enterprise principle— are to be those appropriate in the case of an agent acting at arm’s length, taking into account the risks and costs borne by the establishment.
the profits attributable to the permanent establishment, and
the capital attributable to the permanent establishment under section 21(2)(b),
A deduction is allowed for any allowable expenses incurred for the purposes of the permanent establishment.
Expenses incurred for the purposes of the permanent establishment include executive and general administrative expenses so incurred, whether in the United Kingdom or elsewhere.
It does not matter whether the expenses are incurred by, or reimbursed by, the permanent establishment.
The amount of expenses to be taken into account under subsection (1) is the actual cost to the non-UK resident company.
“Allowable expenses” means expenses of a kind in respect of which a deduction would be allowed for corporation tax purposes if incurred by a UK resident company.
No deduction is allowed for costs in excess of those which would have been incurred on the assumptions in section 21(2).
No deduction is allowed for royalties paid, or other similar payments made, by the permanent establishment to any other part of the non-UK resident company in respect of the use of intangible assets held by the company.
This does not prevent a deduction for any contribution by the permanent establishment to the costs of creation of an intangible asset.
In this section “intangible asset” has the meaning it has for accounting purposes, and includes any intellectual property (as defined in section 712(3)).
No deduction is allowed for payments of interest or other financing costs by the permanent establishment to any other part of the non-UK resident company.
But the restriction in subsection (1) does not apply to interest or other financing costs that are payable in respect of borrowing by the permanent establishment in the ordinary course of a financial business carried on by it.
In subsection (2) “financial business” means any of the following—
banking, deposit-taking, money-lending or debt-factoring, or a business similar to any of those, and
dealing in commodity or financial futures.
In this Part, except in so far as the context otherwise requires—
references to a trade include an office, and
references to carrying on a trade include holding an office.
This Part applies the charge to corporation tax on income to—
the profits of a trade (see Chapter 2), and
post-cessation receipts arising from a trade (see Chapter 15).
Chapters 3 to 14 contain rules relevant to tax under this Part.
Chapter 16 contains rules that give priority to provisions outside this Part in relation to certain matters that fall within it.
This Part needs to be read with Parts 19 (general exemptions) and 20 (general calculation rules).
The charge to corporation tax on income applies to the profits of a trade.
Farming or market gardening in the United Kingdom is treated for corporation tax purposes as the carrying on of a trade or part of a trade (whether or not the land is managed on a commercial basis and with a view to the realisation of profits).
All farming in the United Kingdom carried on by a company, other than farming carried on as part of another trade, is treated for corporation tax purposes as one trade.
This section does not apply to farming or market gardening by an insurance company on land which is an asset of the company’s long-term insurance fund.
In the case of farming carried on by a company as a member of a firm, this rule is explained by section 1270(1).
The commercial occupation of woodlands in the United Kingdom is not a trade or part of a trade for any corporation tax purpose.
For this purpose the occupation of woodlands is commercial if the woodlands are managed—
on a commercial basis, and
with a view to the realisation of profits.
See also sections 208 and 980 (which, when read with this section, secure that profits or losses from the commercial occupation of woodlands in the United Kingdom are ignored for corporation tax purposes).
The commercial occupation of land in the United Kingdom is treated for corporation tax purposes as the carrying on of a trade or part of a trade.
For this purpose the occupation of land is commercial if the land is managed—
on a commercial basis, and
with a view to the realisation of profits.
This section does not apply—
to farming or market gardening (which is dealt with by section 36),
if the land is being prepared for forestry purposes,
if the land comprises woodlands (which is dealt with by section 37), or
to the occupation by an insurance company of land which is an asset of the company’s long-term insurance fund.
Profits or losses arising out of land in the case of a concern to which this section applies are calculated as if the concern were a trade.
Any profits arising out of the land are treated for the purposes of clause 35 as profits of a trade.
Any losses arising out of the land are treated for the purposes of Chapters 2 and 4 of Part 10 of ICTA (loss relief and group relief) as losses of a trade carried on in the United Kingdom.
The concerns to which this section applies are—
mines and quarries (including gravel pits, sand pits and brickfields),
ironworks, gasworks, salt springs or works, alum mines or works, waterworks and streams of water,
canals, inland navigation, docks and drains or levels,
rights of fishing,
rights of markets and fairs, tolls, bridges and ferries,
railways and other kinds of way, and
a concern of the same kind as one specified in paragraph (b), (c), (d) or (e).
But this section does not apply to a concern—
if it is carried on by an insurance company on land which is an asset of the company’s long-term insurance fund, or
if section 38 (commercial occupation of land other than woodlands) applies to the occupation of the land out of which the profits or losses arise.
If a credit union— that is not treated, in calculating the credit union’s income, as the carrying on of a trade or part of a trade.
makes loans to its members, or
invests its surplus funds (by placing them on deposit or otherwise),
In this section “surplus funds” means funds not immediately required for the credit union’s purposes.
This section applies if a company starts or ceases to be within the charge to corporation tax in respect of a trade.
The company is treated for the purposes of this Part—
as starting to carry on the trade when it starts to be within the charge, or
as ceasing to carry on the trade when it ceases to be within the charge.
This section applies if —
in the course of carrying on a trade a company (“the trader”) supplies, or is concerned in the supply of, goods sold or used on premises occupied by another person,
the trader has an estate or interest in the premises,
the estate or interest is dealt with as property employed for the purposes of the trade, and
receipts and expenses in connection with the premises would otherwise be brought into account in calculating the profits of a property business of the trader.
Both the receipts and the expenses are instead brought into account in calculating the profits of the trade.
Any apportionment of receipts or expenses that is necessary because— is to be made on a just and reasonable basis.
the receipts or expenses do not relate only to the premises, or
the above conditions are met only in relation to part of the premises,
This section applies if—
a company (“the trader”) carries on material activities connected with the operation of a caravan site,
the activities are, or are part of, a trade, and
receipts from, and expenses of, lettings of caravans or pitches for caravans on the site would otherwise be brought into account in calculating the profits of a property business of the trader.
The trader may instead bring both the receipts and the expenses into account in calculating the profits of the trade.
But if the conditions in subsection (1)(a) and (b) are met for only part of an accounting period of the trader, subsection (2) applies only to the receipts and expenses that would otherwise be brought into account in calculating the profits of the property business for that part of the accounting period.
In this section—
“caravan site” means—
land on which a caravan is stationed for the purposes of human habitation, and
land which is used in conjunction with land on which a caravan is so stationed, and
This section applies if—
a company (“the trader”) carrying on a trade obtains receipts from a letting of business accommodation that is temporarily surplus to requirements (see subsections (3) and (4)),
the accommodation is not held as trading stock,
the receipts are in respect of part of a building of which another part is used to carry on the trade,
the receipts are relatively small, and
the receipts, and the expenses of the letting, would otherwise be brought into account in calculating the profits of a property business of the trader.
The trader may instead bring both the receipts and the expenses into account in calculating the profits of the trade.
Accommodation is temporarily surplus to requirements only if—
it has been used within the last 3 years to carry on the trade or acquired within the last 3 years,
the trader intends to use it to carry on the trade at a later date, and
the letting is for a term of not more than 3 years.
If accommodation is temporarily surplus to requirements at the beginning of an accounting period, it continues to be temporarily surplus to requirements until the end of that period.
If under this section any of the receipts from and expenses of a letting are brought into account in calculating the profits of the trade, all subsequent receipts from and expenses of the letting must be dealt with in the same way (but only so long as this section continues to apply).
In this section “letting” includes a licence to occupy.
This section applies if—
a company (“the trader”) carries on a trade on some or all of the land to which a wayleave relates,
rent is receivable, or expenses are incurred, by the trader in respect of the wayleave, and
apart from any rent or expenses in respect of a wayleave, no other receipts or expenses in respect of any of the land are brought into account in calculating the profits of any property business of the trader.
If— the trader may instead bring both the rent and the expenses into account in calculating the profits of the trade.
the trader would otherwise be liable to tax under Chapter 8 of Part 4 in respect of the rent for the wayleave (rent receivable for UK electric-line wayleaves), or
expenses incurred by the trader in respect of the wayleave would otherwise be brought into account in calculating profits charged under that Chapter,
If— the trader may instead bring both the rent and the expenses into account in calculating the profits of the trade.
rent for the wayleave would otherwise be brought into account in calculating the profits of a property business of the trader, or
expenses incurred by the trader in respect of the wayleave would otherwise be so brought into account,
In this section “rent” includes—
a receipt mentioned in section 207(3), and
any other receipt in the nature of rent.
In this section “wayleave” means an easement, servitude or right in or over land which is enjoyed in connection with—
an electric, telegraph or telephone wire or cable,
a pipe for the conveyance of any thing, or
any apparatus used in connection with such a pipe.
The reference to the enjoyment of an easement, servitude or right in connection with an electric, telegraph or telephone wire or cable includes (in particular) its enjoyment in connection with—
a pole or pylon supporting such a wire or cable, or
apparatus used in connection with such a wire or cable.
The profits of a trade must be calculated in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for corporation tax purposes.
This does not—
require a company to comply with the requirements of the Companies Act 2006 (c. 46) or subordinate legislation made under that Act except as to the basis of calculation, or
impose any requirements as to audit or disclosure.
This section does not affect any provisions of the Corporation Tax Acts—
relating to the calculation of the profits of—
Lloyd’s underwriters, or
the life assurance business of insurance companies, or
otherwise laying down special rules for the calculation of the profits of a particular description of business.
The same rules apply for corporation tax purposes in calculating losses of a trade as apply in calculating profits.
This is subject to any express provision to the contrary.
In the Corporation Tax Acts, in the context of the calculation of the profits of a trade, references to receipts and expenses are to any items brought into account as credits or debits in calculating the profits.
It follows that references in that context to receipts or expenses do not imply that an amount has actually been received or paid.
This section is subject to any express provision to the contrary.
The rules for calculating the profits of a trade need to be read with—
the provisions of CAA 2001 which treat allowances as expenses of a trade,
the provisions of CAA 2001 which treat charges as receipts of a trade,
section 297 (credits and debits in respect of a loan relationship to which a company is a party for the purposes of a trade it carries on treated as receipts and expenses of the trade),
section 573 (credits and debits in respect of a derivative contract to which a company is a party for the purposes of a trade it carries on treated as receipts and expenses of the trade),
section 747 (credits and debits in respect of an intangible fixed asset held by a company for the purposes of a trade it carries on treated as receipts and expenses of the trade), and
section 749 (credits and debits in respect of an intangible fixed asset held by a company for the purposes of a section 39(4) concern which it carries on treated as receipts and expenses of the concern).
Animals or other living creatures kept for the purposes of a trade are treated as trading stock if they are not kept wholly or mainly—
for the work they do in connection with the carrying on of the trade,
for public exhibition, or
for racing or other competitive purposes.
But they are not treated as trading stock if they are part of a herd in relation to which a herd basis election has effect (see Chapter 8).
This section applies to shares in animals or other living creatures as it applies to the creatures themselves.
Any relevant permissive rule in this Part—
has priority over any relevant prohibitive rule, but
is subject to—
section 56 (car or motor cycle hire),
section 1288 (unpaid remuneration),
section 1290 (employee benefit contributions),
section 1304 (crime-related payments).
In this section “any relevant permissive rule in this Part” means any provision of— which allows a deduction in calculating the profits of a trade.
Chapter 5 (trade profits: rules allowing deductions), apart from sections 62 to 67,
Chapter 7 (trade profits: gifts to charities etc),
Chapter 9 (trade profits: other specific trades), or
Chapter 12 (deductions from profits: unremittable amounts),
In this section “any relevant prohibitive rule”, in relation to any deduction, means any provision of this Part or Chapter 1 of Part 20 (apart from those mentioned in subsection (1)(b)) which might otherwise be read as—
prohibiting or deferring the deduction, or
restricting the amount of the deduction.
This section applies if a period of account of a trade does not coincide with an accounting period.
Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the accounting period—
apportioning the profits or losses of a period of account to the parts of that period falling in different accounting periods, and
adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts).
The steps must be taken by reference to the number of days in the periods concerned.
In calculating the profits of a trade, no deduction is allowed for items of a capital nature.
Subsection (1) is subject to provision to the contrary in the Corporation Tax Acts.
In calculating the profits of a trade, no deduction is allowed for—
expenses not incurred wholly and exclusively for the purposes of the trade, or
losses not connected with or arising out of the trade.
If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purposes of the trade.
This section applies to non-money debts to which neither Part 7 (derivative contracts) nor Part 8 (intangible fixed assets) applies.
In calculating the profits of a company’s trade, no deduction is allowed in respect of a non-money debt owed to the company, except—
by way of impairment loss, or
so far as the debt is released wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement.
In this section “non-money debt” means a debt which is not a money debt for the purposes of Part 5 (loan relationships).
Subsection (2) applies if, in calculating the profits of a trade, a deduction is allowed for expenses incurred on the hiring of a car or motor cycle—
which is not a qualifying hire car or motor cycle (see section 57(2)), and
the retail price of which when new exceeds £12,000.
The amount of the deduction which would otherwise be allowable is reduced by multiplying the amount by the fraction— where RP is the retail price of the car or motor cycle when new.
Subsection (4) applies if a deduction is reduced as a result of subsection (2), or a corresponding provision, and subsequently—
there is a rebate (however described) of the hire charges, or
a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency arrangement.
The amount that, as a result of the rebate or release— is reduced by multiplying it by the fraction in subsection (2).
is brought into account as a receipt of the trade, or
is treated as a post-cessation receipt under section 193 (debts released after cessation),
In this section “corresponding provision” means—
section 1251(2) (car or motor cycle hire: expenses of management),
section 48(2) of ITTOIA 2005 (car or motor cycle hire: trade profits and property income), or
section 76ZN(2) of ICTA (car or motor cycle hire: expenses of insurance companies).
The power under section 74(4) of CAA 2001 to increase or further increase the sums of money specified in Chapter 8 of Part 2 of CAA 2001 includes the power to increase or further increase the sum of money specified in subsection (1)(b) or (2).
In section 56 “car or motor cycle” means a mechanically propelled road vehicle other than one—
of a construction primarily suited for the conveyance of goods or burden of any description, or
of a type not commonly used as a private vehicle and unsuitable for such use.
In section 56 “a qualifying hire car or motor cycle” means a car or motor cycle which—
is hired under a hire-purchase agreement (see subsection (3)) under which there is no option to purchase,
is hired under a hire-purchase agreement under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1% of the retail price of the car or motor cycle when new, or
is a qualifying hire car for the purposes of Part 2 of CAA 2001 (under section 82 of CAA 2001).
For this purpose “hire-purchase agreement” means an agreement under which— but does not include a conditional sale agreement (see subsection (5)).
goods are bailed (or in Scotland hired) in return for periodical payments by the person to whom they are bailed or hired, and
the property in the goods will pass to that person if the terms of the agreement are complied with and one or more of the following events occurs,
The events are—
the exercise of an option to purchase by that person,
the doing of any other specified act by any party to the agreement, and
the happening of any other specified event.
A “conditional sale agreement” means an agreement for the sale of goods under which—
the purchase price or part of it is payable by instalments, and
the goods are to remain the property of the seller (even though they are to be in the possession of the buyer) until specified conditions as to the payment of instalments or otherwise are met.
In this section and section 56 “new” means unused and not second-hand.
Section 56 does not apply to expenses incurred on the hiring of— if the period of hire began before 1 April 2013 under a contract entered into before that date.
a car with low CO2 emissions, or
an electrically-propelled car,
For this purpose—
“car with low CO2 emissions” has the meaning given by section 45D of CAA 2001, and
the conditions in subsections (3) and (4) of section 311 of ITEPA 2003 (employment income exemptions: retraining courses), and
section 157 of the Employment Rights Act 1996, or
In calculating the profits of a trade, no deduction is allowed for royalties or other sums paid for the use of patents.
Section 33A(3) of CAA 2001 provides that no deduction is allowed in respect of certain expenditure on an integral feature of a building or structure (within the meaning of that section).
This section applies if a company incurs expenses for the purposes of a trade before (but not more than 7 years before) the date on which the company starts to carry on the trade (“the start date”).
If, in calculating the profits of the trade— the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).
no deduction would otherwise be allowed for the expenses, but
a deduction would be allowed for them if they were incurred on the start date,
This section does not apply to any expenses in relation to which— to be brought into account for the purposes of Part 5 (loan relationships).
any debit falls, or
any debit would fall but for section 330 (loan relationships: debits in respect of pre-trading expenditure),
Sections 63 to 67 apply if land used in connection with a trade is subject to a taxed lease.
Section 63 (tenants occupying land for purposes of trade treated as incurring expenses) applies in calculating the profits of a trade carried on by the tenant under the taxed lease for the purpose of making deductions for the expenses of the trade.
But any deduction for an expense under section 63 is subject to the application of any provision of Chapter 4 of this Part.
In this section and sections 63 to 67 the following expressions have the same meaning as in Chapter 4 of Part 4 (profits of property businesses: lease premiums etc)—
“taxed lease” (see section 227(4)),
“taxed receipt” (see section 227(4)), and
in England and Wales, any of the bodies mentioned in section 71(1),
in Scotland, any of the bodies mentioned in section 71(2),
in Northern Ireland, any of the bodies mentioned in section 71(3), and
any other educational body which is for the time being approved for the purposes of this section by the Secretary of State or, in Northern Ireland, the Department of Education, and
“unreduced amount” (see section 230(2)).
Section 230(3) and (4) (unreduced amount of taxed receipt under section 217 as a result of section 218) applies for the purposes of sections 63 to 67.
In the application of sections 66 and 67 to Scotland—
references to a lease being granted out of a taxed lease are to the grant of a sublease of land subject to the taxed lease, and
references to the lease so granted are to be read as references to the sublease.
The tenant under the taxed lease is treated as incurring an expense of a revenue nature in respect of the land subject to the taxed lease for each qualifying day.
If there is more than one taxed receipt, this section applies separately in relation to each of them.
A day is a “qualifying day”, in relation to a taxed receipt, if it is a day—
that falls within the receipt period of the taxed receipt, and
on which the tenant occupies the whole or part of the land subject to the taxed lease for the purposes of carrying on a trade.
If on the qualifying day the tenant occupies the whole of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula— where— A is the unreduced amount of the taxed receipt, and TRP is the number of days in the receipt period of the taxed receipt.
If on the qualifying day the tenant occupies part of the land subject to the taxed lease for the purposes of the trade, the amount of the expense for the qualifying day by reference to the taxed receipt is given by the formula— where— F is the fraction of the land that is so occupied calculated on a just and reasonable basis, and A and TRP have the same meaning as in subsection (4).
This section is subject to section 64 (limit on deductions if tenant entitled to mineral extraction allowance).
This section applies if the tenant under the taxed lease has become entitled, in respect of expenditure on the acquisition of an interest in the land subject to the taxed lease, to an allowance for an accounting period under Part 5 of CAA 2001 (mineral extraction allowances) in respect of expenditure falling within section 403 of that Act (qualifying expenditure on acquiring a mineral asset).
If the allowance is in respect of the whole of the expenditure, no deduction is allowed for expenses under section 63 for a qualifying day falling within that or a later accounting period.
If the allowance is in respect of only part of the expenditure (“the allowable part”) the amount of the deduction for expenses under section 63 for a qualifying day falling within that or a later accounting period is calculated by multiplying the amount that, apart from this section, would be the amount of the deduction for the qualifying day by— where— WE is the whole of the expenditure, and AP is the allowable part of the expenditure.
This section applies if the tenant under the taxed lease—
does not occupy the land subject to the taxed lease, or a part of it, but
deals with its interest in the land, or the part of it, as property employed for the purposes of carrying on a trade.
Section 63 applies as if the land or the part of it were occupied by the tenant for the purposes of the trade.
But the tenant is not treated as incurring an expense in respect of the land for a qualifying day as a result of this section so far as the tenant is treated as incurring an expense under section 232 (tenants under taxed leases treated as incurring expenses) in respect of the land for the day in calculating the profits of the tenant’s property business.
This section is subject to sections 66 and 67 (restrictions on section 63 expenses where the additional calculation rule is relevant).
This section applies if a lease has been granted out of the taxed lease and— In this section and section 67 the receipt that is so reduced is referred to as a “lease premium receipt”.
in calculating the amount of a receipt of a property business under Chapter 4 of Part 4 (profits of property businesses: lease premiums etc) in respect of the lease, there is a reduction under section 228 (the additional calculation rule) by reference to the taxed receipt, or
in calculating the amount of a receipt of a property business under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc) in respect of the lease, there is a reduction under section 288 of that Act (the additional calculation rule) by reference to the taxed receipt.
Subsections (3) to (5) provide for the application of section 63 as a result of section 65 for a qualifying day that falls within the receipt period of the lease premium receipt.
The tenant under the taxed lease is treated as incurring an expense under section 63 as a result of section 65 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.
If the condition in subsection (3) is met, the amount of that expense for the qualifying day by reference to the taxed receipt is equal to that excess.
If the qualifying day falls within the receipt period of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.
In this section—
the “daily reduction” of a lease premium receipt is given by the formula— where— AR is the reduction under section 228 below or section 288 of ITTOIA 2005 by reference to the taxed receipt, and RRP is the number of days in the receipt period of the lease premium receipt.
In this section references to a reduction under section 228 below or section 288 of ITTOIA 2005 by reference to a taxed receipt have the same meaning as in Chapter 4 of Part 4 (see section 230(6)).
Section 67 explains how this section operates if the lease does not extend to the whole of the premises subject to the taxed lease.
This section applies if—
section 66 applies, and
the lease granted out of the taxed lease does not extend to the whole of the premises subject to the taxed lease.
Subsections (3) to (5) apply for a qualifying day that falls within the receipt period of the lease premium receipt.
Sections 63, 65 and 66 apply separately in relation to the part of the premises subject to the lease and to the remainder of the premises.
If— sections 63, 65 and 66 apply separately in relation to each part of the premises subject to a lease to which such a lease premium receipt relates and to the remainder of the premises.
more than one lease that does not extend to the whole of the premises subject to the taxed lease has been granted out of the taxed lease, and
the qualifying day falls within the receipt period of two or more lease premium receipts that relate to different leases,
Where sections 63, 65 and 66 apply in relation to a part of the premises, A becomes the amount calculated by multiplying the unreduced amount of the taxed receipt by the fraction of the premises constituted by the part.
This fraction is calculated on a just and reasonable basis.
This section applies if—
expenses are incurred on replacing or altering any tool used for the purposes of a trade, and
a deduction for the expenses would not otherwise be allowable in calculating the profits of the trade because (and only because) they are items of a capital nature.
In calculating the profits of the trade, a deduction is allowed for the expenses.
In this section “tool” means any implement, utensil or article.
In calculating the profits of a trade, a deduction is allowed for a payment—
which is treated as earnings of an employee by virtue of section 225 of ITEPA 2003 (payments for restrictive undertakings), and
which is made, or treated as made for the purposes of section 226 of that Act (valuable consideration given for restrictive undertakings), by the company carrying on the trade.
The deduction is allowed for the accounting period in which the payment—
is made, or
is treated as made for the purposes of section 226 of ITEPA 2003.
This section applies if a company carrying on a trade (“the employer”) makes the services of a person employed for the purposes of the trade available to— on a basis that is stated and intended to be temporary.
a charity, or
an educational establishment,
In calculating the profits of the trade, a deduction is allowed for expenses of the employer that are attributable to the employee’s employment during the period of the secondment.
In this section—
A body in England and Wales is an educational establishment for the purposes of section 70 if it is—
a local education authority,
an educational institution maintained or otherwise supported by a local education authority,
an independent school within the meaning of the Education Act 1996 (c. 56) registered under section 161 of the Education Act 2002 (c. 32), or
an institution within the further education sector, or the higher education sector, within the meaning of the Further and Higher Education Act 1992 (c. 13).
A body in Scotland is an educational establishment for the purposes of section 70 if it is—
an education authority within the meaning of the Education (Scotland) Act 1980 (c. 44),
an educational establishment within the meaning of the Education (Scotland) Act 1980 managed by an education authority within the meaning of that Act,
a public or grant-aided school within the meaning of the Education (Scotland) Act 1980,
an independent school within the meaning of the Education (Scotland) Act 1980,
a central institution within the meaning of the Education (Scotland) Act 1980 (c. 44),
an institution within the higher education sector within the meaning of section 56(2) of the Further and Higher Education (Scotland) Act 1992 (c. 37), or
a college of further education within the meaning of section 36(1) of the Further and Higher Education (Scotland) Act 1992.
A body in Northern Ireland is an educational establishment for the purposes of section 70 if it is—
an education and library board within the meaning of the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3)),
a college of education, a grant-aided school or an independent school within the meaning of the Education and Libraries (Northern Ireland) Order 1986, or
an institution of further education within the meaning of the Further Education (Northern Ireland) Order 1997 (S.I. 1997/1772 (N.I. 15)).
This section applies if—
a company carrying on a trade (“the employer”) is liable to make payments to an individual,
income tax falls to be deducted from those payments as a result of PAYE regulations, and
the employer withholds sums from those payments in accordance with an approved scheme and pays the sums to an approved agent.
In calculating the profits of the employer’s trade, a deduction is allowed for expenses incurred by the employer in making a payment to the agent for expenses which— by the agent in connection with the agent’s functions under the scheme.
have been incurred, or
are to be incurred,
In this section “approved agent” and “approved scheme” have the same meaning as in section 714 of ITEPA 2003.
In calculating the profits of a trade, a deduction is allowed for counselling expenses if—
the company carrying on the trade (“the employer”) incurs the expenses,
the expenses are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
the relevant conditions are met.
In this section “counselling expenses” means expenses incurred—
in the provision of services to the employee in connection with the cessation of the office or employment,
in the payment or reimbursement of fees for such provision, or
in the payment or reimbursement of travelling expenses in connection with such provision.
In this section “the relevant conditions” means—
conditions A to D for the purposes of section 310 of ITEPA 2003 (employment income exemptions: counselling and other outplacement services), and
in the case of travel expenses, condition E for those purposes.
In calculating the profits of a trade, a deduction is allowed for retraining course expenses if—
the company carrying on the trade (“the employer”) incurs the expenses,
they are incurred in relation to a person (“the employee”) who holds or has held an office or employment under the employer for the purposes of the trade, and
the relevant conditions are met.
In this section—
This section applies if—
an employer’s liability to corporation tax for an accounting period is determined on the assumption that a deduction for expenditure is allowed under section 74, and
the deduction would not otherwise have been allowed.
If, subsequently— an assessment of an amount or further amount of corporation tax due as a result of the condition not being met may be made under paragraph 41 of Schedule 18 to FA 1998.
the condition in section 311(4)(a) of ITEPA 2003 is not met because of the employee’s failure to begin the course within the period of one year after ceasing to be employed, or
the condition in section 311(4)(b) of ITEPA 2003 is not met because of the employee’s continued employment or re-employment,
Such an assessment must be made before the end of the period of 6 years immediately following the end of the accounting period in which the failure to meet the condition occurred.
If subsection (2) applies, the employer must give an officer of Revenue and Customs a notice containing particulars of— within 60 days of coming to know of it.
the employee’s failure to begin the course,
the employee’s continued employment, or
the employee’s re-employment,
If an officer of Revenue and Customs has reason to believe that the employer has failed to give such a notice, the officer may by notice require the employer to provide such information as the officer may reasonably require for the purposes of this section about—
the failure to begin the course,
the continued employment, or
the re-employment.
A notice under subsection (5) may specify a time (not less than 60 days) within which the required information must be provided.
Sections 77 to 79 apply if—
a company (“the employer”) makes a redundancy payment or an approved contractual payment to another person (“the employee”), and
the payment is in respect of the employee’s employment wholly in the employer’s trade or partly in the employer’s trade and partly in one or more other capacities.
For the purposes of this section and sections 77 to 81 “redundancy payment” means a redundancy payment payable under—
Part 11 of the Employment Rights Act 1996 (c. 18), or
Part 12 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
For the purposes of this section and those sections—
This section applies if—
the payment is in respect of the employee’s employment wholly in the employer’s trade, and
no deduction would otherwise be allowable for the payment.
In calculating the profits of the trade, a deduction is allowed under this section for the payment.
The deduction under this section for an approved contractual payment must not exceed the amount which would have been due to the employee if a redundancy payment had been payable.
If the payment is made after the employer has permanently ceased to carry on the trade, it is treated as made on the last day on which the employer carried on the trade.
If there is a partnership change, subsection (4) does not apply so long as a company carrying on the trade in partnership immediately before the change continues to carry it on in partnership after the change.
The reference in subsection (5) to a partnership change is to a change in the persons carrying on the trade in circumstances where the trade is carried on by persons in partnership immediately before or immediately after the change (or at both those times).
The deduction under this section is allowed for the accounting period in which the payment is made (or treated under subsection (4) as made).
This section applies if the payment is in respect of the employee’s employment with the employer—
partly in the employer’s trade, and
partly in one or more other capacities.
The amount of the redundancy payment, or the amount which would have been due if a redundancy payment had been payable, is to be apportioned on a just and reasonable basis between—
the employment in the trade, and
the employment in the other capacities.
The part of the payment apportioned to the employment in the trade is treated as a payment in respect of the employee’s employment wholly in the trade for the purposes of section 77.
This section applies if the employer permanently ceases to carry on a trade or part of a trade and makes a payment to the employee in addition to—
the redundancy payment, or
if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
If, in calculating the profits of the trade— a deduction is allowed under this section for the additional payment.
no deduction would otherwise be allowable for the additional payment, but
a deduction would be allowable for it if the employer had not permanently ceased to carry on the trade or the part of the trade,
The deduction under this section is limited to 3 times the amount of—
the redundancy payment, or
if an approved contractual payment is made, the amount that would have been due if a redundancy payment had been payable.
If the payment is made after the employer has permanently ceased to carry on the trade or the part of the trade, it is treated as made on the last day on which the employer carried on the trade or the part of the trade.
The deduction under this section is allowed for the accounting period in which the payment is made (or treated under subsection (4) as made).
This section deals with the application of section 79 in circumstances where—
there is a change in the persons carrying on a trade, and
the trade is carried on by persons in partnership before or after the change (or at both those times).
The employer is treated for the purposes of section 79 as permanently ceasing to carry on the trade unless a company carrying on the trade in partnership immediately before the change continues to carry it on in partnership after the change.
This section applies if, in respect of a redundancy payment or an approved contractual payment payable by an employer—
the Secretary of State makes a payment under section 167 of the Employment Rights Act 1996 (c. 18), or
the Department for Employment and Learning makes a payment under Article 202 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)).
So far as the employer reimburses the Secretary of State or Department for the payment, sections 77 to 80 apply as if the payment were— made by the employer.
a redundancy payment, or
an approved contractual payment,