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For corporation tax purposes the income and chargeable gains of a company for an accounting period must be calculated and expressed in sterling.

See the following sections for provision about the application of subsection (1) in certain cases where profits or losses fall to be calculated in accordance with generally accepted accounting practice—

This section applies if, for a period of account, in accordance with generally accepted accounting practice, a UK resident company—

Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as if the company prepared its accounts in sterling.

This section applies if, for a period of account, in accordance with generally accepted accounting practice—

Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows— Step 1 Calculate those profits or losses in the functional currency as if the company prepared its accounts in that currency. Step 2 Take the sterling equivalent of those profits or losses (see section 11).

If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the functional currency of the company.

This section applies if, for a period of account—

Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows— Step 1 Calculate those profits or losses in the accounts currency. Step 2 Take the sterling equivalent of those profits or losses (see section 11).

If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

This section applies if—

Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows— Step 1 Calculate those profits or losses in the accounts currency. Step 2 Take the sterling equivalent of those profits or losses (see section 11).

If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

The reference in subsection (1) to the company’s “return of accounts” is to a return of such accounts of its permanent establishment in the United Kingdom as may be required under paragraph 3 of Schedule 18 to FA 1998 (company tax returns).

Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

The translation must be made by reference to—

That rate is—

Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

The translation must be made by reference to—

That rate is—

Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below). Rule 1 applies if the later tax calculation currency is the same as the earlier tax calculation currency. Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11. Rule 2 applies if— the later tax calculation currency is not the same as the earlier tax calculation currency, and the earlier tax calculation currency is sterling. Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the last day of the relevant accounting period. Rule 3 applies if— the later tax calculation currency is not the same as the earlier tax calculation currency, and the earlier tax calculation currency is a currency other than sterling. Rule 3 is that the loss must be translated into its sterling equivalent by— being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

In the table in subsection (2)—

This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below). Rule 1 applies if the earlier tax calculation currency is the same as the later tax calculation currency. Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11. Rule 2 applies if— the earlier tax calculation currency is not the same as the later tax calculation currency, and the later tax calculation currency is sterling. Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the first day of the relevant accounting period. Rule 3 applies if— the earlier tax calculation currency is not the same as the later tax calculation currency, and the later tax calculation currency is a currency other than sterling. Rule 3 is that the loss must be translated into its sterling equivalent by— being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

In the table in subsection (2)—

This section applies if conditions A, B and C are met.

Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-back amount.

Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried back (“the earlier tax calculation currency”) is a currency other than sterling.

The loss must be adjusted by—

In this section “the relevant accounting period” means the latest accounting period of the company that both—

This section applies if conditions A, B and C are met.

Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-forward amount.

Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried forward (“the later tax calculation currency”) is a currency other than sterling.

The loss must be adjusted by—

In this section “the relevant accounting period” means the earliest accounting period of the company that both—

This section is about the interpretation of the references in sections 13(2) and 15(5) to the profit against which a carried-forward amount is to be set off, in a case where the carried-forward amount—

In such a case, the references are to be read as references to the profit in calculating which the amount is deductible, disregarding the deduction.

References in this Chapter to the accounts of a UK resident company are to—

In this Chapter “carried-back amount” means—

In this Chapter “carried-forward amount” means—

References in this Chapter to a company’s functional currency are to the currency of the primary economic environment in which the company operates.

References in this Chapter to the tax calculation currency of a company in an accounting period are to the currency in which profits or losses of the company arising in that period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes are required to be calculated by virtue of section 5(1), section 6(2), Step 1 of section 7(2), Step 1 of section 8(2) or Step 1 of section 9(2).

This Chapter—

This Chapter also provides for restrictions on relief for the following cases—

In this Chapter references to a company carrying on a trade are references to the company carrying on the trade so as to be within the charge to corporation tax in relation to the trade.

In this Chapter, except in so far as the context otherwise requires—

This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade.

The company may make a claim for relief for the loss under this section (but see subsection (5)).

If the company makes a claim, the relief is given by deducting the loss from the company’s total profits of—

The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the loss so far as it cannot be deducted under that subsection for a subsequent accounting period.

The company may not make a claim if, in the loss-making period, the company carries on the trade wholly outside the United Kingdom.

A deduction under subsection (3)(b) may be made for an accounting period only if the company—

The company’s claim must be made—

If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest loss).

Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

This section applies if an accounting period falls partly within the period of 12 months mentioned in section 37(3)(b).

The amount of the deduction for the loss for the accounting period is not to exceed an amount equal to the overlapping proportion of the company’s total profits of that period.

The overlapping proportion is the same as the proportion that the part of the accounting period falling within the period of 12 months bears to the whole of the accounting period.

This section applies if—

Sections 37(3)(b) and 38(1) and (3) have effect in relation to the terminal loss as if the references to 12 months were references to 3 years.

The following are terminal losses made in the trade—

The overlapping proportion is the same as the proportion that the part of the accounting period falling within the final 12 months bears to the whole of the accounting period.

“The final 12 months” means the period of 12 months ending when the company ceases to carry on the trade.

This section is subject to section 41.

This section applies if—

Sections 37(3)(b) and 38(1) and (3) have effect in relation to the loss (so far as it is not a terminal loss) as if the references to 12 months were references to 3 years.

But if the loss exceeds the allowance mentioned in subsection (1)(b), subsection (2) applies in relation to the loss only so far as it does not exceed that allowance.

This section is subject to section 41.

This section applies if—

Relief for the part of the loss that cannot be relieved under section 37 (“the unrelieved loss”) is given to the company under this section.

The relief is given by deducting the unrelieved loss from the profits of the ring fence trade of an accounting period that—

The amount of a deduction to be made under subsection (3) for any accounting period is so much of the unrelieved loss as cannot be deducted under that subsection from profits of the ring fence trade of a subsequent accounting period (but this is subject to subsections (5) and (6)).

In the case of an accounting period that falls partly before the 3 year relief period, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling within the 3 year relief period bears to the whole of the accounting period.

In the case of an accounting period that falls partly before 17 April 2002, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling before that date bears to the whole of the accounting period.

If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest first).

In this section—

This section applies in relation to a claim under section 37 if—

So far as the claim relates to the increase mentioned in subsection (1)(a), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to the period given by adding two years to the post-cessation period (within the meaning of section 165 of CAA 2001).

So far as the claim relates to the expenditure mentioned in subsection (1)(b), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to a period of 5 years.

Relief under section 37 is not available for a loss made in a trade unless for the loss-making period (see section 37(3)(a)) the trade is carried on—

References in subsection (1)(b) to a profit in the trade include references to a profit in any larger undertaking of which the trade forms part.

If during the loss-making period there is a change in the way in which the trade is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

The restriction on relief under this section does not apply if the trade is a trade carried on in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade.

Relief for the loss is given to the company under this section.

The relief is given for that part of the loss for which no relief is given under section 37 or 42 (“the unrelieved loss”).

For this purpose—

In this section and section 46 references to profits of the trade are references to profits of the trade chargeable to corporation tax.

Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

This section applies for the purposes of section 45 if—

Treat any interest or dividends within subsection (3) as profits of the trade of the later period.

Interest or dividends are within this subsection if they—

This section applies for the purposes of section 45 if the company carrying on the trade is a registered industrial and provident society.

The following amounts may be brought into account in calculating the profits of the trade—

This section applies if a loss is made in a trade of farming or market gardening in an accounting period (“the current period”).

Relief under section 37 is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade—

But this section does not prevent relief for the loss from being available if—

A loss in a trade is calculated without regard to capital allowances by ignoring—

This section explains how the farming or market gardening activities (“the activities”) meet the reasonable expectation of profit test for the purposes of section 48(3)(b).

The test is decided by reference to the expectations of a competent farmer or market gardener (a “competent person”) carrying on the activities.

The test is met if—

In determining whether a competent person carrying on the activities in the current year would reasonably expect future profits, regard must be had to—

“The prior period of loss” means—

This subsection applies if—

For the purposes of section 48(3)(c) a trade is to be treated as ceased, and a new trade as started, in any of the following cases— Case 1 A company starts or ceases to be within the charge to corporation tax in respect of a trade. Case 2 There is a change in the persons carrying on a trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on. Case 3 There is a change in the persons carrying on a trade and— immediately before the change, the trade is carried on by persons who include a company, and after the change, no company that carried on the trade in partnership immediately before the change continues to carry it on in partnership. Case 4 There is a change in the persons carrying on a trade and— immediately before the change, no company carries on the trade in partnership, and immediately after the change, the trade is carried on in partnership by persons who include a company.

Subsection (1) is subject to subsections (3) and (4).

A trade is not to be treated as ceased if the change in the persons carrying on the trade is a transfer to which Chapter 1 of Part 22 applies (transfers of trade without a change of ownership).

In determining if there is a change in the persons carrying on a trade, subsection (1) is subject to the following rules— Rule 1 A husband and wife are treated as the same person. Rule 2 Individuals who are civil partners of each other are treated as the same person. Rule 3 A husband or wife is treated as the same person as— a company of which either of them has control, or a company of which both have control. Rule 4 An individual’s civil partner is treated as the same person as— a company of which either of the civil partners has control, or a company of which both have control.

In subsection (4) “control” has the same meaning as in section 450.

This section applies for the purposes of sections 48(2) and 49(6) if, as a result of section 50(4), a company is treated as the same person as an individual.

A loss in an accounting period may be determined by reference to profits and losses made by the individual in the trade in tax years (within the meaning of the Income Tax Acts).

For this purpose—

Section 70(2), (3)(a), (4)(a) and (5) of ITA 2007 applies for the purpose of determining the individual’s profits and losses in the trade for tax years.

This section applies if—

Relief under section 37 is not available for the loss.

Arrangements are within this subsection if as a result of them the sole or main benefit that might be expected to arise to the company from the company’s interest in the partnership is the obtaining of a reduction in tax liability by means of relief under section 37.

If relief is given in a case to which this section applies, the relief is withdrawn by the making of an assessment to corporation tax under this section.

“Commodity futures” means commodity futures that are for the time being dealt in on a recognised futures exchange (as defined in section 288(6) of TCGA 1992).

This section applies if—

In the allowance period and any subsequent accounting period, no relief is available to the leasing company as mentioned in subsection (1)(e) except against profits (if any) arising under the leasing contract.

Arrangements are within this subsection if, as a result of them, a successor company will be able to carry on, at some time during or after the allowance period, any part of the leasing company’s trade which includes the performance of all or any of the obligations which (apart from the arrangements) would be the leasing company’s obligations under the leasing contract.

A company (“company S”) is a successor company if—

“Arrangements” means arrangements of any kind (whether or not in writing).

For the purposes of this section, calculate losses made on the leasing contract and profits arising under that contract as if—

In determining if relief is available to the leasing company as mentioned in subsection (1)(e), any losses made on the leasing contract are treated as made in a trade carried on by the leasing company separately from any other trade carried on by it.

This section applies if—

The receipts are not to be excluded from the profits of the trade so as to give rise to a loss to be deducted under any of these provisions—

For the purposes of subsection (1) a receipt is “tax-exempt” if it has been treated as tax-exempt under arrangements having effect under section 2 of TIOPA 2010.

This Chapter restricts the amount of relief that may be given for any loss made by a company in a trade carried on by the company—

In this Chapter persons carrying on a trade in partnership are referred to collectively as a “firm”.

This section applies if—

There is a restriction on the amount of relief that may be given for the loss—

The restriction is that the sum of— must not exceed the company’s contribution to the firm as at the time mentioned in subsection (5).

Relief is within this subsection if it is given under section 37 or Part 5 for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

The time referred to in subsection (3) is—

If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

For the purposes of section 56 the company’s contribution to the firm is the sum of amounts A and B.

Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

In particular, the company’s share of any profits of the firm is to be included in the amount which the company has contributed to the firm as capital so far as that share has been added to the firm’s capital.

An amount of capital is within this subsection if it is an amount which the company—

In subsection (4) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

Amount B is the amount of the company’s total share of profits within subsection (7) except so far as—

Profits are within this subsection if they are from the limited partnership trade.

In determining the amount of the company’s total share of profits within subsection (7) ignore the company’s share of any losses from the limited partnership trade which would (apart from this subsection) reduce that amount.

In subsections (3), (7) and (8) any reference to profits or losses are to profits or losses calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits or losses for tax purposes).

If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, subsections (7) and (8) have effect as if references to the limited partnership trade were references to the limited partnership trade or any of the other trades.

In sections 56 and 57 “limited partner” means a company which carries on a trade—

A company in substance acts as a limited partner in relation to a trade if the company—

The condition referred to in subsection (1)(c) is that—

In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).

This section applies if—

There is a restriction on the amount of relief that may be given for the loss—

The restriction is that the sum of— must not exceed the company’s contribution to the LLP as at the time mentioned in subsection (5).

Relief is within this subsection if it is given under section 37 or Part 5 for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

The time mentioned in subsection (3) is—

If the LLP is carrying on, or has carried on, other trades apart from the LLP trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the LLP trade and then add the results together.

For the purposes of section 59 the company’s contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

In particular, the company’s share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP’s capital.

In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

An amount of capital is within this subsection if it is an amount which the company—

In subsection (5) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

Amount B is the amount of the company’s liability on a winding up of the LLP so far as that amount is not included in amount A.

For the purposes of subsection (7) the amount of the company’s liability on a winding up of the LLP is the amount which—

This section applies if—

For the purpose of determining the relief under section 37 or Part 5 to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).

An amount of loss is excluded so far as—

An amount of loss is also excluded so far as relief under the Corporation Tax Acts has been given for the amount other than as a result of this section.

This section applies if, in an accounting period, a company carrying on a UK property business makes a loss in the business.

Relief for the loss is given to the company under this section.

The relief is given by deducting the loss from the company’s total profits of the accounting period.

Subsection (5) applies if—

So far as the loss cannot be deducted, it—

Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

This section applies if, in an accounting period, a company with investment business (as defined in section 1218 of CTA 2009)—

Subsection (3) applies if, as a result of the company ceasing to carry on the UK property business or to be within the charge to corporation tax in respect of it, an amount of loss made in carrying on that business cannot be carried forward to the next accounting period for the purposes of section 62.

The amount of loss—

Sections 62 and 63 apply to a UK property business only so far as it is carried on—

A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

This section applies if a company carries on a UK furnished holiday lettings business.

“UK furnished holiday lettings business” means a UK property business so far as it consists of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 4 of CTA 2009).

For the purposes of this Part the company is treated as carrying on a single trade—

Accordingly, sections 62 to 64 apply in relation to the company’s UK property business as if the lettings mentioned in subsection (3)(a) were not included in it.

If there is a letting of accommodation only part of which is furnished holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in the trade treated as carried on.

This section applies if, in an accounting period, a company carrying on an overseas property business makes a loss in the business.

Relief for the loss is given to the company under this section.

For this purpose—

Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Section 66 applies to an overseas property business only so far as it is carried on—

A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

A company which has subscribed for shares in a qualifying trading company is eligible for relief under this Chapter (“share loss relief”) if—

Subsection (1) applies only if the disposal of the shares is—

Subsection (1) does not apply to any allowable loss incurred on the disposal if—

For the meaning of “qualifying trading company”, see section 78.

These are the eligibility conditions mentioned in section 68(1)(b) that a company which has subscribed for shares in a qualifying trading company must meet to be eligible for share loss relief on the disposal of the shares.

Condition A is that the subscribing company (“the investor”) is an investment company on the date of the disposal of the shares (“the disposal date”).

Condition B is that the investor has been an investment company—

Condition C is that the investor was not associated with, or a member of the same group as, the qualifying trading company at any time during the period—

For the purposes of condition C, two companies are associated with each other if—

Sections 450 and 451 (which contain provision as to when a person is to be taken to have control of a company) apply for the purposes of subsection (5).

This section applies where a company is eligible for share loss relief.

The company may make a claim for the loss to be deducted in calculating for corporation tax purposes the company’s income—

The company may make a claim under subsection (2)(b) for any accounting period only if the company was an investment company throughout that period.

A claim for share loss relief must be made before the end of the period of two years after the end of the accounting period in which the loss is incurred.

This subsection explains how deductions in respect of share loss relief claimed by a company under section 70 are to be made. Step 1 Deduct the loss in calculating the company’s income for the accounting period in which the loss is incurred. Step 2 If not all of the loss can be deducted at Step 1, deduct the remaining loss in calculating the company’s income for any accounting period falling (wholly or partly) within the 12 month period that ends immediately before the beginning of the accounting period in which the loss is incurred.

The amount of a deduction to be made at Step 2 for any accounting period is the amount of the loss so far as it cannot be deducted under subsection (1) for a subsequent accounting period.

Subsection (1) is subject to sections 72, 74(5) and 75 (which set limits on the amount of share loss relief that may be obtained in particular cases).

A deduction at Step 2 from the income of an accounting period may be made only after all other deductions have been made from the income for that period in respect of share loss relief given for an earlier loss.

Deductions made on the basis of relief claimed under Part 7 of Schedule 15 to FA 2000 (relief for losses on disposal of shares to which investment relief is attributable) must, in accordance with paragraph 70 of that Schedule, be made before making deductions for share loss relief.

A claim for share loss relief does not affect any claim for a deduction under TCGA 1992 for so much of the allowable loss as is not deducted under subsection (1).

This section applies if an accounting period falls partly within the period of 12 months ending immediately before the beginning of the accounting period in which the loss is incurred.

The amount of the deduction under Step 2 in section 71(1) for the accounting period is not to exceed an amount equal to the overlapping proportion of the company’s income of that period.

The overlapping proportion is the same as the proportion that the part of the accounting period falling within the 12 month period mentioned in subsection (1) bears to the whole of the accounting period.

This section has effect for the purposes of this Chapter.

A company subscribes for shares in another company if they are issued to the company by the other company in consideration of money or money’s worth.

If— the company is treated as having subscribed for the bonus shares.

If— the company is treated as having subscribed for the bonus shares on that date.

This section applies if—

The company is not eligible for share loss relief on the disposal of the new shares unless condition A or B is met. This is subject to section 87(3).

Condition A is that the company would have been eligible for share loss relief on a disposal of the old shares—

Condition B is that the company gave for the new shares consideration in money or money’s worth other than consideration of the kind mentioned in paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

If the company relies on condition B, the amount of share loss relief on the disposal of the new shares must not exceed the amount or value of the new consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.

Subsection (2) applies if—

The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares had not formed part of the holding.

Subsection (4) applies if—

The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if—

Subsection (6) applies if— References in this subsection and subsection (6) to other shares in the same company include debentures of the same company.

The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares and the other shares in the same company were not to be treated as the same asset.

In this section—

For the purposes of this section and section 76, shares are not capable of being qualifying shares at any time if—

For the purposes of subsection (5), shares are not capable of being qualifying shares at any time if they are shares of a different class from the shares mentioned in paragraph (a) of that subsection.

This section applies if a company disposes of shares forming part of a mixed holding of shares, that is, a holding of shares in a company which includes—

Any question— is to be determined as provided by the following provisions of this section.

Any such question as is mentioned in subsection (2) is to be determined—

For the purposes of subsection (3)(a)(i), the question is to be determined by identifying the shares disposed of in accordance with sections 105 and 107 of TCGA 1992.

For the purposes of subsection (3)(a)(ii), the question is to be determined by treating the disposal and any previous disposal by the company out of the section 104 or 1982 holding as relating to shares acquired later rather than earlier.

For the purposes of subsection (3)(b), the question is to be determined—

Any such question as is mentioned in subsection (2) which cannot be determined as provided by subsections (3) to (6) is to be determined on a just and reasonable basis.

In this section “holding” means any number of shares of the same class held by one company in the same capacity, growing or diminishing as shares of that class are acquired or disposed of. For this purpose shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange.

In this section “section 104 holding”, “1982 holding” and “qualifying shares” have the same meaning as in section 75.

In a case to which section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal) applies (including a case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of section 76 as acquired when the original shares were acquired.

Any shares held or disposed of by a nominee or bare trustee for a company are treated for the purposes of section 76 as held or disposed of by that company.

In this section “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to D.

Condition A is that the company either—

Condition B is that the company either—

Condition C is that the company—

Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period—

The trading requirement is that—

If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades— This subsection does not apply at any time after the abandonment of that intention.

For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.

In this section—

In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 78(3).

In section 195 of ITA 2007 (as applied by subsection (7) for the purpose of the definition of “excluded activities”), references to the issuing company are to be read as references to the company mentioned in subsection (1).

A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership. This has effect subject to subsections (2) and (3).

Subsection (1) applies only if— is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 78(2)— This is subject to subsection (4).

Subsection (3) does not apply if —

References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.

The control element of the requirement is that—

The independence element of the requirement is that—

This section is subject to section 87(3).

In this section—

The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

In this section “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

In this section—

The gross assets requirement in the case of a single company is that the value of the company’s gross assets—

The gross assets requirement in the case of a parent company is that the value of the group assets—

The value of the group assets means the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.

In this section—

The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the share loss relief is claimed are issued—

The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time— if the order was made after the relevant time.

In this section—

This section and section 88 apply in relation to shares if— In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.

For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

Nothing in— applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) or, in the case of section 81, arrangements with a view to such an exchange.

For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

References in section 88 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares which had been subscribed for by the company (“the investor”).

This Chapter has effect in relation to any subsequent disposal or other event as if—

Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 79(7) above for the purpose of the definition of “excluded activities”.

This section applies for the purposes of the following provisions—

If— the bonus shares are treated as having been issued at the time the original shares were issued to the company or are treated as having been so issued.

In this Chapter (subject to subsections (2) to (7))—

For the purposes of the definition of “corresponding bonus shares” in subsection (1), shares are not treated as being of the same class unless they would be so treated if they were—

Except as provided by subsection (4), paragraph (b) of the definition of shares in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in sections 75(3) to (6), (8) and (9) and 87(1) to (4).

Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 87(1).

The definition of “shares” in subsection (1) does not apply in sections 79(5)(a), 84(3) and 85(1)(c) and (2).

For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.

For the purposes of this Chapter a disposal of shares which results in an allowable loss for the purposes of corporation tax on chargeable gains is treated as made at the time when the disposal is made or treated as made for the purposes of TCGA 1992.

This Chapter allows a company to surrender losses and other amounts it has for an accounting period.

Sections 99 to 104 set out the basic provisions about the surrendering of losses and other amounts.

Sections 105 to 110 place restrictions on the surrendering of losses and other amounts.

This section applies if a company has one or more of the following for an accounting period—

The company may surrender the losses and other amounts under this Chapter so far as the losses and other amounts are eligible for corporation tax relief (apart from this Part).

Subsection (2) applies in relation to losses and other amounts within subsection (1)(a) to (c) even if the company has other profits in the accounting period mentioned in subsection (1) from which the losses and other amounts could be deducted.

But so far as losses and other amounts are within subsection (1)(d) to (g), subsection (2) is subject to the restriction in section 105.

Subsection (2) is also subject to—

Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders losses or other amounts, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief in relation to the amounts (see Requirement 1 in section 130).

In this Part, in relation to losses or other amounts within subsection (1) that a company has for an accounting period—

In section 99(1)(a) “trading loss” means a loss made in a trade in the surrender period.

But it does not include—

In section 99(1)(b) “capital allowance excess” means an excess of the kind mentioned in section 260(1) of CAA 2001 for the surrender period.

In determining if there is such an excess for the surrender period and, if there is, its amount, apply section 260(1) of CAA 2001 but subject to subsections (3) and (4).

Capital allowances brought forward from previous accounting periods are to be ignored.

The reference in section 260(1) of CAA 2001 to a description of the company’s income is to be read as a reference to that description of income before deductions for—

In section 99(1)(e) “UK property business loss” means a loss made in a UK property business in the surrender period.

But it does not include a loss treated as made in the surrender period as a result of section 62(5).

In section 99(1)(f) “management expenses” means expenses that are deductible for the surrender period under section 1219 of CTA 2009.

But it does not include—

In section 99(1)(g) “non-trading loss on intangible fixed assets” is to be read in accordance with Part 8 of CTA 2009.

But so much of such a loss as is made up of an amount carried forward under section 753(3) of CTA 2009 is excluded from the scope of section 99(1)(g).

This section applies if the surrendering company has for the surrender period losses or other amounts within section 99(1)(d) to (g) (“relevant amounts”) that are eligible for corporation tax relief (apart from this Part).

The surrendering company may not surrender any relevant amount under this Chapter unless the total of the relevant amounts exceeds the surrendering company’s gross profits of the surrender period.

If the total of the relevant amounts does exceed those gross profits—

If the surrendering company surrenders relevant amounts, the amount surrendered is treated as consisting of—

For the purposes of this section the surrendering company’s gross profits of the surrender period are its profits for that period without any of the following—

This section is subject to section 305 (oil activities: availability of group relief against ring fence profits).

This section applies if the surrendering company is UK resident.

The surrendering company may not surrender a loss or other amount under this Chapter so far as the loss or other amount—

A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company’s surrenderable amounts for the surrender period if those amounts were determined—

The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carries on a trade in the United Kingdom.

An amount is within this subsection if, for the purposes of non-UK tax (see section 187) chargeable under the law of the territory in which the permanent establishment is situated, the amount is (in any period) deductible from or otherwise allowable against non-UK profits (see section 108) of a person other than the surrendering company.

Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.

This section applies if the surrendering company is a non-UK resident company carrying on a trade in the United Kingdom through a permanent establishment.

The surrendering company may surrender a loss or other amount under this Chapter only so far as conditions A, B and C are met in relation to the loss or other amount.

Condition A is that the loss or other amount is attributable to activities of the surrendering company in respect of which it is within the charge to corporation tax for the surrender period.

Condition B is that the loss or other amount is not attributable to activities of the surrendering company that are double taxation exempt for the surrender period (see section 186).

Condition C is that—

An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is (in any period) deductible from or otherwise allowable against non-UK profits of any person.

But an amount is not to be taken to be within subsection (6) by reason only that it is—

Subsection (9) applies for the purposes of subsection (6) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned.