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CORPORATION TAX ACT 2010

UK Public General Acts

Version 01/04/2010

2010 CHAPTER 4

Default Geographical Extent: E+W+S+N.I.


  • Part 1. Introduction
  • Part 2. Calculation of liability in respect of profits
    • Chapter 1. Introduction
    • Chapter 2. Rates at which corporation tax on profits charged
    • Chapter 3. Calculation of amount to which rates applied
    • Chapter 4. Currency
      • The currency to be used in tax calculations
      • Translating amounts into other currencies
      • Adjustment of sterling losses
      • Interpretation
  • Part 3. Companies with small profits
    • The small profits rate
    • Marginal relief
    • The lower limit and the upper limit
    • Supplementary
  • Part 4. Loss relief
    • Chapter 1. Introduction
    • Chapter 2. Trade losses
      • Introduction
      • Trade loss relief against total profits
      • Carry forward of trade loss relief
      • Restrictions on relief: farming or market gardening
      • Restrictions on relief: commodity futures
      • Other restrictions on relief
    • Chapter 3. Limited partners and members of limited liability partnerships
      • Introduction
      • Limited partners
      • Members of LLPs
    • Chapter 4. Property losses
      • UK property businesses
      • Overseas property businesses
    • Chapter 5. Losses on disposal of shares
      • Share loss relief against income
      • Shares: subscription and disposal
      • Qualifying trading companies: the requirements
      • Qualifying trading companies: supplementary
      • Interpretation
    • Chapter 6. Losses from miscellaneous transactions
    • Chapter 7. Write-off of government investment
  • Part 5. Group relief
    • Chapter 1. Introduction
    • Chapter 2. Surrender of company's losses etc for an accounting period
      • Introduction
      • Basic provisions about surrendering losses and other amounts
      • Restrictions on losses and other amounts that may be surrendered
    • Chapter 3. Surrenders made by non-UK resident company resident or trading in the EEA
      • Introduction
      • Basic provisions about surrendering losses and other amounts
      • Conditions that must be met
      • Other rules, assumptions and exclusions
    • Chapter 4. Claims for group relief
      • Introduction
      • Surrenderable amounts under Chapter 2
      • Surrenderable amounts under Chapter 3
      • Giving of group relief
      • General limitation on amount of group relief to be given
      • Limitations on group relief if claim based on consortium condition 1, 2 or 3
    • Chapter 5. Subsidiaries, groups and consortiums
      • Introduction
      • Explanations of terms
      • Arrangements for transfers of companies
    • Chapter 6. Equity holders and profits or assets available for distribution
      • Introduction
      • Equity holders
      • Company's entitlement to profits or assets available for distribution: basic provisions
      • Company's entitlement to profits or assets available for distribution: supplementary
    • Chapter 7. Miscellaneous provisions and interpretation of Part
      • Miscellaneous
      • Interpretation
  • Part 6. Charitable donations relief
    • Chapter 1. Nature of relief
    • Chapter 2. Certain payments to charity
      • Qualifying payments
      • Payment attributed to earlier period
      • Interpretation
    • Chapter 3. Certain disposals to charity
      • Amounts treated as qualifying charitable donations
      • Value of net benefit to charity
      • Special provisions about qualifying interests in land
      • Interpretation
  • Part 7. Community investment tax relief
    • Chapter 1. Introduction
      • CITR
      • Miscellaneous
    • Chapter 2. Qualifying investments
    • Chapter 3. General conditions
    • Chapter 4. Limitations on claims and attribution
      • Limitations on claims
      • Attribution
    • Chapter 5. Withdrawal or reduction of CITR
      • Introduction
      • Disposals
      • Repayment of loans
      • Receipts of value
      • CITR not due
      • Manner of withdrawal or reduction
    • Chapter 6. Supplementary and general
      • Alternative finance arrangements
      • Miscellaneous
      • Definitions
  • Part 8. Oil activities
    • Chapter 1. Introduction
    • Chapter 2. Basic definitions
    • Chapter 3. Deemed separate trade
    • Chapter 4. Calculation of profits
      • Oil valuation
      • Loan relationships
      • Sale and lease-back
      • Regional development grants
      • Tariff receipts etc
      • Abandonment guarantees
      • Abandonment expenditure
      • Deduction of PRT in calculating income for corporation tax purposes
      • Interest on repayment of PRT or APRT
      • Relief
    • Chapter 5. Ring fence expenditure supplement
      • Introduction
      • Application and interpretation
      • Pre-commencement supplement
      • Post-commencement supplement
    • Chapter 6. Supplementary charge in respect of ring fence trades
    • Chapter 7. Reduction of supplementary charge for certain new oil fields
      • Reduction of adjusted ring fence profits
      • Pool of field allowances
      • Field allowance: when held and unactivated amount
      • No change in equity share: activation of allowance
      • Change in equity share: activation of allowance
      • Change in equity share: transfer of field allowance
      • Miscellaneous
      • Interpretation
  • Part 9. Leasing plant or machinery
    • Chapter 1. Introduction
    • Chapter 2. Long funding leases of plant or machinery
      • Introduction
      • Lessors under long funding finance leases
      • Lessors under long funding operating leases
      • Cases where sections 360 to 369 do not apply
      • Lessees under long funding finance leases
      • Lessees under long funding operating leases
      • Interpretation
    • Chapter 3. Sales of lessors: leasing business carried on by a company alone
      • Introduction
      • Income and matching expense in different accounting periods
      • “Business of leasing plant or machinery”
      • “Qualifying change of ownership”
      • The amount of the income
      • “Associated company”
    • Chapter 4. Sales of lessors: leasing business carried on by a company in partnership
      • Introduction
      • “Business of leasing plant or machinery”
      • “Qualifying change” in company's interest in a business
      • Qualifying changes in partner company's interest in business
      • Qualifying changes of ownership in relation to partner company
      • Interpretation
    • Chapter 5. Sales of lessors: anti-avoidance provisions
    • Chapter 6. Sales of lessors: general interpretation
  • Part 10. Close companies
    • Chapter 1. Overview of Part
    • Chapter 2. Basic definitions
      • Meaning of “close company": general
      • Companies which are not to be close companies
      • Meaning of other expressions in this Part
    • Chapter 3. Charge to tax in case of loan to participator
      • Charge to tax in case of loan to participator
      • Exceptions to the charge to tax under section 455
      • Relief in case of repayment or release of loan
      • Loan treated as made to participator
      • Loan treated as made by close company
      • Taxation of debtor on release of loan to trustees of settlement which has ended
    • Chapter 4. Power to obtain information
  • Part 11. Charitable companies etc
    • Chapter 1. Introduction
    • Chapter 2. Gifts and other payments
      • Gifts and other payments to charitable companies
      • Gifts to eligible bodies
      • Gifts to scientific research associations
    • Chapter 3. Other exemptions
      • Exemptions
      • Application of exemptions to certain bodies
    • Chapter 4. Restrictions on exemptions
      • Restrictions on exemptions
      • Non-charitable expenditure
      • Substantial donor transactions
      • Approved charitable investments and loans
      • Carry back of excess non-charitable expenditure
  • Part 12. Real Estate Investment Trusts
    • Chapter 1. Introduction
      • Introductory
      • Key concepts
    • Chapter 2. Requirements for being a UK REIT
      • Becoming a UK REIT
      • Being a UK REIT in relation to an accounting period
    • Chapter 3. Tax treatment of profits and gains of UK REITs
    • Chapter 4. Entering the UK REIT regime
    • Chapter 5. Assets etc
      • Ring-fencing of property rental business
      • Profits: financing-cost ratio
      • Cancellation of tax advantage
      • Funds awaiting reinvestment
    • Chapter 6. Distributions
      • Recipients of distributions
      • Attribution of distributions
      • Distributions to certain shareholders
    • Chapter 7. Gains etc
      • Movement of assets
      • Demergers
      • Interpretation
    • Chapter 8. Breach of conditions in Chapter 2
    • Chapter 9. Leaving the UK REIT regime
      • Introduction
      • Notice to leave regime
      • Automatic termination
      • Effects of cessation
      • Early exit
    • Chapter 10. Joint ventures
      • Introduction
      • Notice for Part to apply to joint venture
      • Effect and duration of notice
      • Specific requirements and modifications
      • Additional entry charge due in some cases
      • Supplementary
    • Chapter 11. Part 12: supplementary
      • Miscellaneous
      • Interpretation
  • Part 13. Other special types of company etc
    • Chapter 1. Corporate beneficiaries under trusts
      • Discretionary payments
      • Trustees' expenses
    • Chapter 2. Authorised investment funds
      • Introduction
      • Open-ended investment companies
      • Authorised unit trusts
      • Court investment funds
    • Chapter 3. Unauthorised unit trusts
    • Chapter 4. Securitisation companies
    • Chapter 5. Companies in liquidation or administration
      • Introduction
      • Companies in liquidation
      • Companies in administration
      • Supplementary
    • Chapter 6. Banks etc in compulsory liquidation
    • Chapter 7. Co-operative housing associations
    • Chapter 8. Self-build societies
    • Chapter 9. Community amateur sports clubs
      • Basic concepts
      • Exemptions
      • Restrictions on exemptions
      • Deemed disposal and acquisition of asset
      • Decisions and appeals
  • Part 14. Change in company ownership
    • Chapter 1. Introduction
    • Chapter 2. Disallowance of trading losses
    • Chapter 3. Company with investment business: restrictions on relief: general provision
      • Introduction
      • Notional split of accounting period in which change in ownership occurs
      • Restrictions on relief
      • Apportionment of amounts
      • Adjustment to balancing charges if relief is restricted
      • Meaning of “significant increase in the amount of a company's capital”
    • Chapter 4. Company with investment business: restrictions on relief: asset transferred within group
      • Introduction
      • Notional split of accounting period in which change in ownership occurs
      • Restrictions on relief
      • Apportionment of amounts
    • Chapter 5. Company without investment business: disallowance of property losses
    • Chapter 6. Recovery of unpaid corporation tax
      • General definitions
      • Recovery of unpaid corporation tax for accounting period beginning before change
      • Recovery of unpaid corporation tax for accounting period ending on or after change
      • Miscellaneous
    • Chapter 7. Meaning of “change in the ownership of a company”
      • Meaning of “change in the ownership of a company”
      • Changes in indirect ownership
      • Disregard of change in ownership
      • Supplementary provision
    • Chapter 8. Supplementary provision
  • Part 15. Transactions in securities
    • Introduction
    • Company liable to counteraction of corporation tax advantage
    • Circumstances in which corporation tax advantages obtained or obtainable
    • Procedure for counteraction of corporation tax advantages
    • Clearance procedure
    • Appeals
    • Interpretation
  • Part 16. Factoring of income etc
    • Chapter 1. Transfers of income streams
    • Chapter 2. Finance arrangements
      • Type 1 arrangements
      • Type 2 arrangements
      • Type 3 arrangements
      • Exceptions
      • Supplementary
    • Chapter 3. Loan or credit transactions
  • Part 17. Manufactured payments and repos
    • Chapter 1. Introduction
    • Chapter 2. Manufactured dividends
    • Chapter 3. Manufactured overseas dividends
    • Chapter 4. Further provision about manufactured payments
      • Manufactured payments exceeding, or less than, underlying payments
      • Manufactured payments under arrangements with unallowable purpose
      • Miscellaneous
    • Chapter 5. Stock lending arrangements and repos
      • Interpretation
      • Tax credits: stock lending arrangements and repos
      • Deemed manufactured payments
    • Chapter 6. Interpretation of Part
  • Part 18. Transactions in land
    • Introduction
    • Charge to tax on gains from transactions in land
    • Further provisions relevant to the charge
    • Exemptions
    • Recovery of tax
    • Clearances and power to obtain information
    • Interpretation
  • Part 19. Sale and lease-back etc
    • Chapter 1. Payments connected with transferred land
      • Introduction
      • Application of the Chapter
      • Relief (other than for certain insurance company expenses): restriction and carrying forward
      • Insurance company expenses: restriction and carrying forward of relief
      • Interpretation etc
    • Chapter 2. New lease of land after assignment or surrender
      • Introduction
      • Application of the Chapter
      • Taxation of consideration
      • Relief for rent under new lease
      • New lease treated as ending
      • Lease varied to provide for increased rent
      • Interpretation
    • Chapter 3. Leased trading assets
      • Introduction
      • Application of the Chapter
      • Relief: restriction and carrying forward
      • Interpretation
    • Chapter 4. Leased assets: capital sums
      • Introduction
      • Application of the Chapter
      • Charge to corporation tax
      • Obtaining of sum
      • Apportionment
      • Interpretation
  • Part 20. Tax avoidance involving leasing plant or machinery
    • Chapter 1. Restrictions on use of losses in leasing partnerships
    • Chapter 2. Capital payments in respect of leases treated as income
  • Part 21. Leasing arrangements: finance leases and loans
    • Chapter 1. Introduction
      • Introduction
      • Meaning of expressions about rent
    • Chapter 2. Finance leases with return in capital form
      • Introduction
      • Leases to which this Chapter applies
      • Current lessor taxed by reference to accountancy rental earnings
      • Reduction of taxable rent by cumulative rental excesses
      • Relief for bad debts by reduction of cumulative rental excesses
      • Effect of disposals
      • Capital allowances: clawback of major lump sum
      • Schemes to which this Chapter does not at first apply
    • Chapter 3. Other finance leases
      • Introduction
      • Current lessor taxed by reference to accountancy rental earnings
      • Application of provisions of Chapter 2 for purposes of this Chapter
    • Chapter 4. Supplementary provisions
  • Part 22. Miscellaneous provisions
    • Chapter 1. Transfers of trade without a change of ownership
      • Introduction
      • Transfers to which Chapter applies
      • Effect of Chapter in relation to transfers to which it applies
      • Supplementary
    • Chapter 2. Transfers of trade to obtain balancing allowances
    • Chapter 3. Transfer of relief within partnerships
    • Chapter 4. Surrender of tax refund within group
    • Chapter 5. Set off of income tax deductions against corporation tax
    • Chapter 6. Collection etc of tax from UK representatives of non-UK resident companies
    • Chapter 7. Recovery of unpaid corporation tax due from non-UK resident company
    • Chapter 8. Exemptions
      • Trade unions and employers' associations
      • Local authorities etc
      • Health service bodies
      • Reserve Bank of India and State Bank of Pakistan
      • Agricultural societies
    • Chapter 9. Other miscellaneous provisions
      • European Economic Interest Groupings
      • Harbour reorganisation schemes
      • Groups: use of different accounting practices
  • Part 23. Company distributions
    • Chapter 1. Introduction
    • Chapter 2. Matters which are distributions
      • Introduction
      • Meaning of “distribution”
      • Distributions, other than dividends, in respect of shares
      • Redeemable share capital
      • Securities issued otherwise than for new consideration
      • Distributions in respect of non-commercial securities
      • Exceptions to section 1008
      • Distributions in respect of special securities
      • Transfers of assets or liabilities treated as distributions
      • Bonus issue following repayment of share capital
      • Interpretation of references to repayment of share capital
    • Chapter 3. Matters which are not distributions
      • Introduction
      • Distributions in a winding up
      • Distribution as part of a cross-border merger
      • Payments of interest
      • Purchase of own shares
      • Purchase of own shares: supplementary
      • Stock dividends
      • Building society payments
      • Industrial and provident society payments
      • Payments made by UK agricultural or fishing co-operatives
      • Supplementary provisions
    • Chapter 4. Special rules for distributions made by certain companies
      • Close companies
      • Companies carrying on a mutual business
      • Companies not carrying on a business
      • Members of a 90% group
    • Chapter 5. Demergers
      • Introduction
      • Exempt distributions
      • Exemption by virtue of section 1076 or 1077: conditions
      • Chargeable payments
      • Advance clearance
      • Information and returns
      • Supplementary
    • Chapter 6. Information and returns: further provisions
      • General duties to provide information
      • Companies and nominees required to provide tax certificates
    • Chapter 7. Tax credits
    • Chapter 8. Interpretation of Part
  • Part 24. Corporation Tax Acts definitions etc
    • Chapter 1. Definitions
    • Chapter 2. Permanent establishments
      • General
      • Circumstances where there is no permanent establishment
      • Brokers
      • Investment managers
      • Lloyd's agents
      • Supplementary
    • Chapter 3. Subsidiaries
    • Chapter 4. Investment trusts
    • Chapter 5. Other Corporation Tax Acts provisions
  • Part 25. Definitions for purposes of Act and final provisions
    • Definitions for the purposes of Act
    • Final provisions
  • Version 01/04/2010
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  • Version 03/03/2010

Introductory Text

Corporation Tax Act 2010

2010 CHAPTER 4

An Act to restate, with minor changes, certain enactments relating to corporation tax and certain enactments relating to company distributions; and for connected purposes.

[3rd March 2010]

Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Part 1
Introduction



1 Overview of Act

(1) Part 2 is about calculation of the corporation tax chargeable on a company's profits, in particular—

(a) the rates at which corporation tax on profits is charged (see Chapter 2) ,
(b) ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3) , and
(c) the currency in which profits are to be calculated and expressed (see Chapter 4).
(2) Parts 3 to 7 make provision for the following reliefs—

(a) relief for companies with small profits (see Part 3) ,
(b) relief for trade losses (see Chapters 2 and 3 of Part 4) ,
(c) relief for losses from property businesses (see Chapter 4 of Part 4) ,
(d) relief for losses on a disposal of shares (see Chapter 5 of Part 4) ,
(e) relief for losses from miscellaneous transactions (see Chapter 6 of Part 4) ,
(f) group relief (see Part 5) ,
(g) relief for qualifying charitable donations (see Part 6) , and
(h) community investment tax relief (see Part 7).
(3) Parts 8 to 13 make provision about special types of business and company etc, in particular—

(a) oil activities (see Part 8) ,
(b) leasing plant or machinery (see Part 9) ,
(c) close companies (see Part 10) ,
(d) charitable companies etc (see Part 11) ,
(e) Real Estate Investment Trusts (see Part 12) ,
(f) corporate beneficiaries under trusts (see Chapter 1 of Part 13) ,
(g) open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13) ,
(h) unauthorised unit trusts (see Chapter 3 of Part 13) ,
(i) securitisation companies (see Chapter 4 of Part 13) ,
(j) companies in liquidation or administration (see Chapter 5 of Part 13) ,
(k) banks etc in compulsory liquidation (see Chapter 6 of Part 13) ,
(l) co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13) , and
(m) community amateur sports clubs (see Chapter 9 of Part 13).
(4) Parts 14 to 21 contain provisions relating to tax avoidance, in particular with respect to—

(a) change in company ownership (see Part 14) ,
(b) transactions in securities (see Part 15) ,
(c) factoring of income (see Part 16) ,
(d) manufactured payments and repos (see Part 17) ,
(e) transactions in land (see Part 18) ,
(f) the sale and lease-back of assets (see Part 19) ,
(g) leasing plant or machinery (see Part 20) , and
(h) other arrangements involving asset leasing (see Part 21).
(5) Part 22 contains miscellaneous provisions, including provision with respect to—

(a) transfers of trade without a change of ownership (see Chapter 1) ,
(b) transfers of trade to obtain balancing allowances (see Chapter 2) ,
(c) transfer of relief within partnerships (see Chapter 3) ,
(d) the surrender of tax refunds within groups of companies (see Chapter 4) ,
(e) the set off of income tax deductions against corporation tax (see Chapter 5) ,
(f) the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6) ,
(g) the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7) , and
(h) exemptions (see Chapter 8).
(6) Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7) Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8) Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9) For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

Part 2
Calculation of liability in respect of profits



Chapter 1
Introduction



2 Overview of Part

(1) This Part contains provisions that relate to the calculation of the corporation tax chargeable on a company's profits of an accounting period.

(2) Chapter 2 is about the rates at which corporation tax on profits is charged.

(3) Chapter 3 is about ascertaining the amount of a company's profits of an accounting period to which the rates of corporation tax applicable to the company are applied.

(4) Chapter 4 makes provision about the currency in which a company must calculate and express its profits for corporation tax purposes.

(5) For provision about the calculation of the corporation tax payable for an accounting period see paragraph 8 of Schedule 18 to FA 1998.

Chapter 2
Rates at which corporation tax on profits charged



3 Corporation tax rates

(1) Corporation tax is charged at the rate set by Parliament for the financial year (“the main rate”).

(2) Section 18 provides for tax to be charged at the small profits rate instead of the main rate in certain cases.

(3) In this Act “the small profits rate” means a rate that is—

(a) lower than the main rate, and
(b) set by Parliament as the small profits rate.

Chapter 3
Calculation of amount to which rates applied



4 Amount of profits to which corporation tax rates applied

(1) In the calculation under paragraph 8(1) of Schedule 18 to FA 1998 of the amount of corporation tax payable for an accounting period of a company, the first step is to apply the rate or rates of corporation tax applicable to the profits of the company of the period on which tax is chargeable.

(2) The profits of a company of an accounting period on which corporation tax is chargeable (in this Act referred to as the company's taxable total profits of the period) are found as follows— Step 1 Find the company's total profits of the period (see subsection (3) ). Step 2 Deduct from the result of Step 1 any amounts which can be relieved against the company's total profits of the period.

(3) To find a company's total profits of an accounting period take the following steps. Step 1 Find the amount in respect of which the company is chargeable for the period under the charge to corporation tax on income after any reduction required to give effect to relief from tax. Step 2 Add to the result of Step 1 any amount to be included in respect of chargeable gains in the company's total profits of the accounting period (see section 8 of TCGA 1992) after any reduction required to give effect to relief from tax.

(4) Subsections (2) and (3) are subject to the provisions of the Corporation Tax Acts.

Chapter 4
Currency



The currency to be used in tax calculations


5 Basic rule: sterling to be used

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

(2) 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— section 6 (UK resident company operating in sterling and preparing accounts in another currency) , section 7 (UK resident company operating in currency other than sterling and preparing accounts in another currency) , section 8 (UK resident company preparing accounts in currency other than sterling) , section 9 (non-UK resident company preparing accounts in currency other than sterling).

6 UK resident company operating in sterling and preparing accounts in another currency

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

(a) prepares its accounts in a currency other than sterling, and
(b) in those accounts identifies sterling as its functional currency.
(2) 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.

7 UK resident company operating in currency other than sterling and preparing accounts in another currency

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

(a) a UK resident company prepares its accounts in one currency,
(b) in those accounts it identifies another currency as its functional currency, and
(c) that other currency is not sterling.
(2) 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).

(3) 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.