PART IV PROVISIONS RELATING TO THE SCHEDULE D CHARGE

C1CHAPTER V COMPUTATIONAL PROVISIONS

Annotations:
Modifications etc. (not altering text)
C1

See—1979(C) s.122—election to take capital gain or loss into account when asset appropriated to stock in trade.1989 ss.67-74—employee share ownership trusts.Banking Act 1987 (c.22) s.66—contributions to the Deposit Protection Fund.

Deductions

F175BAmounts reversing expenses of management deducted: charge to tax

1

This section applies in any case where the following conditions are satisfied—

a

a credit is brought into account by a company in a period of account (the “reversal period”) which ends on or after the commencement date,

b

the credit reverses (in whole or in part) a debit brought into account in a previous period of account of the company (whenever ending),

c

the debit (in whole or in part) represents expenses of management deductible under section 75(1) for an accounting period of the company (“the period of deductibility”),

d

the expenses of management were so deductible for that period otherwise than by virtue of section 75(9) (carry forward of unrelieved excess),

e

the period of deductibility ends before, or at the same time as, the reversal period,

f

the reversal period does not coincide with an accounting period beginning before the commencement date.

2

In any such case, subsection (4) or (5) below (as the case may be) shall apply in relation to the reversal amount.

3

In this section “the reversal amount” means so much of the credit as—

a

reverses so much of the debit as represents the expenses of management, and

b

does not represent sums otherwise taken into account in determining for the purposes of corporation tax the profits and losses of the company for the relevant accounting period or any earlier accounting period.

For this purpose the relevant accounting period is the latest accounting period of the company that falls wholly or partly within the reversal period.

4

If the reversal period coincides with an accounting period of the company beginning on or after the commencement date, the reversal amount shall be dealt with for that period in accordance with subsection (7) below.

5

If the reversal period does not coincide with an accounting period of the company—

a

the reversal amount shall be apportioned between any accounting periods that fall within the reversal period, and

b

any amount so apportioned to an accounting period beginning on or after the commencement date shall be dealt with for that period in accordance with subsection (7) below.

6

An apportionment under subsection (5) above shall be in accordance with section 834(4) (time basis) unless it appears that that method would work unreasonably or unjustly, in which case such other method shall be used as appears just and reasonable.

7

Where an amount falls to be dealt with in accordance with this subsection for an accounting period—

a

it shall, so far as possible, be applied in reducing or further reducing (but not below nil) the company’s expenses of management deductible for that period otherwise than by virtue of section 75(9) (carry forward of unrelieved excess), and

b

so much of the amount as cannot be so applied shall be regarded as income of the company chargeable under Case VI of Schedule D for that accounting period.

8

In subsection (1) above “brought into account”, in relation to a period of account of a company, means brought into account in accordance with generally accepted accounting practice in determining, for accounting purposes, profit and loss for that period of account.

9

If (apart from this subsection) an accounting period does not coincide with, or fall within, any period of account, it shall be assumed for the purposes of this section that there is a period of account of the company that coincides with that accounting period.

10

It shall be assumed for the purposes of this section that, in determining for accounting purposes profit and loss for any period of account of any company, amounts fall to be brought into account in accordance with generally accepted accounting practice.

11

For the purposes of this section a credit reverses a debit in whole or in part in any case where the sum represented in whole or in part by the debit is paid and then in whole or in part repaid (as well as in a case where the sum represented by the debit is never paid).

12

In this section—

  • the commencement date” means 1st April 2004;

  • credit” means an amount which for accounting purposes increases or creates a profit, or reduces a loss, for a period of account;

  • debit” means an amount which for accounting purposes reduces a profit, or increases or creates a loss, for a period of account.