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Part 4 U.K.Real Estate Investment Trusts

ProfitsU.K.

120Calculation of profitsU.K.

(1)This section provides for the calculation of profits for the purposes of sections 107(8), 115(2), 119(1) and 123(c).

[F1(2)Profits (of any kind) are calculated in the same way as profits of a UK property business are calculated for the purposes of the charge to tax under Chapter 2 of Part 4 of CTA 2009 (as to which see, in particular, section 210 of that Act).]

(3)[F2Section 211(1) of CTA 2009 (property businesses:] disregard of credits and debits from loan relationships and derivative contracts) shall not apply in respect of—

(a)a loan relationship if or in so far as it relates to tax-exempt business,

(b)a hedging derivative contract if or in so far as it relates to tax-exempt business, or

(c)embedded derivatives if or in so far as the host contract is entered into for the purposes of tax-exempt business.

(4)For the purposes of subsection (3)—

(a)a derivative contract is hedging in relation to a company if or in so far as it is acquired as a hedge of risk in relation to [F3an asset by the exploitation of which tax-exempt business is conducted,]

[F4(aa)a derivative contract is hedging in relation to a company if or in so far as it is acquired as a hedge of risk in relation to a liability incurred in connection with tax-exempt business,]

(b)a designation of a contract as wholly or partly hedging for the purposes of a company's accounts shall be conclusive, and

[F5(c)“embedded derivatives” is to be read in accordance with section 584 or 586 (as the case may be) of CTA 2009, and

(d)“the host contract” means—

(i)the rights and liabilities within section 584(1)(b)(ii) of CTA 2009, or

(ii)the rights and liabilities within section 586(1)(b)(ii) of that Act,

as the case may be.]

[F6(4A)In subsection (4)(a) the reference to an asset includes a reference to—

(a)the value of an asset, and

(b)profits attributable to it.]

(5)Profits shall be computed without regard to items giving rise to credits or debits which would be within [F7Part 7 of CTA 2009] (derivative contracts) but for [F8section 589(2)(b) and (c) of that Act] (exclusion of share-based and unit-trust-based contracts).

(6)Income and expenditure relating partly to tax-exempt business and partly to non-tax-exempt business shall be apportioned reasonably.

(7)Section 3(1) of CAA 2001 (claims for capital allowances) shall not apply; and any allowance which the company could claim under that section shall be made automatically and reflected in the calculation of profits.

Textual Amendments

F1S. 120(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 688(2) (with Sch. 2 Pts. 1, 2)

F2Words in s. 120(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 688(3) (with Sch. 2 Pts. 1, 2)

F3Words in s. 120(4)(a) substituted (with effect as mentioned in s. 52(2) of the amending Act) by Finance Act 2007 (c. 11), s. 52, Sch. 17 para. 9(a)

F4S. 120(4)(aa) inserted (with effect as mentioned in s. 52(2) of the amending Act) by Finance Act 2007 (c. 11), s. 52, Sch. 17 para. 9(b)

F5S. 120(4)(c)(d) substituted for s. 120(4)(c) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 688(4) (with Sch. 2 Pts. 1, 2)

F6S. 120(4A) inserted (with effect as mentioned in s. 52(2) of the amending Act) by Finance Act 2007 (c. 11), s. 52, Sch. 17 para. 9(c)

F7Words in s. 120(5) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 688(5)(a) (with Sch. 2 Pts. 1, 2)

F8Words in s. 120(5) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 688(5)(b) (with Sch. 2 Pts. 1, 2)

Modifications etc. (not altering text)