Corporation Tax Act 2009

Part 20 U.K. General calculation rules

Chapter 1 U.K. Restriction of deductions

Modifications etc. (not altering text)

C1 Pt. 20 Ch. 1 applied by 1989 c. 26, s. 85(2BA) (as 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. 348(4) (with Sch. 2 Pts. 1, 2))

C2 Pt. 20 Ch. 1 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 92(4) (with s. 147, Sch. 17)

Unpaid remuneration U.K.

1288 Unpaid remuneration U.K.

(1) This section applies if—

(a) an amount is charged in respect of employees' remuneration in a company's accounts for a period,

(b) the amount would, apart from this section, be deductible in calculating income from any source for corporation tax purposes, and

(c) the remuneration is not paid before the end of the period of 9 months immediately following the end of the period of account.

(2) If the remuneration is paid after the end of that period of 9 months, the deduction for it is allowed for the period of account in which it is paid.

(3) No deduction is allowed for the remuneration if it is not paid.

(4) Provision corresponding to that made by this section is made by—

(a) section 1249 (in relation to expenses of management of a company's investment business), [F1 including as applied by section 82 of FA 2012] F2 ...

F2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Words in s. 1288(4)(a) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 209(a)

F2 S. 1288(4)(b) and the word immediately preceding it omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 209(b)

1289 Unpaid remuneration: supplementary U.K.

(1) For the purposes of section 1288 an amount charged in the accounts in respect of employees' remuneration includes an amount for which provision is made in the accounts with a view to its becoming employees' remuneration.

(2) For the purposes of section 1288 it does not matter whether an amount is charged for—

(a) particular employments, or

(b) employments generally.

(3) If the income is calculated before the end of the 9 month period mentioned in section 1288(1)(c)—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, nothing in this subsection prevents the calculation being revised and any tax return being amended accordingly.

(4) For the purposes of this section and section 1288 remuneration is paid when it—

(a) is treated as received by an employee for the purposes of ITEPA 2003 by section 18 or 19 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

(5) In this section and section 1288—

• “employee” includes an office-holder and “employment” therefore includes an office, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of ITEPA 2003.

Modifications etc. (not altering text)

C3 S. 1289 applied by 2010 c. 8, s. 424A(4) (as inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 9)

Employee benefit contributions U.K.

1290 Employee benefit contributions U.K.

(1) This section applies if, in calculating for corporation tax purposes the profits of a company (“the employer”) of a period of account, a deduction would otherwise be allowable for the period in respect of employee benefit contributions made or to be made (but see subsection (4)).

[F3 (1A) No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.]

(2) No deduction is allowed for the contributions for the period except so far as—

(a) qualifying benefits are provided, or qualifying expenses are paid, out of the contributions during the period or within 9 months from the end of it, or

(b) if the making of the contributions is itself the provision of qualifying benefits, the contributions are made during the period or within 9 months from the end of it.

[F4 (2A) Subsection (2) is subject to subsections (1A) and (2B).

(2B) Where subsection (3C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (3D)).]

(3) An amount disallowed under subsection (2) is allowed as a deduction for a subsequent period of account so far as—

(a) qualifying benefits are provided out of the contributions before the end of the subsequent period, or

(b) if the making of the contributions is itself the provision of qualifying benefits, the contributions are made before the end of the subsequent period.

[F5 (3A) Subsection (3) is subject to subsections (1A) and (3B).

(3B) Where subsection (3C) applies, an amount disallowed under subsection (2) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(3C) This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(3D) An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(3E) For the purposes of subsection (3D)—

(a) the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b) the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(3F) For the purposes of subsections (3C) and (3E), “employment income tax charge” and “NIC charge” have the meaning given by section 1292(7).]

[F6 (3G) Subsection (3H) applies where—

(a) a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees' remuneration, and

(b) in consequence of the payment of the employees' remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(3H) In calculating for corporation tax purposes the profits of a company, the deduction referred to in subsection (3G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees' remuneration).]

(4) This section does not apply to any deduction that is allowable—

(a) for anything given as consideration for goods or services provided in the course of a trade or profession,

(b) for contributions under a registered pension scheme or under a superannuation fund to which section 615(3) of ICTA applies,

(c) for contributions under a qualifying overseas pension scheme in respect of an individual who is a relevant migrant member of the pension scheme in relation to the contributions,

(d) for contributions under an accident benefit scheme,

(e) under Chapter 1 of Part 11 (share incentive plans),

(f) under section 67 of FA 1989 (qualifying employee share ownership trusts), or

(g) under Part 12 (other relief for employee share acquisitions).

(5) For the purposes of subsection (4)(c) “qualifying overseas pension scheme” and “relevant migrant member” have the same meaning as in Schedule 33 to FA 2004 (see paragraphs 4 to 6 of that Schedule).

(6) See also—

• section 1291 (making of “employee benefit contributions”),

• section 1292 (provision of qualifying benefits),

• section 1293 (timing and amount of certain qualifying benefits),

• section 1294 (provision or payment out of employee benefit contributions),

• section 1295 (profits calculated before end of 9 month period),

• section 1296 (interpretation of sections 1290 to 1296),

• section 1297 (some special rules for companies carrying on a life assurance business).

Textual Amendments

F3 S. 1290(1A) inserted (with effect in accordance with s. 37(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 37(2)

F4 S. 1290(2A)(2B) inserted (with effect in accordance with s. 37(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 37(3)

F5 S. 1290(3A)-(3F) inserted (with effect in accordance with s. 37(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 37(4)

F6 S. 1290(3G)(3H) inserted (with effect in accordance with s. 37(7) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 37(5)

1291 Making of “employee benefit contributions” U.K.

(1) For the purposes of section 1290 an “employee benefit contribution” is made if, as a result of any act or omission—

(a) property is held, or may be used, under an employee benefit scheme, or

(b) there is an increase in the total value of property that is so held or may be so used (or a reduction in any liabilities under an employee benefit scheme).

(2) For this purpose “employee benefit scheme” means a trust, scheme or other arrangement for the benefit of persons who are, or include, present or former employees of the employer [F7 or persons linked with present or former employees of the employer].

[F8 (3) Section 554Z1 of ITEPA 2003 applies for the purposes of subsection (2) but as if references to A were to a present or former employee of the employer.

(4) So far as it is not covered by subsection (2), “employee benefit scheme” also means—

[F9 (a) an arrangement (the “relevant arrangement”) which is—

(i) an arrangement within subsection (1)(b) of section 554A of ITEPA 2003 to which subsection (1)(c) of that section applies, or

(ii) an arrangement within subsection (1)(b) of section 554AA of ITEPA 2003 to which subsection (1)(c) of that section applies,] or

(b) any other arrangement connected (directly or indirectly) with the relevant arrangement.]

Textual Amendments

F7 Words in s. 1291(2) inserted (19.7.2011) (with effect in accordance with Sch. 2 paras. 52-59, 61 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 45(2)

F8 S. 1291(3)(4) inserted (19.7.2011) (with effect in accordance with Sch. 2 paras. 52-59, 61 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 45(3)

F9 S. 1291(4)(a) substituted (with effect in accordance with Sch. 1 para. 16 of the amending Act) by Finance Act 2018 (c. 3), Sch. 1 para. 7

1292 Provision of qualifying benefits U.K.

(1) For the purposes of section 1290 qualifying benefits are provided if there is—

(a) a payment of money, or

(b) a transfer of assets,

which meets condition A, B, C or D.

(2) Condition A is that the payment or transfer gives rise both to an employment income tax charge and to an NIC charge.

(3) Condition B is that the payment or transfer would give rise to both charges if—

(a) the duties of the employment in respect of which the payment or transfer was made were performed in the United Kingdom, and

(b) the person in respect of whose employment the payment or transfer was made met at all relevant times the conditions as to residence or presence in Great Britain or Northern Ireland prescribed under section 1(6) of the Contributions and Benefits Act.

(4) Condition C is that the payment or transfer is made in connection with the termination of the recipient's employment with the employer.

(5) Condition D is that the payment or transfer is made under an employer-financed retirement benefits scheme [F10 and the payment or transfer—

(a) gives rise to an employment income tax charge under Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act, or

(b) is an excluded benefit as defined in section 393B(3) of that Act.]

(6) None of the conditions is met if the payment or transfer is by way of loan.

F11 (6ZA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F12 (6A) For the purposes of section 1290 qualifying benefits are also provided if—

(a) a relevant step within the meaning of Part 7A of ITEPA 2003 is taken, and

(b) Chapter 2 of that Part applies by reason of the step.]

[F13 (6B) For those purposes qualifying benefits are also provided, where a payment of money is made to a person, if and to the extent that the payment is exempt from income tax by virtue of section 312A of ITEPA 2003.]

(7) In this section—

• “the Contributions and Benefits Act” means—

  (a)

  the Social Security Contributions and Benefits Act 1992 (c. 4), or

  (b)

  the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7),

• “employment income tax charge” means a charge to tax under ITEPA 2003 (whether on the recipient or on someone else), and

• “NIC charge” means a liability to pay national insurance contributions under section 6 (Class 1 contributions), section 10 (Class 1A contributions) or section 10A (Class 1B contributions) of the Contributions and Benefits Act.

Textual Amendments

F10 Words in s. 1292(5) inserted (19.7.2011) (with effect in accordance with Sch. 2 paras. 52-59, 62 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 46(2)

F11 S. 1292(6ZA) omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(4)(h)

F12 S. 1292(6A) inserted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 46(3)

F13 S. 1292(6B) inserted (with effect in accordance with Sch. 37 para. 23(2) of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 23(1)

1293 Timing and amount of certain qualifying benefits U.K.

[F14 (1) If the provision of a qualifying benefit takes the form of a payment of money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies to the money, is provided for the purposes of section 1290 when the money is treated as received for the purposes of that Chapter (applying the rules in section 18 of that Act (receipt of money earnings)).]

[F15 (1A) Except so far as subsection (1) applies to the provision of the qualifying benefit, if the provision of a qualifying benefit is a chargeable relevant step, for the purposes of section 1290—

(a) the benefit is provided when A's employment with B starts if the chargeable relevant step is taken before then, or

(b) otherwise, the benefit is provided when the chargeable relevant step is taken.]

(2) If the provision of a qualifying benefit takes the form of a transfer of an asset [F16 which meets condition A, B, C or D in section 1292], the amount provided for the purposes of section 1290 is the total of—

(a) the amount (if any) spent on the asset by a scheme manager, F17 ...

(b) in a case where the asset was transferred to a scheme manager by the employer, the amount of the deduction that would be allowable as mentioned in subsection (1) of that section in respect of the transfer [F18 , and

(c) if the transfer is a chargeable relevant step, the cost of the relevant step so far as not covered by paragraph (a) or (b)]

(3) But if the amount given by subsection (2) is more than the amount that—

(a) is charged to tax under ITEPA 2003 in respect of the transfer, or

(b) would be so charged if condition B in section 1292 were met,

the deduction allowable under section 1290(2) or (3) is limited to that lower amount.

[F19 (4) If the provision of a qualifying benefit is a chargeable relevant step which does not involve a sum of money (see section 554Z(10) of ITEPA 2003) and is not covered by subsection (2), the amount provided for the purposes of section 1290 is the cost of the relevant step (subject to subsection (5)).

(5) If the provision of a qualifying benefit is a chargeable relevant step which is not covered by subsection (2) (whether or not it involves a sum of money), the amount provided for the purposes of section 1290 is not to exceed the amount that—

(a) is charged to tax under ITEPA 2003 in relation to the relevant step (whether under Part 7A of that Act or otherwise), or

(b) would be charged had not A been non-UK resident in any tax year.

F20 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In this section—

(a) “chargeable relevant step” means a relevant step within the meaning of Part 7A of ITEPA 2003 by reason of which Chapter 2 of that Part applies (and references to A and B are to be read accordingly), and

(b) references to the cost of a chargeable relevant step are to be read in accordance with section 554Z3(6) of that Act.]

Textual Amendments

F14 S. 1293(1) substituted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 63 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 47(2)

F15 S. 1293(1A) inserted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 47(3)

F16 Words in s. 1293(2) inserted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 47(4)(a)

F17 Word in s. 1293(2)(a) omitted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 2 para. 47(4)(b)

F18 S. 1293(2)(c) and word inserted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 47(4)(c)

F19 S. 1293(4)-(6) inserted (19.7.2011) (with effect in accordance with Sch . 2 para. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 47(5)

F20 S. 1293(5A) omitted (with effect in accordance with s. 12(5)-(7) of the amending Act) by virtue of Finance Act 2017 (c. 10), s. 12(4)(h)

1294 Provision or payment out of employee benefit contributions U.K.

(1) For the purposes of section 1290(2)(a)—

(a) any qualifying benefits provided, or

(b) any qualifying expenses paid,

by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided or paid out of the contributions.

(2) The rule in subsection (1) operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 1290(2)(a).

(3) For the purposes of section 1290(3)(a) any qualifying benefits provided by a scheme manager after the receipt by the scheme manager of employee benefit contributions are treated as being provided out of the contributions.

(4) The rule in subsection (3) operates up to the total amount of the contributions reduced by the amount of any benefits or expenses previously provided or paid as mentioned in section 1290(2)(a) or (3)(a).

(5) For the purposes of this section no account is taken of any other amount received or paid by the scheme manager.

1295 Profits calculated before end of 9 month period U.K.

(1) This section applies if the income of the period of account mentioned in section 1290(1) is calculated before the end of the 9 month period mentioned in section 1290(2).

(2) It must be assumed, in making the calculation, that any benefits, expenses or contributions which are not provided, paid or made when the calculation is made will not be provided, paid or made before the end of that period.

(3) But if the benefits, expenses or contributions are subsequently provided, paid or made before the end of that period, nothing in this section prevents the calculation being revised and any tax return being amended accordingly.

1296 Interpretation of sections 1290 to 1296 U.K.

(1) In this section and sections 1290 to 1295—

• “accident benefit scheme” means an employee benefit scheme under which benefits may be provided only by reason of a person's disablement, or death, caused by an accident occurring during the person's service as an employee of the employer,

• “employee benefit contribution” is to be read in accordance with section 1291(1),

• “employee benefit scheme” has the meaning given by section [F21 1291(2) to (4)],

• “the employer” is to be read in accordance with section 1290(1),

• “employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see section 393A of that Act) [F22 but ignoring section 393B(2)(a) and (c) of that Act],

• “qualifying benefits” is to be read in accordance with section 1292,

• “qualifying expenses” includes any expenses of a scheme manager (other than the provision of benefits to employees of the employer)—

  (a)

  which are incurred in operating the employee benefit scheme, and

  (b)

  which, if incurred by the employer, would be deductible in calculating for corporation tax purposes the employer's profits of any period of account, and

• “scheme manager” means a person who administers an employee benefit scheme (acting in that capacity).

(2) A reference in this section and sections 1290 to 1295 to a company's employee includes the holder of an office under that company, and “employment” is to be read accordingly.

Textual Amendments

F21 Words in s. 1296(1) substituted (19.7.2011) (with effect in accordance with Sch. 2 paras. 52-59, 61 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 48(a)

F22 Words in s. 1296(1) inserted (19.7.2011) (with effect in accordance with Sch. 2 paras. 52-59, 62 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 48(b)

1297 [F23 Basic life assurance and general annuity business] U.K.

(1) This section applies if the employer is a company in relation to which [F24 the I - E rules apply].

F25 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) For the [F27 purpose of calculating the adjusted BLAGAB management expenses of the company for the purposes of section 73 of FA 2012], the employee benefit contributions are treated as expenses [F28 debited, in accordance with generally accepted accounting practice, in the accounts drawn up by the company for that period].

(5) For the purposes of sections 1290 to 1296—

(a) any reference to a deduction for employee benefit contributions is to be read as a reference to [F29 an amount constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012], and

(b) references to deduction are to be read in that light.

Textual Amendments

F23 S. 1297 heading substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 210(6)

F24 Words in s. 1297(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 210(2)

F25 S. 1297(2) omitted (with effect in relation to accounting periods of companies beginning on or after 1.1.2023 of the commencing S.I.) by virtue of Finance Act 2022 (c. 3), Sch. 5 paras. 3(3), 4; S.I. 2022/1164, reg. 2(1) (with reg. 2(2))

F26 S. 1297(3) omitted (with effect in relation to accounting periods of companies beginning on or after 1.1.2023 of the commencing S.I.) by virtue of Finance Act 2022 (c. 3), Sch. 5 paras. 3(3), 4; S.I. 2022/1164, reg. 2(1) (with reg. 2(2))

F27 Words in s. 1297(4) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 210(4)(a)

F28 Words in s. 1297(4) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 210(4)(b)

F29 Words in s. 1297(5)(a) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 210(5)

Business entertainment and gifts U.K.

1298 Business entertainment and gifts U.K.

(1) This section applies if a company incurs expenses in providing entertainment or gifts in connection with a business which it carries on.

(2) The general rule is that—

(a) no deduction is allowed for the expenses in calculating income from any source for corporation tax purposes,

(b) no deduction is allowed under section 1219 for the expenses, and

[F30 (c) expenses to which this section applies are not to be regarded as constituting ordinary BLAGAB management expenses of the company for the purposes of section 76 of FA 2012.]

(3) The general rule prohibits the deduction, or the bringing into account, of expenses which are incurred—

(a) in paying sums to or on behalf of an employee of the company, or

(b) in putting sums at the disposal of an employee of the company,

if (and only if) the sums are paid, or put at the employee's disposal, exclusively for meeting expenses incurred or to be incurred by the employee in providing the entertainment or gift.

(4) The general rule is subject to exceptions—

• for entertainment (see section 1299), and

• for gifts (see section 1300).

(5) For the purposes of this section and those two sections—

(a) “employee” includes a director of the company and a person engaged in the management of the company,

(b) “entertainment” includes hospitality of any kind, and

(c) the expenses incurred in providing entertainment or a gift include expenses incurred in providing anything incidental to the provision of entertainment or a gift.

Textual Amendments

F30 S. 1298(2)(c) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 211

1299 Business entertainment: exceptions U.K.

(1) The prohibition in section 1298 on deducting, or bringing into account, expenses incurred in providing entertainment does not apply in either of cases A and B.

(2) Case A is where—

(a) the entertainment is of a kind which it is the company's business to provide, and

(b) the entertainment is provided in the ordinary course of the business either for payment or free of charge in order to advertise to the public generally.

(3) Case B is where the entertainment is provided for employees of the company unless—

(a) the entertainment is also provided for others, and

(b) the provision of the entertainment for the employees is incidental to its provision for the others.

1300 Business gifts: exceptions U.K.

(1) The prohibition in section 1298 on deducting, or bringing into account, expenses incurred in providing gifts does not apply in any of cases A, B, C and D.

(2) Case A is where—

(a) the gift is of an item which it is the company's business to provide, and

(b) the item is given away in the ordinary course of the business in order to advertise to the public generally.

(3) Case B is where the gift incorporates a conspicuous advertisement for the company unless—

(a) the gift is food, drink, tobacco or a token or voucher exchangeable for goods, or

(b) the cost of the gift to the company, together with any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) given to the same person in the same accounting period, exceeds £50.

The Treasury may by order amend the sum for the time being specified in paragraph (b) so as to increase it.

(4) Case C is where gifts are provided for employees of the company unless—

(a) gifts are also provided for others, and

(b) the provision of the gifts for the employees is incidental to the provision of gifts for the others.

(5) Case D is where the gift is given to—

(a) a charity,

(b) the Historic Buildings and Monuments Commission for England, or

(c) the Trustees of the National Heritage Memorial Fund.

Miscellaneous U.K.

1301 Restriction of deductions for annual payments U.K.

(1) In calculating a company's income from any source, no deduction is allowed for an annual payment which meets the conditions in subsections (2) to (6).

(2) The payment must be a payment charged to—

(a) income tax under Part 5 of ITTOIA 2005 otherwise than as relevant foreign income, or

(b) corporation tax under Chapter 7 of Part 10 (annual payments not otherwise charged).

(3) The payment must be made under a liability incurred for consideration in money or money's worth all or any of which—

(a) consists of, or of the right to receive, a dividend, or

(b) is not required to be brought into account in calculating for corporation tax purposes the income of the company making the payment.

(4) The payment must not be a payment of income—

(a) which arises under a settlement made by one party to a marriage or civil partnership by way of provision for the other—

(i) after the dissolution or annulment of the marriage or civil partnership, or

(ii) while they are separated under an order of a court, or under a separation agreement, or if the separation is likely to be permanent, and

(b) which is payable to, or applicable for the benefit of, the other party.

(5) The payment must not be made to an individual under a liability incurred at any time in consideration of the individual surrendering, assigning or releasing an interest in settled property to or in favour of a person with a subsequent interest.

(6) The payment must not be a payment of an annuity granted in the ordinary course of a business of granting annuities.

(7) In subsection (2) “relevant foreign income” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007).

(8) In the application of this section to Scotland the reference in subsection (5) to settled property is to be read as a reference to property held in trust.

[F31 1301A Restriction of deductions for interest U.K.

In calculating a company's income from any source for corporation tax purposes, no deduction is allowed for interest otherwise than under Part 5 (loan relationships).]

Textual Amendments

F31 S. 1301A inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 39 (with Sch. 9 paras. 1-9, 22)

[F32 1301B Qualifying charitable donations U.K.

In calculating a company's income from any source for corporation tax purposes, no deduction is allowed in respect of qualifying charitable donations.]

Textual Amendments

F32 S. 1301B inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 692 (with Sch. 2)

1302 Social security contributions U.K.

(1) No deduction is allowed for corporation tax purposes for any contribution paid by any person under—

(a) Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4), or

(b) Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7).

(2) But this prohibition does not apply to an employer's contribution.

(3) For this purpose “an employer's contribution” means—

(a) a secondary Class 1 contribution,

(b) a Class 1A contribution, or

(c) a Class 1B contribution,

within the meaning of Part 1 of the Social Security Contributions and Benefits Act 1992 or of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(4) Subsection (1) does not apply to the calculation of income from the holding of an office (in relation to which section 969 applies income tax principles, those including section 360A of ITEPA 2003 which corresponds to this section).

1303 Penalties[F33 , interest and VAT surcharges] [F33 and interest] U.K.

(1) In calculating profits for any corporation tax purpose, no deduction is allowed for any penalty or interest mentioned in the first column of the following table.

(2) This is the table—

Penalty or interest	Description of tax, levy or duty
Penalty under any of sections 60 to 70 of VATA 1994	Value added tax
[F34 Interest under section 101 of FA 2009 in respect of an amount of value added tax]
Penalty under any of sections 8 to 11 of FA 1994	Excise duties
Penalty under any of paragraphs 12 to 19 of Schedule 7 to FA 1994	Insurance premium tax
Interest under paragraph 21 of that Schedule
Penalty under any provision of Part 5 of Schedule 5 to FA 1996	Landfill tax
Interest under paragraph 26 or 27 of that Schedule
Penalty under any provision of Schedule 6 to FA 2000	Climate change levy
Interest under any of paragraphs 70, 81 to 85 and 109 of that Schedule
Penalty under any provision of Part 2 of FA 2001	Aggregates levy
Interest under any of paragraphs 5 to 9 of Schedule 5 to, paragraph 6 of Schedule 8 to and paragraph 5 of Schedule 10 to FA 2001
Penalty under section 25 or 26 of FA 2003	[F35 Customs duties]
Penalty under any provision of Part 4 of FA 2003	Stamp duty land tax
Interest under any provision of that Part
[F36 Interest under section 101 of FA 2009 in connection with sums required to be deducted under section 61 of FA 2004 (construction industry)]
[F37 Penalty under Schedule 24 to FA 2007	Various taxes and excise duties]
[F37 Penalty under Schedule 41 to FA 2008	Various taxes and excise duties]
[F38 Penalty under Schedule 16 to F(No. 2)A 2017	Various taxes]

(3) [F39 In calculating profits for any corporation tax purpose, no deduction is allowed for any surcharge under section 59 of VATA 1994. ]

Textual Amendments

F33 Words in s. 1303 heading substituted (1.1.2023 for specified purposes, 6.4.2024 for specified purposes) by Finance Act 2021 (c. 26), s. 118(2), Sch. 27 para. 36(a); S.I. 2022/1278, reg. 2(3)(4)(c); S.I. 2024/440, reg. 2

F34 Words in s. 1303(2) table substituted (with effect in accordance with art. 1(3)(b) of the amending S.I.) by The Finance Act 2009, Sections 101 and 102 (Value Added Tax) (Late Payment Interest and Repayment Interest) (Exceptions and Consequential Amendments) Order 2022 (S.I. 2022/1298), arts. 1(3)(a), 5(3)

F35 Words in s. 1303(2) substituted (13.9.2018 for specified purposes, 31.12.2020 in so far as not already in force) by Taxation (Cross-border Trade) Act 2018 (c. 22), s. 57(1)(a), Sch. 7 para. 157 (with savings and transitional provisions in S.I. 2020/1449, reg. 3 and 2020 c. 26, Sch. 2 para. 7(7)-(9)); S.I. 2020/1642, reg. 4(a)

F36 Words in s. 1303(2) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2009, Sections 101 and 102 (Interest on Late Payments and Repayments) (Consequential Amendments) Order 2014 (S.I. 2014/1283), art. 1(1), Sch. para. 6

F37 Words in s. 1303(2) added (1.4.2010) by The Finance Act 2008 (Penalties for Errors and Failure to Notify etc) (Consequential Amendments) Order 2010 (S.I. 2010/530), art. 1, Sch. para. 10

F38 Words in s. 1303(2) table inserted (with effect in accordance with Sch. 16 para. 62 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 16 para. 60

F39 S. 1303(3) omitted (1.1.2023 for specified purposes) by virtue of Finance Act 2021 (c. 26), s. 118(2), Sch. 27 para. 36(b); S.I. 2022/1278, reg. 2(3)(4)(c)

1304 Crime-related payments U.K.

(1) In calculating income from any source for corporation tax purposes, no deduction is allowed for any expenses to which subsection (4) or (5) applies.

(2) No deduction is allowed under section 1219 (expenses of management of a company's investment business) for any expenses to which subsection (4) or (5) applies.

[F40 (3) Expenses to which subsection (4) or (5) applies are not to be regarded as constituting ordinary BLAGAB management expenses of a company for the purposes of section 76 of FA 2012.]

(4) This subsection applies to expenses incurred—

(a) in making a payment if the making of the payment constitutes a criminal offence, or

(b) in making a payment outside the United Kingdom if the making of a corresponding payment in any part of the United Kingdom would constitute a criminal offence in that part.

(5) This subsection applies to expenses incurred in making a payment induced by a demand which constitutes—

(a) the offence of blackmail under section 21 of the Theft Act 1968 (c. 60) (England and Wales),

(b) the offence of extortion (Scotland), or

(c) the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland).

Textual Amendments

F40 S. 1304(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 212

1305 Dividends and other distributions U.K.

(1) In the calculation of a company's profits for corporation tax purposes, no deduction is allowed in respect of a dividend or other distribution.

(2) Subsection (1) is subject to any provision of the Corporation Tax Acts expressly authorising a deduction.

(3) In this section “profits” has the same meaning as in Part 2.

[F41 1305A Avoidance schemes involving the transfer of corporate profits U.K.

(1) This section applies if—

(a) two companies (“A” and “B”) are party to any arrangements (whether or not at the same time),

(b) A and B are members of the same group,

(c) the arrangements result in what is, in substance, a payment (directly or indirectly) from A to B of all or a significant part of the profits of the business of A or of a company which is a member of the same group as A or B (or both) (“the profit transfer”), and

(d) the main purpose or one of the main purposes of the arrangements is to secure a tax advantage for any person involving the profit transfer (whether by circumventing section 695A (disguised distribution arrangements: derivative contracts) or otherwise).

(2) A's profits are to be calculated for corporation tax purposes as if the profit transfer had not occurred.

(3) Accordingly—

(a) if (apart from this section) an amount relating to the profit transfer would be brought into account by A as a deduction in that calculation, no deduction is allowed in respect of that amount, and

(b) A's profits are to be increased by so much of the amount of the profit transfer as is not an amount to which paragraph (a) applies (whether or not the profits transferred would be A's profits apart from the arrangements).

(4) For the purposes of this section a company is a member of the same group as another company if it is (or has been) a member of the same group at a time when the arrangements mentioned in subsection (1) have effect.

(5) Where in relation to arrangements involving one or more derivative contracts the requirements of section 695A(1)(a) to (e) are met, nothing in this section applies in relation to any debit in respect of any of those contracts.

(6) In this section—

• “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;

• “group” has the meaning given by section 357GD of CTA 2010;

• “tax advantage” has the meaning given by section 1139 of CTA 2010.]

Textual Amendments

F41 S. 1305A inserted (with effect in accordance with s. 30(2) of the amending Act) by Finance Act 2014 (c. 26), s. 30(1)

Chapter 2 U.K. Other general rules

Miscellaneous profits and losses U.K.

1306 Losses calculated on same basis as miscellaneous income U.K.

(1) The same rules apply for corporation tax purposes in calculating a company's miscellaneous losses as apply in calculating corresponding miscellaneous income.

(2) This is subject to any express provision to the contrary.

(3) In this section—

(a) “miscellaneous income” means profits or other income of the company charged to corporation tax under or by virtue of a provision to which [F42 section 1173 of CTA 2010] applies, and

(b) “miscellaneous losses” means losses in transactions in respect of which the company is within the charge to corporation tax under or by virtue of such a provision.

(4) Provision corresponding to that made by this section is made by—

(a) section 47 (in relation to trades), and

(b) section 210 (in relation to property businesses).

Textual Amendments

F42 Words in s. 1306(3)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 693 (with Sch. 2)

1307 Apportionment etc of miscellaneous profits and losses to accounting period U.K.

(1) This section applies if—

(a) income is chargeable to corporation tax under or by virtue of any provision to which [F43 section 1173 of CTA 2010] applies, and

(b) any period for which accounts are drawn up (a “period of account”) does not coincide with an accounting period.

(2) For this purpose the reference to any provision to which [F44 section 1173 of CTA 2010] applies is to be read as if subsection (3) of that section were omitted (exclusion of Chapter 8 of Part 10 so far as relating to income which arises from a source outside the United Kingdom).

(3) 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—

(a) apportioning the profits or losses of a period of account to the parts of that period falling in different accounting periods, and

(b) 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).

(4) The steps must be taken by reference to the number of days in the periods concerned.

Textual Amendments

F43 Words in s. 1307(1)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 694(2) (with Sch. 2)

F44 Words in s. 1307(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 694(3) (with Sch. 2)

Expenditure on research and development U.K.

1308 Expenditure brought into account in determining value of intangible asset U.K.

(1) Subsection (2) applies if a company—

(a) incurs expenditure on research and development which is not of a capital nature, and

(b) brings the expenditure into account in determining the value of an intangible asset.

(2) The expenditure is not prevented from being allowed as a deduction in calculating for corporation tax purposes the company's profits, just because it is brought into account as mentioned in subsection (1)(b).

(3) Subsection (2) applies, in particular, for the purposes of—

(a) section 87 (expenses of research and development), and

(b) Part 13.

(4) Subsection (5) applies if, in accordance with subsection (2), expenditure is both—

(a) brought into account in determining the value of an intangible asset, and

(b) allowed as a deduction in calculating profits.

(5) No deduction may be made in calculating for corporation tax purposes the profits of the company in respect of the writing down of so much of the value of the intangible asset as is attributable to the expenditure.

(6) Subsection (2) does not allow expenditure as a deduction in calculating a company's profits for an accounting period so far as—

(a) a deduction has been made in respect of it in calculating the company's profits for a previous accounting period, or

(b) the company has benefited from a tax relief in respect of it for a previous accounting period under Part 13.

(7) In this section—

• “intangible asset” has the meaning it has for accounting purposes, and

• “research and development” has the meaning given by [F45 section 1138 of CTA 2010].

Textual Amendments

F45 Words in s. 1308(7) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 695 (with Sch. 2)

Visiting performers U.K.

1309 Payments treated as made to visiting performers U.K.

(1) This section applies if a payment or transfer made to a company within the charge to corporation tax is treated under section 13(5) of ITTOIA 2005 as made instead to the performer.

(2) The company is treated for corporation tax purposes as if the payment or transfer had not been made to it.

(3) Subsection (2) does not apply in such circumstances as may be prescribed by regulations.

(4) Regulations—

(a) may provide that any liability to corporation tax which would apart from subsection (2) arise in relation to the payment or transfer is not to arise (or is to arise so far as prescribed),

(b) may make provision generally for giving effect to subsection (2), and

(c) may make different provision for different cases or descriptions of cases.

(5) In this section—

• “payment” and “transfer” have the same meaning as in section 13 of ITTOIA 2005,

• “regulations” means regulations made by the Treasury.