Corporation Tax Act 2010 (c. 4)

Part 9 U.K. Leasing plant or machinery

Chapter 3 U.K. Sales of lessors: leasing business carried on by a company alone

Income and matching expense in different accounting periods U.K.

383 Income and matching expense in different accounting periods U.K.

(1) This section applies if on any day (“the relevant day”)—

(a) a company carries on a business of leasing plant or machinery otherwise than in partnership,

(b) the company is within the charge to corporation tax in respect of the business, and

(c) there is a qualifying change of ownership in relation to the company.

[F1 (1A) For the meaning of “qualifying change of ownership”, see sections 394A to 398A.]

(2) On the relevant day—

(a) the company is treated as receiving an amount of income, and

(b) the accounting period of the company ends.

(3) The income—

(a) is treated as a receipt of the business, and

(b) is brought into account in calculating for corporation tax purposes the profits of the business for that accounting period.

(4) On the day following the relevant day—

(a) the company is treated as incurring an expense, and

(b) a new accounting period of the company begins.

(5) The expense—

(a) is treated as an expense of the business, and

(b) is allowed as a deduction in calculating for corporation tax purposes the profits of the business for that new accounting period.

(6) This section is supplemented by sections 384 to 386.

Textual Amendments

F1 S. 383(1A) inserted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 3

384 Amount of income and expense U.K.

(1) The amount of the income under section 383 is calculated in accordance with sections 399 to 407.

(2) The amount of the expense under section 383 is the same as the amount of the income.

385 [F2 No carry back of loss against the income] U.K.

(1) This section applies if the business carried on by the company is a trade carried on wholly or partly in the United Kingdom the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009 (trading income).

[F3 (2) No part of a loss may be deducted under section 37(3)(b) (relief for trade losses against total profits of earlier accounting periods) [F4 or section 45F (relief for terminal trade losses)] from so much of the company's total profits as derive from the income.

(3) For the purpose of determining how much of those profits derive from the income, those profits are to be calculated on the basis that the income is the final amount to be added.]

Textual Amendments

F2 Words in s. 385 heading substituted (with effect in accordance with s. 24(9) of the amending Act) by Finance Act 2012 (c. 14), s. 24(2)(b)

F3 S. 385(2)(3) substituted (with effect in accordance with s. 24(9) of the amending Act) by Finance Act 2012 (c. 14), s. 24(2)(a)

F4 Words in s. 385(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 164

386 Relief for expense otherwise giving rise to carried forward loss U.K.

(1) This section applies if—

(a) there is a qualifying change of ownership in relation to a company on any day (“the relevant day”),

(b) on the following day the company is treated under section 383 as incurring an expense of a business and an accounting period of the company (“period 1”) begins,

(c) the company makes a loss in period 1 or a later accounting period,

(d) apart from this section some or all of that loss (“the carried forward loss”) would be carried forward to the next accounting period of the company after the accounting period in which the loss is made (“the subsequent period”),

(e) some or all of the carried forward loss (“the derived loss”) derives from—

(i) the expense under section 383, or

(ii) an expense treated as arising under subsection (2) and allowed as a deduction for the accounting period in which the loss is made, and

(f) the subsequent period starts within the period of 5 years beginning immediately after the relevant day and does not start as a result of section 383 or 425.

(2) Instead of being so carried forward, the derived loss is to be treated for corporation tax purposes as giving rise to an expense of an amount equal to—

where—

DL is the derived loss,

D is the number of days in the accounting period in which the loss is made, and

R is the percentage rate applicable to section 826 of ICTA under section 178 of FA 1989.

(3) The amount of the expense under this section is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the subsequent period.

(4) For the purpose of determining how much of the carried forward loss derives from the expense under section 383 or an expense within subsection (1)(e)(ii), the loss is to be calculated on the basis that that expense is the final amount to be deducted.