Corporation Tax Act 2010

293 Relief for reimbursement expenditure under abandonment guarantees

(1) This section applies if—

(a) a payment (“the guarantee payment”) is made by the guarantor under an abandonment guarantee,

(b) as a result of the making of the guarantee payment, the relevant participator becomes liable under the terms of the abandonment guarantee to pay any sum to the guarantor, and

(c) expenditure is incurred, or consideration in money’s worth is given, by the relevant participator in or towards meeting that liability.

(2) In this section “reimbursement expenditure” means expenditure incurred as mentioned in subsection (1)(c) or consideration (or the value of consideration) given as so mentioned; and any reference to the incurring of reimbursement expenditure is to be read accordingly.

(3) So much of any reimbursement expenditure as constitutes qualifying expenditure (see subsection (4)) is to be allowed as a deduction in calculating the relevant participator’s ring fence income; and no part of the expenditure which is so allowed is to be otherwise deductible or allowable by way of relief for corporation tax purposes.

(4) The amount of reimbursement expenditure incurred in any accounting period by the relevant participator which constitutes qualifying expenditure is determined by the formula—

where—

• A is the reimbursement expenditure incurred in the accounting period,

• B is so much of the expenditure represented by the guarantee payment as, had it been incurred by the relevant participator, would have been taken into account (by way of capital allowance or a deduction) in calculating the relevant participator’s ring fence income, and

• C is the total of the sums which, at or before the end of the accounting period, the relevant participator is or has become liable to pay to the guarantor as mentioned in subsection (1)(b).

But this is subject to subsection (5).

(5) In relation to the guarantee payment, the total of the reimbursement expenditure (whenever incurred) which constitutes qualifying expenditure may not exceed whichever is the less of B and C in subsection (4).

(6) Any limitation on qualifying expenditure under subsection (5) is to be applied to the expenditure of a later accounting period in preference to an earlier one.

(7) For the purposes of this section, the expenditure represented by the guarantee payment is any expenditure—

(a) for which the relevant participator is liable, and

(b) which is met, directly or indirectly, out of the guarantee payment (and which, accordingly, because of section 292(4) is not to be regarded as expenditure incurred by the relevant participator).

(8) See also—

(a) section 294 (payment under abandonment guarantee not immediately applied), and

(b) section 295 which excludes amounts from subsection (1).