Corporation Tax Act 2010

298 Reimbursement by defaulter in respect of certain abandonment expenditure

(1) This section applies if expenditure is incurred, or consideration in money’s worth is given, by the defaulter in reimbursing the contributing participator in respect of, or otherwise making good to the contributing participator, the whole or any part of the default payment.

(2) In this section “reimbursement expenditure” means expenditure incurred as mentioned in subsection (1) 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) Reimbursement expenditure is to be allowed as a deduction in calculating the defaulter’s ring fence income (but this is subject to subsection (6)).

(4) Reimbursement expenditure received by the contributing participator is to be treated as a receipt (in the nature of income) of the participator’s ring fence trade for the relevant accounting period (but this is subject to subsection (6)).

(5) Any additional assessment to corporation tax required in order to take account of the receipt of reimbursement expenditure by the contributing participator may be made at any time not later than 4 years after the end of the calendar year in which the reimbursement expenditure is so received.

(6) In relation to a particular default payment, reimbursement expenditure incurred at any time—

(a) is to be allowed as mentioned in subsection (3), and

(b) is to be taken into account as a result of subsection (4) in calculating the contributing participator’s ring fence income,

only so far as, when aggregated with any reimbursement expenditure previously incurred in respect of that default payment, it does not exceed so much of the default payment as falls to be attributed to the contributing participator as mentioned in section 296(1)(b).

(7) The incurring of reimbursement expenditure is not to be regarded, by virtue of section 532 of CAA 2001 (the general rule excluding contributions), as the meeting of the expenditure of the contributing participator in making the default payment.

(8) In subsection (4) “the relevant accounting period” means—

(a) the accounting period in which the reimbursement expenditure is received by the contributing participator,

(b) if the contributing participator ceases to carry on the ring fence trade before the receipt of the reimbursement expenditure, the last accounting period of the trade, or

(c) if the contributing participator ceases to be within the charge to corporation tax in respect of the ring fence trade before the receipt of the reimbursement expenditure, the accounting period during or at the end of which the contributing participator ceased to be within the charge to corporation tax in respect of the trade.