Finance (No. 2) Act 1975

PART II Corporation Tax

Entitlement to relief

6 (1) Where a company carries on a trade in respect of which it is within the charge to corporation tax under Case I of Schedule D and—

(a) the value of its trading stock at the end of its base period (in this Schedule referred to as its " closing stock value ") exceeds

(b) the value of its trading stock at the beginning of that period (in this Schedule referred to as its " opening stock value "),

the company shall, subject to the provisions of this Schedule, be entitled to relief under this paragraph by reference to the amount of that excess; and in the following provisions of this Schedule the amount of that excess is referred to as the company's " base period increase ".

(2) For the purposes of the Corporation Tax Acts other than this Schedule, in any case in which a company is entitled to relief under this paragraph—

(a) the company's closing stock value shall be treated as reduced by—

(i) an amount equal to its base period increase less 10 per cent, of its relevant income for its base period ; and

(ii) if it was excluded from section 18 of the [1975 c. 7.] Finance Act 1975 by virtue of subsection (5)(a) of that section (companies with closing stock value under £25,000), an amount equal to 5 per cent, of the amount mentioned in sub-paragraph (i) above ; or

(iii) if relief under that section was excluded wholly or in part by virtue of subsection (9)(b) of that section (" trading stock" not to include work in progress), an amount equal to 5 per cent, or, as the case may be, a corresponding part of 5 per cent, of the amount mentioned in sub-paragraph (i) above ; and

(b) the value of its trading stock at the beginning of the period of account which begins on the day following that as at which the closing stock value is determined shall be treated as reduced by the amount referred to in paragraph (a)(i) above;

and all such adjustments shall be made in any assessment to corporation tax for any relevant accounting period as are necessary to give effect to any relief under this paragraph.

(3) A company shall not be entitled to relief under this paragraph unless a claim for the relief is made within two years after the end of the accounting period, or the last of the accounting periods, ending in the financial year 1974.

Base period

7 (1) A company has a base period for the purposes of relief under paragraph 6 above if it has one or more accounting periods ending in the financial year 1974.

(2) A company's base period ends—

(a) if the accounting period, or the first of the accounting periods, ending in the financial year 1974 ends on the same day as a period of account, with that day ;

(b) in any other case, with the last day of the period of account which is current at the end of that accounting period.

(3) A company's base period begins 24 months before the day on which it ends except that—

(a) if the base period ends after the financial year 1974, the base period begins 24 months before the end of the accounting period ending in that year ;

(b) if the date which would be the beginning of the base period under the foregoing provisions is not the first day of a period of account, the base period begins with the first day of the period of account which is current on that date; and

(c) if the company began to carry on the trade after the date on which the base period would begin under the foregoing provisions, that period begins on the day on which it began to carry on the trade.

8 (1) If a company began to carry on the trade before 1st April 1973 and its base period is longer than 24 months, then, for the purposes of paragraph 6 above—

(a) its base period increase ; and

(b) its relevant income for that period,

shall each be reduced by multiplying them by the fraction of which the numerator is 24 and the denominator is the number of months in the base period.

(2) If a company began to carry on the trade after 31st March 1973, then, for the purposes of paragraph 6 above—

(a) its base period increase ; and

(b) its relevant income for that period,

shall each be reduced by multiplying them by the fraction of which the numerator is the number of months in the period beginning with the day on which it began to carry on the trade and ending with the last day of the accounting period, or the first of the accounting periods, ending in the financial year 1974 and the denominator is the number of months in the base period.

(3) Where a company's 1973 increase in stock value fell to be determined under Schedule 3 to the [1975 c. 7.] Finance Act 1975 by reference to the 1973 reference period as defined in that Schedule, and its base period ends on the same day as that reference period, the amount of the reduction under paragraph 6(2)(a)(i) above shall be diminished by the amount of the reduction under section 18(4)(a) of that Act.

Extra period of account following base period

9 (1) This paragraph has effect where a company has two or more periods of account ending in the financial year 1974.

(2) Without prejudice to the application of the foregoing provisions in relation to the company's base period as determined in accordance with paragraph 7(2) and (3) above, those provisions shall also apply as if the company had a further base period, or further base periods, ending with the last day of each of those periods of account other than the first and beginning at the same time as its base period as determined under paragraph 7(2) and (3).

(3) In the case of any such further base period the reduction to be made in the company's closing stock value shall be only such as is provided for by sub-paragraph (a)(i) of paragraph 6(2) above and its relevant income shall be computed without regard to any reduction under that paragraph.

Commencement of trade

10 Paragraph 4 above shall, with the necessary modifications, have effect in relation to companies claiming relief under paragraph 6 above as it has effect in respect of persons clairning relief under paragraph 1 above.

Cessation of trade

11 A company shall not be entitled to relief under paragraph 6 above if any accounting period ending in or at the same time as its base period ends by virtue of the company—

(a) ceasing to trade or to be, in respect of the trade concerned or of all the trades carried on by the company, within the charge to corporation tax ; or

(b) ceasing to be resident in the United Kingdom ; or

(c) ceasing to be within the charge to corporation tax.