Finance Act 2004

39Accounting period to which expenses of management are referableU.K.

(1)After section 75 of the Taxes Act 1988 (which is inserted by section 38) insert—

“75AAccounting period to which expenses of management are referable

(1)This section has effect for the purpose of determining the accounting period to which expenses of management are referable for the purposes of section 75(1).

(2)Where—

(a)expenses of management are debited in accounts drawn up by a company for a period of account,

(b)the treatment of those expenses in those accounts is in accordance with generally accepted accounting practice, and

(c)the period of account coincides with an accounting period,

the expenses of management are referable to that accounting period.

(3)Where—

(a)expenses of management are debited in accounts drawn up by a company for a period of account, and

(b)the treatment of those expenses in those accounts is in accordance with generally accepted accounting practice, but

(c)the period of account does not coincide with an accounting period,

subsection (4) below applies.

(4)Where this subsection applies, the expenses of management—

(a)shall be apportioned between any accounting periods that fall within the period of account, and

(b)are referable to an accounting period to the extent that they are so apportioned to it.

(5)An apportionment under subsection (4) above shall be in accordance with section 834(4) (time basis) unless it appears that that method would work unreasonably or unjustly, in which case such other method shall be used as appears just and reasonable.

(6)Where—

(a)expenses of management are not referable to an accounting period by virtue of subsections (2) to (5) above, but

(b)accounts are drawn up by the company for a period of account, and

(c)if the expenses of management had been treated in those accounts in accordance with generally accepted accounting practice, they would fall to be debited in those accounts,

the expenses of management are referable to the accounting period to which they would have been referable in accordance with subsections (2) to (5) above if they had been so debited in those accounts.

(7)Where expenses of management are not referable to an accounting period by virtue of subsections (2) to (6) above, they are referable to the accounting period to which they would be referable in accordance with subsections (2) to (5) above on the assumptions in subsection (8) below.

(8)Those assumptions are—

(a)that for each accounting period that does not coincide with, or fall within, any period of account, there is a period of account that coincides with that accounting period, and

(b)that so much of the expenses of management as would fall to be debited in accordance with generally accepted accounting practice in accounts drawn up by the company for any such deemed period of account are so debited.

(9)This section is without prejudice to any other provision of the Corporation Tax Acts which provides for amounts to be treated for the purposes of section 75 as expenses of management referable to an accounting period.

(10)Any reference in this section to expenses of management being debited in accounts is a reference to those expenses being brought into account, in accordance with generally accepted accounting practice, as a debit—

(a)in the company’s profit and loss account, or

(b)in a statement of total recognised gains and losses or other statement of items brought into account in computing the company’s profits and losses for accounting purposes.

For this purpose “debit” means an amount which for accounting purposes reduces a profit, or increases a loss, for a period of account.”.

(2)This section has effect in accordance with sections 42 and 43 (commencement and transitional provisions).