Corporation Tax Act 2009

Rules differing from generally accepted accounting practiceU.K.

320Credits and debits treated as relating to capital expenditureU.K.

[F1(1)This section applies if—

(a)an amount for an accounting period in respect of a company's loan relationship relates to any of the matters in section 306A(1),

(b)generally accepted accounting practice allows the amount to be treated in the company's accounts as an amount recognised in determining the carrying value of an asset or liability, and

(c)any profit or loss for corporation tax purposes in relation to that asset or liability will not fall to be calculated in accordance with generally accepted accounting practice.

(2)Despite that treatment, the amount is to be brought into account as a credit or debit for the purposes of this Part, for the accounting period for which it is recognised, in the same way as an amount which is brought into account as a credit or debit in determining the company's profit or loss for that period in accordance with generally accepted accounting practice.

(3)But subsection (2) does not apply to an amount which relates to an intangible fixed asset to which an election under section 730 (writing down at fixed rate: election for fixed-rate basis) applies.]

F2(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F3(5)If an amount relating to an asset or liability is brought into account as mentioned in subsection (2) as a debit, no debit may be brought into account for the purposes of this Part in respect of—

(a)the writing down of so much of the value of the asset or liability as is attributable to that debit, or

(b)so much of any amortisation or depreciation representing a writing-off of that value as is attributable to that debit.]

[F4320AAmounts recognised in other comprehensive income and not transferred to profit or lossU.K.

(1)This section applies if—

(a)in a period of account an asset or liability representing a loan relationship of a company ceases in accordance with generally accepted accounting practice to be recognised in the company's accounts,

(b)amounts relating to the matters mentioned in section 306A(1) in respect of that loan relationship have in accordance with generally accepted accounting practice been recognised in the company's accounts as items of other comprehensive income and have not subsequently been transferred to become items of profit or loss, and

(c)condition A or B is met.

(2)Condition A is that, at the time when the asset or liability ceases to be recognised, it is not expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(3)Condition B is that, at any later time, it is no longer expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(4)The amounts mentioned in subsection (1)(b)—

(a)must be brought into account for the purposes of this Part as credits or debits for the period of account in which the time mentioned in subsection (2) or (3) falls, in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice, and

(b)must not be brought into account for a later period of account even if they are subsequently transferred to become items of profit or loss for the later period.

(5)This section applies in a case where part of an asset or liability representing a loan relationship of a company ceases to be recognised in the company's accounts as it applies in a case where the whole of an asset or liability representing a loan relationship ceases to be recognised, but as if the reference in subsection (1)(b) to amounts in respect of the loan relationship were a reference to so much of those amounts as are attributable to that part of the asset or liability.

(6)In determining what amounts fall within subsection (1)(b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous accounting periods.

(7)But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous accounting periods which differs from that mentioned in subsection (6), that different assumption applies in determining what amounts fall within subsection (1)(b) at the time in question.

(8)In this section “item of profit or loss” and “item of other comprehensive income” each has the meaning that it has for accounting purposes.]

[F5320BHybrid capital instruments: amounts recognised in equityU.K.

(1)This section applies if in accordance with generally accepted accounting practice, an amount in respect of a hybrid capital instrument relating to any of the matters in section 306A(1) of CTA 2009—

(a)is recognised in equity or shareholders' funds for a period, and

(b)is not recognised in the company's accounts for the period as an item of profit or loss or as an item of other comprehensive income.

(2)The amount is to be brought into account for the period for the purposes of this Part in the same way as an amount which is brought into account as a credit or debit in determining the company's profit or loss for the period in accordance with generally accepted accounting practice.

(3)But this section does not bring into account for the purposes of this Part any exchange gain or loss of the company which is recognised in the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings.]

F6321Credits and debits recognised in equityU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7321ARestriction on debits resulting from release of loans to participators etcU.K.

(1)This section applies if—

(a)a loan gives rise to a charge to tax under section 455 of CTA 2010 (including a charge by virtue of section 459 or 460 of that Act), and

(b)the whole or a part of the debt in respect of the loan is released or written off.

(2)No debit is to be brought into account for the purposes of this Part in respect of the release or writing off.]

322Release of debts: cases where credits not required to be brought into accountU.K.

(1)This section applies if—

(a)a liability to pay an amount under a company's debtor relationship is released, and

(b)the release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of that relationship.

(2)The company is not required to bring into account a credit in respect of the release for the purposes of this Part if [F8any of conditions A to [F9E]] is met.

(3)Condition A is that the release is part of a statutory insolvency arrangement.

(4)Condition B is that the release is [F10not a release of relevant rights and is]—

(a)in consideration of shares forming part of the ordinary share capital of the debtor company, or

(b)in consideration of any entitlement to such shares.

F11(4A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)Condition C is that—

(a)the debtor company meets one of the insolvency conditions (see subsection (6)), and

(b)the debtor relationship is not a connected companies relationship (see section 348).

[F12(5A)Condition D is that the liability is released in consequence of [F13the making of a mandatory reduction instrument or a third country instrument or] the exercise of a stabilisation power under Part 1 of the Banking Act 2009 [F14or the exercise of a third-country instrument or a stabilisation power under Schedule 11 to the Financial Services and Markets Act 2023].]

[F15(5B)Condition E is that—

(a)the release is neither a deemed release, as defined by section 358(3), nor a release of relevant rights, and

(b)immediately before the release, it is reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months the company would be unable to pay its debts.]

(6)For the purposes of this section a company meets the insolvency conditions if—

(a)it is in insolvent liquidation,

(b)it is in insolvent administration,

(c)it is in insolvent administrative receivership,

(d)an appointment of a provisional liquidator is in force in relation to the company under section 135 of the Insolvency Act 1986 (c. 45) or Article 115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(e)under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a), (b), (c) or (d) exist.

[F16(6A)In subsections (4) and (5B)(a), “relevant rights” has the same meaning as in section 358.]

(7)Section [F17323(A1) applies for the interpretation of subsection (5B)(b); and the rest of section] 323 applies for the interpretation of subsection (6).

(8)For further cases where no credit in respect of the release is to be brought into account, see—

(a)section 358 (exclusion of credits on release of connected companies debts: general), and

(b)section 359 (exclusion of credits on release of connected companies debts during creditor's insolvency).

323Meaning of expressions relating to insolvency etcU.K.

[F18(A1)For the purposes of sections 322(5B) and 323A(1)(b) a company is unable to pay its debts if—

(a)it is unable to pay its debts as they fall due, or

(b)the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.]

(1)For the purposes of section 322(6) a company is in insolvent liquidation during the period—

(a)beginning when it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up, and

(b)ending when the winding up is completed or otherwise brought to an end (whether under paragraph 37 or 38 of Schedule B1 to the Insolvency Act 1986 (c. 45) or otherwise).

(2)In subsection (1) “liquidation” has the meaning given in—

(a)section 247(2) of the Insolvency Act 1986, or

(b)Article 6(2) of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).

(3)For the purposes of section 322(6) a company in administration is in insolvent administration if it entered administration under—

(a)Schedule B1 to the Insolvency Act 1986, or

(b)Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),

at a time when its assets were insufficient for the payment of its debts and other liabilities and the expenses of the administration.

(4)For the purposes of section 322(6) a company is in insolvent administrative receivership if—

(a)an appointment of an administrative receiver is in force in relation to the company, and

(b)the company was put into administrative receivership at a time when its assets were insufficient for the payment of its debts and other liabilities and the expenses of administrative receivership.

(5)In subsection (4) “administrative receiver” has the same meaning as in—

(a)Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 (c. 45), or

(b)Part 4 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)),

and “administrative receivership” is to be read accordingly.

[F19323ASubstantial modification: cases where credits not required to be brought into accountU.K.

(1)Subsection (2) applies if—

(a)a debtor relationship of a company is modified or replaced by another,

(b)immediately before the modification or replacement it is reasonable to assume that, without the modification or replacement and any arrangements of which the modification or replacement forms part, there would be a material risk that at some time within the next 12 months the company would be unable to pay its debts, and

(c)the modification or replacement is treated for accounting purposes as a substantial modification of the terms of a loan relationship of the company.

(2)The company is not required to bring into account for the purposes of this Part a credit in respect of any change in the carrying value of the liability representing the modified or replacement debtor relationship.

(3)If as a result of subsection (2) no credit was brought into account in respect of a change in the carrying value of a liability representing a debtor relationship, the company may not bring into account a debit for the purposes of this Part in respect of a change in the carrying value of that liability, to the extent that the change represents a reversal of the change in carrying value to which subsection (2) applied.

(4)Section 323(A1) applies for the interpretation of subsection (1)(b).]

[F20323BInsurers in financial difficulties: write-down ordersU.K.

(1)Subsection (2) applies if a debtor relationship of a company is modified by a write-down order.

(2)The company is not required to bring into account for the purposes of this Part a credit in respect of any change in the carrying value of the liability representing the modified debtor relationship.

(3)If as a result of subsection (2) no credit was brought into account in respect of a change in the carrying value of a liability representing a debtor relationship, the company may not bring into account a debit for the purposes of this Part in respect of a change in the carrying value of that liability, to the extent that the change represents a reversal of the change in carrying value to which subsection (2) applied.

(4)In this section “write-down order” means an order under section 377A of the Financial Services and Markets Act 2000 (court order writing down liabilities of insurer).]

324Restriction on debits resulting from revaluationU.K.

(1)No debit is to be brought into account for the purposes of this Part as a result of the revaluation of an asset representing a creditor relationship of a company except—

(a)an impairment loss, or

(b)a debit resulting from a release by the company of any liability under the relationship.

(2)For the meaning of “impairment loss” see section 476(1).

(3)The reference in subsection (1) to revaluation of an asset includes any case where a provision or allowance is made by the company reducing the carrying value of the asset or of a group of assets including the asset in question.

[F21(3A)Where a company has a hedging relationship between a relevant contract (“the hedging instrument”) and the asset or liability representing the loan relationship, this section does not prevent credits or debits being brought into account in respect of changes in the fair value of the asset or liability which are attributable to any of the risks in respect of which the hedging instrument was intended to act as a hedge.]

(4)This section does not affect the debits to be brought into account in respect of exchange gains or losses.

(5)This section does not apply if fair value accounting is used.

325Restriction on credits resulting from reversal of disallowed debitsU.K.

(1)No credit is to be brought into account for the purposes of this Part in respect of the reversal of a debit disallowed by section 324(1).

(2)This section does not apply if fair value accounting is used.

(3)See also paragraph 61 of Schedule 2 (restriction on bringing into account credits resulting from reversal of debits disallowed in a period of account beginning before 1 January 2005).

326Writing off government investmentsU.K.

(1)This section applies if a government investment in a company is written off by the release of a liability to pay any amount under a debtor relationship of the company.

(2)The company is not required to bring into account a credit for the purposes of this Part in respect of the release.

(3)[F22Section 94 of CTA 2010] (write-off of government investment) applies for interpreting the reference in subsection (1) to a government investment in a company being written off as it applies for the purposes of [F23Chapter 7 of Part 4] of that Act.

327Disallowance of imported losses etcU.K.

(1)This section applies for an accounting period of a company (“the loss period”) if—

(a)apart from this section, a loss arising in connection with a loan relationship of the company would fall to be brought into account for the purposes of this Part, and

(b)the loss is wholly or partly referable to a time when the relationship was not subject to United Kingdom taxation.

(2)The amounts brought into account for the loss period for the purposes of this Part must be such as to secure that none of the loss referable to a time when the relationship was not so subject is treated for those purposes as arising in the loss period or any other accounting period of the company.

(3)For the purposes of this section a loss is referable to a time when a relationship is not subject to United Kingdom taxation so far as, at the time to which the loss is referable, the company would not have been chargeable to corporation tax in the United Kingdom on any profits arising from the relationship.

(4)If the company was not a party to the relationship at the time to which the loss is referable, subsection (3) applies as if the reference to the company were a reference to the person who at that time was in the same position as respects the relationship as is subsequently held by the company.

(5)An amount which would be brought into account for the purposes of this Part in respect of any matter apart from this section is treated for the purposes of section 464(1) (amounts brought into account under this Part excluded from being otherwise brought into account) as if it were so brought into account.

(6)Accordingly, that amount must not be brought into account for corporation tax purposes as respects that matter either under this Part or otherwise.

(7)This section does not apply if fair value accounting is used.