Corporation Tax Act 2010

Chapter 7Write-off of government investment

92Loss relief to be reduced if government investment is written off

(1)This section applies if an amount of government investment in a company (“the written-off amount”) is written off.

(2)The written-off amount is set off against the company’s carry-forward losses as at the end of the accounting period ending last before the day of the write-off.

(3)If the written-off amount exceeds those losses, the excess is set off against the company’s carry-forward losses as at the end of the next accounting period and so on until the whole of the written-off amount has been set off.

(4)In this Chapter “company” has the meaning given by section 1121 but does not include an unincorporated association.

(5)This section needs to be read with—

• section 93 (which applies if the company is in a group of companies),

• section 94 (which explains what is meant by government investment being written off and how the written-off amount is calculated), and

• section 95 (which explains what is meant by carry-forward losses).

93Groups of companies

(1)This section applies if—

(a)at the end of an accounting period a company in which an amount of government investment is written off is in a group of companies, and

(b)under section 92(2) or (3) an amount could be set off against the company’s carry-forward losses as at the end of that period (or could be so set off if there were enough of those losses).

(2)The amount may be set off (wholly or partly) against the carry-forward losses of one or more companies within subsection (3), as may be just and reasonable.

(3)A company (other than the company referred to in subsection (1)(a)) is within this subsection if at the end of the accounting period it is in the group of companies.

(4)A “group of companies” consists of a company that has one or more 51% subsidiaries, together with that or those subsidiaries.

94Cases in which government investment is written off

(1)Government investment in a company is written off if any of the following occurs in relation to the company.

This is subject to subsection (2).

• Case 1

  The company’s liability to repay any money lent to it out of public funds by a Minister is extinguished.

  In this case the written-off amount is the amount of the liability extinguished and the write-off occurs when the liability is extinguished.

• Case 2

  Any of the company’s shares for which a Minister has subscribed out of public funds are cancelled.

  In this case the written-off amount is the amount subscribed for the shares and the write-off occurs when the shares are cancelled.

• Case 3

  The company’s commencing capital debt (see subsection (3)) is reduced otherwise than by being paid off or its public dividend capital (see subsection (4)) is reduced otherwise than by being repaid (including, in either case, a reduction to nil).

  In this case the written-off amount is the amount of the reduction and the write-off occurs when the reduction occurs.

(2)The written-off amount is reduced so far as it is replaced by—

(a)money lent, or a payment made, out of public funds, or

(b)shares subscribed for by a Minister for money or money’s worth.

(3)“Commencing capital debt” means a debt to a Minister assumed as such under an enactment.

(4)“Public dividend capital” means an amount paid by a Minister—

(a)under an enactment in which that amount is so described, or

(b)under an enactment corresponding to an enactment in which a payment made on similar terms to another body is so described.

(5)In this section—

• “enactment” includes an Act of the Scottish Parliament, and

• “Minister” means a Minister of the Crown, the Scottish Ministers or a Northern Ireland department.

95Meaning of “carry-forward losses”

(1)A company’s carry-forward losses as at the end of an accounting period are as follows.

• Type 1

  Losses of the company to be carried forward under section 45, 62 or 66 to the next accounting period.

  These include losses to be treated as expenses of management of the company under section 63 for the next accounting period.

• Type 2

  Any excess of the company to be carried forward for deduction to the next accounting period under section 1223(3) of CTA 2009.

• Type 3

  Any excess of the company to be carried forward for deduction to the next accounting period under section 260(2) of CAA 2001.

• Type 4

  Any qualifying charitable donations made by the company so far as they exceed the company’s profits of the accounting period and are available for surrender for the next accounting period under Part 5 (group relief).

• Type 5

  Allowable losses of the company available under section 8 of TCGA 1992 so far as not allowed for the accounting period or any previous accounting period.

(2)For the purposes of section 92(2) an amount is excluded from a company’s carry-forward losses if, before the day of the write-off, a claim is made in relation to the amount under section 37 or Part 5 (group relief) of this Act or section 260(3) of CAA 2001.

(3)But, for the purposes of section 92(3), any such claim made on or after that day is to be disregarded in determining the company’s carry-forward losses as at the end of any accounting period.

(4)The set off of an amount against a company’s carry-forward losses as at the end of any accounting period is to be done—

• first, against those within Types 1 to 4, and

• second, against those within Type 5.

96Interaction with other tax provisions

(1)A company, in calculating its profits of a trade for corporation tax purposes, is not prevented from deducting a sum by reason only that an amount of government investment in the company is written off.

(2)Subsection (3) applies for the purposes of section 50 of TCGA 1992 and section 532 of CAA 2001 in their application in relation to a company.

(3)Expenditure is not met by a public body (as defined in section 532(2) of CAA 2001) by reason only that an amount of government investment in the company is written off.

(4)Section 464(1) of CTA 2009 does not prevent section 92 of this Act from applying if the writing-off of an amount of government investment in a company involves the extinguishment (in whole or in part) of a liability under a loan relationship.