Corporation Tax Act 2010

• Citation: 2010 c. 4
• Sections: 2813

Section 1 Overview of Act

(1) Part 2 is about calculation of the corporation tax chargeable on a company's profits, in particular—

(a) the rates at which corporation tax on profits is charged (see Chapter 2),

(b) ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3), and

(c) the currency in which profits are to be calculated and expressed (see Chapter 4).

(2) Parts 3A to 7 make provision for the following reliefs—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a) relief for companies with small profits (other than ring-fence profits) (see Part 3A),

(b) relief for trade losses (see Chapters 2 and 3 of Part 4),

(c) relief for losses from property businesses (see Chapter 4 of Part 4),

(d) relief for losses on a disposal of shares (see Chapter 5 of Part 4),

(e) relief for losses from miscellaneous transactions (see Chapter 6 of Part 4),

(f) group relief (see Part 5),

(fa) group relief for carried-forward losses (see Part 5A),

(g) relief for qualifying charitable donations (see Part 6), ...

(ga) relief for expenditure on grassroots sport (see Part 6A), and

(h) community investment tax relief (see Part 7).

(2A) Part 7ZA contains provision restricting the amount of certain deductions which may be made in calculating the profits of a company on which corporation tax is chargeable.

(3) Parts 7A to 13 make provision about special types of business and company etc , in particular—

(za) banking companies (see Part 7A),

(a) oil activities (see Part 8),

(aa) oil contractor activities (see Part 8ZA),

(ab) profits arising from the exploitation of patents etc (see Part 8A),

(ac) trading profits taxable at Northern Ireland rate (see Part 8B),

(ad) restitution interest (see Part 8C),

(b) leasing plant or machinery (see Part 9),

(c) close companies (see Part 10),

(d) charitable companies etc (see Part 11),

(e) Real Estate Investment Trusts (see Part 12),

(f) corporate beneficiaries under trusts (see Chapter 1 of Part 13),

(g) open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13),

(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) securitisation companies (see Chapter 4 of Part 13),

(j) companies in liquidation or administration (see Chapter 5 of Part 13),

(k) banks etc in compulsory liquidation (see Chapter 6 of Part 13),

(l) co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13), and

(m) community amateur sports clubs (see Chapter 9 of Part 13).

(4) Parts 14 to 21C contain provisions relating to tax avoidance, in particular with respect to—

(a) change in company ownership (see Part 14),

(aa) transfer of deductions (see Part 14A),

(ab) carried-forward losses (see Part 14B),

(b) transactions in securities (see Part 15),

(c) factoring of income (see Part 16),

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(da) manufactured dividends (see Part 17A),

(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) the sale and lease-back of assets (see Part 19),

(g) leasing plant or machinery (see Part 20), ...

(h) other arrangements involving asset leasing (see Part 21) ...

(i) risk transfer schemes (see Part 21A).

(j) group mismatch schemes (see Part 21B). , and

(ja) tax mismatch schemes (see Part 21BA),

(k) tainted donations made to charities (see Part 21C).

(5) Part 22 contains miscellaneous provisions, including provision with respect to—

(a) transfers of trade without a change of ownership (see Chapter 1),

(b) transfers of trade to obtain balancing allowances (see Chapter 2),

(c) transfer of relief within partnerships (see Chapter 3),

(d) the surrender of tax refunds within groups of companies (see Chapter 4),

(e) the set off of income tax deductions against corporation tax (see Chapter 5),

(f) the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6),

(g) the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7), and

(h) exemptions (see Chapter 8).

(6) Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7) Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8) Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9) For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

Section 2 Overview of Part

(1) This Part contains provisions that relate to the calculation of the corporation tax chargeable on a company's profits of an accounting period.

(2) Chapter 2 is about the rates at which corporation tax on profits is charged.

(3) Chapter 3 is about ascertaining the amount of a company's profits of an accounting period to which the rates of corporation tax applicable to the company are applied.

(4) Chapter 4 makes provision about the currency in which a company must calculate and express its profits for corporation tax purposes.

(5) For provision about the calculation of the corporation tax payable for an accounting period see paragraph 8 of Schedule 18 to FA 1998.

Section 3 Corporation tax rates

(1) Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.

(2) Subsection (1) is subject to—

(a) section 18A (which provides for tax to be charged at the standard small profits rate instead of the main rate in certain cases), and

(b) any other provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.

Section 4 Amount of profits to which corporation tax rates applied

(1) In the calculation under paragraph 8(1) of Schedule 18 to FA 1998 of the amount of corporation tax payable for an accounting period of a company, the first step is to apply the rate or rates of corporation tax applicable to the profits of the company of the period on which tax is chargeable.

(2) The profits of a company of an accounting period on which corporation tax is chargeable (in this Act referred to as the company's taxable total profits of the period) are found as follows—

Step 1

Find the company's total profits of the period (see subsection (3)).

Step 2

Deduct from the result of Step 1 any amounts which can be relieved against the company's total profits of the period.

(3) To find a company's total profits of an accounting period take the following steps.

Step 1

Find the amount in respect of which the company is chargeable for the period under the charge to corporation tax on income after any reduction required to give effect to relief from tax.

Step 2

Add to the result of Step 1 any amount to be included in respect of chargeable gains in the company's total profits of the accounting period (see section 8 of TCGA 1992) after any reduction required to give effect to relief from tax.

(4) Subsections (2) and (3) are subject to the provisions of the Corporation Tax Acts.

Section 5 Basic rule: sterling to be used

(1) For corporation tax purposes the income and chargeable gains of a company for an accounting period must be calculated and expressed in sterling.

(2) See the following sections for provision about the application of subsection (1) in certain cases where profits or losses fall to be calculated in accordance with generally accepted accounting practice—

section 6 (UK resident company operating in sterling and preparing accounts in another currency),

section 7 (UK resident company operating in currency other than sterling and preparing accounts in another currency),

section 8 (UK resident company preparing accounts in currency other than sterling),

section 9 (non-UK resident company preparing accounts in currency other than sterling).

(3) See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.

Section 6 UK resident company operating in sterling and preparing accounts in another currency

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice, a UK resident company (other than a UK resident investment company) —

(a) prepares its accounts in a currency other than sterling, and

(b) in those accounts identifies sterling as its functional currency.

(1A) This section also applies if, for a period of account, a UK resident investment company—

(a) in accordance with generally accepted accounting practice, prepares its accounts in a currency other than sterling, and

(b) either—

(i) has sterling as its designated currency for that period of account (see sections 9A and 9B), or

(ii) if it does not have a designated currency for that period, in those accounts identifies sterling as its functional currency in accordance with generally accepted accounting practice.

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as if the company prepared its accounts in sterling.

Section 7 UK resident company operating in currency other than sterling and preparing accounts in another currency

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a) a UK resident company (other than a UK resident investment company) prepares its accounts in one currency,

(b) in those accounts it identifies another currency as its functional currency, and

(c) that other currency is not sterling.

(1A) This section also applies if, for a period of account, a UK resident investment company—

(a) in accordance with generally accepted accounting practice, prepares its accounts in one currency,

(b) either—

(i) has another currency as its designated currency for that period (see sections 9A and 9B), or

(ii) if it does not have a designated currency for that period, in those accounts identifies another currency as its functional currency in accordance with generally accepted accounting practice, and

(c) that other currency is not sterling.

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

Step 1

Calculate those profits or losses in the relevant currency as if the company prepared its accounts in that currency.

Step 2

Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the relevant currency of the company.

(4) In subsections (2) and (3) “ the relevant currency ” means the currency other than sterling referred to in subsection (1)(c) or (1A)(c).

Section 8 UK resident company preparing accounts in currency other than sterling

(1) This section applies if, for a period of account—

(a) a UK resident company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b) neither section 6 nor section 7 applies.

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

Step 1

Calculate those profits or losses in the accounts currency.

Step 2

Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

Section 9 Non-UK resident company preparing return of accounts in currency other than sterling

(1) This section applies if a non-UK resident company within the charge to corporation tax prepares its return of accounts for a period of account in a currency other than sterling (the “accounts currency”).

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

Step 1

Calculate those profits or losses in the accounts currency.

Step 2

Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

(4) The reference in subsection (1) to the company's “return of accounts” is to a return of such accounts ... as may be required under paragraph 3 of Schedule 18 to FA 1998 (company tax returns).

Section 9A Designated currency of a UK resident investment company

(1) The designated currency of a UK resident investment company is the currency which the company elects as its designated currency.

(2) An election under this section by a company (“X”) takes effect only if, at the time when it is to take effect (see section 9B(1))—

(a) X is a UK resident investment company, and

(b) Condition A or Condition B is met.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Condition A is that a significant proportion of X's assets and liabilities are denominated in the currency.

(5) Condition B is that—

(a) the currency is the functional currency of another company, and

(b) it is reasonable to assume that the two companies will meet the consolidation condition.

(6) X and another company (“Y”) meet the consolidation condition at any time if—

(a) for a period which includes that time, the financial results of X are comprised in financial statements of Y's group prepared in accordance with acceptable accounting practice, or

(b) if no financial statements of the group are prepared in accordance with acceptable accounting practice for a period which includes that time, the financial results of X would be comprised in financial statements of Y's group for a period which includes that time if such statements were prepared in accordance with international accounting standards.

(7) In subsection (6)—

“ financial statements of the group ” means consolidated financial statements of Y and its subsidiaries (and for this purpose “ subsidiaries ” has the meaning given by international accounting standards) ,

“ Y's group ” means a worldwide group of which Y is the ultimate parent within the meaning of Part 10 of TIOPA 2010,

“ acceptable accounting practice ” means—

international accounting standards,

UK generally accepted accounting practice, or

accounting practice which is generally accepted in the country in which Y is resident.

(8) A currency is the designated currency of X for a period of account if the election in respect of that currency has effect throughout that period (see section 9B).

(9) In relation to any period of account for which a currency is X's designated currency as a result of an election under this section, profits or losses of X that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated as if—

(a) the designated currency were the functional currency of the company, and

(b) no part of X's business could, in accordance with generally accepted accounting practice, be regarded as having another currency as its functional currency.

Section 9B Period for which an election under section 9A has effect

(1) An election under section 9A takes effect at the beginning of the day specified in the election as the day on which it takes effect (which must be later than the day on which the election is made).

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) An election under section 9A may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.

(4) Subject to that, an election has effect until immediately before—

(a) the day on which another election by X takes effect, or

(b) the day on which a revocation event occurs,

(whichever first occurs).

(5) A revocation event occurs in a period of account (other than a period to which subsection (6) applies) if, at any time during that period—

(a) it is not the case that a significant proportion of X's assets and liabilities are denominated in the currency to which the election relates, and

(b) it is not the case that the currency is the functional currency of another company which, with X, met the consolidation condition (within the meaning of section 9A(6)) at any time during the preceding period of account.

(6) A revocation event occurs in the period of account in which X's first accounting period begins if—

(a) Condition A and not Condition B is satisfied at the beginning of that accounting period, and

(b) the condition in subsection (5)(a) is met at any time during the period of account but after the first accounting period begins.

(6A) A revocation event also occurs in a period of account (whether or not a period to which subsection (6) applies) if, at any time during that period, X ceases to be a UK resident investment company.

(7) Subsections (8) and (9) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—

(a) an election under section 9A takes effect, or

(b) a revocation event occurs.

(8) It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—

(a) the first beginning with the straddling period of account and ending immediately before that day, and

(b) the second beginning with that day and ending with the straddling period of account,

and X's profits and losses are to be computed accordingly for the purposes of corporation tax.

(9) For those purposes, it is to be assumed—

(a) that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and

(b) that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X's functional currency, the accounts for each of the two periods do likewise.

(10) In this section references to “X” are to be construed in accordance with section 9A.

Section 9C Chargeable gains and losses of companies

(1) This section applies if—

(a) a company disposes of an asset which is a ship, an aircraft, shares or an interest in shares, and

(b) at any time beginning with the company's acquisition of the asset (or, if earlier, the time allowable expenditure was first incurred in respect of the asset) and ending with the disposal, the company's relevant currency is not sterling.

(2) A company's relevant currency at any time is its functional currency at that time, subject to subsection (3).

(3) If, at any time—

(a) a company is a UK resident investment company, and

(b) the company has a designated currency (see sections 9A and 9B) which is different from its functional currency,

the company's relevant currency at that time is that designated currency.

(4) If the relevant currency of the company at the time of the disposal is not sterling, the chargeable gain or loss accruing to the company on the disposal must be calculated as follows—

Step 1 Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal.

Step 2 Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

(5) In any case, subsections (6) to (10) apply for the purposes of calculating the chargeable gain or loss.

(6) Where any allowable expenditure is incurred in a currency which is not the company's relevant currency at the time it is incurred, that expenditure is to be translated into that relevant currency by reference to the spot rate of exchange for the day on which it is incurred.

(7) Where, at any time after any allowable expenditure is incurred but before the asset is disposed of, there is a change in the company's relevant currency, that expenditure is to be translated (or, if it has previously been translated under this section, further translated) into the relevant currency of the company immediately following the change, by reference to the spot rate of exchange for the day of the change.

(8) Any amount of consideration for the disposal which is given in a currency other than the company's relevant currency is to be translated into that relevant currency by reference to the spot rate of exchange on the day of disposal.

(9) For the purposes of subsections (6) and (7)—

(a) any translation of expenditure under subsection (6) is to be done before any translation of the expenditure under subsection (7), and

(b) if subsection (7) applies as a result of more than one change in the company's relevant currency, it is to be applied in relation to each change in the order the changes were made (with the earliest first).

(10) Where, by virtue of any enactment, the company was at any time treated for the purposes of corporation tax on chargeable gains as acquiring the asset—

(a) for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the person disposing of the asset, or

(b) for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

(11) For the purposes of this section, a reference to a ship or aircraft includes a reference to the benefit of a contract—

(a) to which section 67 of CAA 2001 applies, and

(b) which relates to plant or machinery which is a ship or aircraft.

(12) In this section—

“ allowable expenditure ” means expenditure which, immediately before the disposal, was attributable to the asset under section 38(1)(a) to (c) of TCGA 1992;

“ interest in shares ” has the same meaning as in Schedule 7AC to TCGA 1992 (see paragraph 29 of that Schedule);

“ shares ” includes stock.

Section 10 The equivalent in another currency of a sterling amount

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

Section 11 Sterling equivalents: basic rule

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(4) Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

Section 12 Sterling equivalents: carried-back amounts

(1) This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below).

(3) In the table in subsection (2)—

“ the earlier tax calculation currency ” means the tax calculation currency of the company in the accounting period to which the carried-back amount is to be carried back,

“ the later tax calculation currency ” means the tax calculation currency of the company in the accounting period in which the loss arises, and

“ the relevant accounting period ” means the latest accounting period of the company that both—

ends before the accounting period in which the loss arises, and

is a period in which the tax calculation currency of the company is the same as the earlier tax calculation currency.

Section 13 Sterling equivalents: carried-forward amounts

(1) This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below).

(3) In the table in subsection (2)—

“ the earlier tax calculation currency ” means the tax calculation currency of the company in the accounting period in which the loss arises,

“ the later tax calculation currency ” means the tax calculation currency of the company in the accounting period to which the carried-forward amount is to be carried forward, and

“ the relevant accounting period ” means the earliest accounting period of the company that both—

begins after the accounting period in which the loss arises, and

is a period in which the tax calculation currency of the company is the same as the later tax calculation currency.

Section 14 Carried-back amounts

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-back amount.

(4) Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried back (“the earlier tax calculation currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) first being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and

(b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(6) In this section “ the relevant accounting period ” means the latest accounting period of the company that both—

(a) ends before the accounting period in which the loss arises, and

(b) is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

Section 15 Carried-forward amounts

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-forward amount.

(4) Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried forward (“the later tax calculation currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) first being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and

(b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(6) In this section “ the relevant accounting period ” means the earliest accounting period of the company that both—

(a) begins after the accounting period in which the loss arises, and

(b) is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

Section 16 Sections 13(2) and 15(5): profit against which carried-forward amount to be set off

(1) This section is about the interpretation of the references in sections 13(2) and 15(5) to the profit against which a carried-forward amount is to be set off, in a case where the carried-forward amount—

(a) is one that is treated as arising in an accounting period later than that in which it in fact arises, and

(b) is accordingly deductible in calculating a profit for that later period.

(2) In such a case, the references are to be read as references to the profit in calculating which the amount is deductible, disregarding the deduction.

Section 17 Interpretation of Chapter

(1) References in this Chapter to the accounts of a UK resident company are to—

(a) the annual accounts of the company required by Part 15 of the Companies Act 2006, or

(b) if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the territory under whose laws the company is incorporated, or

(c) if the company is not required to keep accounts as mentioned in paragraph (a) or (b), those accounts of the company that most closely correspond to accounts which it would have been required to prepare if the provisions of Part 15 of the Companies Act 2006 applied to it.

(2) In this Chapter “ carried-back amount ” means—

(a) an amount carried back under section 37 (relief for trade losses against total profits),

(aa) an amount carried back under section 45F (relief for terminal trade losses),

(b) an amount carried back under section 389(2) of CTA 2009 (deficits of insurance companies), or

(c) an amount carried back by virtue of a claim under section 459(1)(b) or 463B(1)(b) of CTA 2009 (non-trading deficits from loan relationships).

(3) In this Chapter “ carried-forward amount ” means—

(a) an amount carried forward under section 45 (carry forward of pre-1 April 2017 trade loss against subsequent trade profits),

(aa) an amount carried forward under section 45A (carry forward of post 1-April 2017 trade loss against total profits),

(ab) an amount carried forward under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits),

(b) an amount carried forward under section 62(5) (UK property business losses),

(c) an amount carried forward under section 63(3) (company with investment business ceasing to carry on a UK property business),

(d) an amount carried forward under 66(3) (overseas property business losses),

(e) an amount carried forward under section 91(6) (losses from miscellaneous transactions),

(f) an amount carried forward under section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies) ,

(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) an amount carried forward under section 391(2) of CTA 2009 (deficits of insurance companies),

(i) an amount carried forward under section 457(3) , 463G(6) or 463H(4) of CTA 2009 (non-trading deficits from loan relationships),

(j) an amount carried forward under section 753(3) of CTA 2009 (non-trading loss on intangible fixed assets),

(k) an amount carried forward under section 925(3) of CTA 2009 (patent income: relief for expenses), or

(l) an amount carried forward under section 1223 of CTA 2009 (expenses of management and other amounts).

(3A) In this Chapter “ investment company ” means a company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived from those investments.

(4) References in this Chapter to the functional currency of a company or of part of a company's business are references to the currency of the primary economic environment in which the company or part operates.

(5) References in this Chapter to the tax calculation currency of a company in an accounting period are to the currency in which profits or losses of the company arising in that period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes are required to be calculated by virtue of section 5(1), section 6(2), Step 1 of section 7(2), Step 1 of section 8(2) or Step 1 of section 9(2).

Section 18 Profits charged at the small profits rate

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Section 18A Profits charged at the standard small profits rate

(1) Corporation tax is charged at the standard small profits rate on a company's taxable total profits of an accounting period which are not ring fence profits if—

(a) the company is UK resident in the accounting period,

(b) it is not a close investment-holding company in the period, and

(c) its augmented profits of the accounting period do not exceed the lower limit.

(2) In this Act “ the standard small profits rate ” means a rate that—

(a) is lower than the main rate, and

(b) is set by Parliament for the financial year as the standard small profits rate.

(3) In this Part “ ring fence profits ” has the same meaning as in Part 8 (see section 276).

(4) In the case of a company with ring fence profits, see section 279A(3) (small ring fence profits rate chargeable on ring fence profits).

Section 18B Marginal relief for companies without ring fence profits

(1) This section applies if—

(a) a company is UK resident in an accounting period,

(b) it is not a close investment-holding company in the period,

(c) its augmented profits of the accounting period exceed the lower limit but do not exceed the upper limit, and

(d) its augmented profits of the accounting period do not include any ring fence profits.

(2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to—

where—

F is the standard marginal relief fraction,

U is the upper limit,

A is the amount of the augmented profits, and

N is the amount of the taxable total profits.

(3) In this Act “ the standard marginal relief fraction ” means the fraction set by Parliament for the financial year as the standard marginal relief fraction for the purposes of this Part.

Section 18C Marginal relief for companies with ring fence profits

In the case of a company with ring fence profits—

(a) see section 279B (if the company's augmented profits of an accounting period consist exclusively of ring fence profits), and

(b) see section 279C (if the company's augmented profits of an accounting period consist of both ring fence profits and other profits).

Section 18D The lower limit and the upper limit

(1) This section gives the meaning in this Part of “the lower limit” and “ the upper limit ” in relation to an accounting period of a company (“C”).

(2) If C has no associated company in the accounting period—

(a) the lower limit is £50,000, and

(b) the upper limit is £250,000.

(3) If C has one or more associated companies in the accounting period—

(a) the lower limit is—

(b) the upper limit is—

where N is the number of those associated companies.

(4) For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

Section 18E Associated companies

(1) For the purposes of section 18D, a company is another company's associated company in an accounting period if it is an associated company (see subsection (4)) for any part of the accounting period.

(2) The rule in subsection (1) applies to each of two or more associated companies even if they are associated companies for different parts of the accounting period.

(3) But an associated company is ignored for the purposes of section 18D if—

(a) it has not carried on a trade or business at any time in the accounting period, or

(b) it was an associated company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period.

(4) For the purposes of this Part, a company is an associated company of another at any time when—

(a) one of the two has control of the other, or

(b) both are under the control of the same person or persons.

(5) In subsection (4) “ control ” has the same meaning as in Part 10 (see sections 450 and 451).

(6) In this section—

(a) subsection (3) is subject to section 18F, and

(b) subsections (4) and (5) are subject to sections 18G to 18J.

Section 18F Section 18E(3): treatment of certain non-trading companies

(1) Subsection (2) applies if a company carries on a business of making investments in an accounting period and throughout the period the company—

(a) carries on no trade,

(b) has one or more 51% subsidiaries, and

(c) is a passive company.

(2) The company is treated for the purposes of section 18E(3) as not carrying on a business at any time in the accounting period.

(3) A company is a passive company throughout an accounting period only if the following requirements are met—

(a) it has no assets in that period, other than shares in companies which are its 51% subsidiaries,

(b) no income arises to it in that period other than dividends,

(c) if income arises to it in that period in the form of dividends—

(i) the redistribution condition is met (see subsection (4)), and

(ii) the dividends are exempt distributions of a qualifying kind received by it (see subsection (5)),

(d) no chargeable gains accrue to it in that period,

(e) no expenses of management of the business mentioned in subsection (1) are referable to that period, and

(f) no qualifying charitable donations are deductible from the company's total profits of that period.

(4) The redistribution condition is that—

(a) the company pays dividends to one or more of its shareholders in the accounting period, and

(b) the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period.

(5) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(6) If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (3)(c) is met in respect of the income—

(a) neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (3)(a), and

(b) no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (3)(a) in that period or any earlier accounting period.

Section 18G Attribution to persons of rights and powers of their partners

(1) This section applies if—

(a) it is necessary to determine in accordance with section 18E(4) and (5) whether a company is an associated company of another company, and

(b) the relationship between the two companies is not one of substantial commercial interdependence.

(2) In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates.

(3) The Treasury may by regulations prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section.

Section 18H Associated companies: fixed-rate preference shares

(1) In determining for the purposes of section 18E(4) whether a company is under the control of another, fixed-rate preference shares held by a company are ignored if the company holding them—

(a) is not a close company,

(b) takes no part in the management or conduct of the company which issued the shares, or in the management or conduct of its business, and

(c) subscribed for the shares in the ordinary course of a business which includes the provision of finance.

(2) In this section “ fixed-rate preference shares ” means shares which—

(a) were issued wholly for new consideration,

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(c) do not carry any right to dividends other than dividends which—

(i) are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued.

(3) In subsection (2)(a) “ new consideration ” has the meaning given by section 1115.

Section 18I Association through a loan creditor

(1) A company (“A”) is not under the control of another company (“B”) for the purposes of section 18E(4) if—

(a) B is a loan creditor of A,

(b) there is no other connection between A and B, and

(c) either—

(i) B is not a close company, or

(ii) B's relationship to A as a loan creditor arose in the ordinary course of a business which B carries on.

(2) Subsection (3) applies if—

(a) two companies (“ A ” and “ B ”) are controlled by the same person who is a loan creditor of each of them,

(b) there is no other connection between A and B, and

(c) either—

(i) the loan creditor is a company which is not a close company, or

(ii) the loan creditor's relationship to each of A and B as a loan creditor arose in the ordinary course of a business which the loan creditor carries on.

(3) In determining for the purposes of this Part whether A and B are associated with each other, rights which the loan creditor has as a loan creditor of A, or as a loan creditor of B, are ignored.

(4) In subsection (2)(a) “ control ” has the same meaning as in section 18E(4).

(5) In this section—

(a) “ connection ” includes a connection in the past as well as a connection in the present, and

(b) references to a connection between two companies include any dealings between them.

(6) In this section references to a loan creditor of a company are to be read in accordance with section 453.

Section 18J Association through a trustee

(1) Subsection (2) applies if—

(a) two companies (“ A ” and “ B ”) are controlled by the same person by virtue of rights or powers (or both) held in trust by that person, and

(b) there is no other connection between A and B.

(2) In determining for the purposes of this Part whether A and B are associated with each other, the rights and powers mentioned in subsection (1)(a) are ignored.

(3) In subsection (1)—

(a) “ control ” has the same meaning as in section 18E(4),

(b) “ connection ” includes a connection in the past as well as a connection in the present, and

(c) the reference to a connection between A and B includes any dealings between them.

Section 18K Power to obtain information

(1) This section applies if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company.

(2) The officer may, for the purposes of this Part, by notice require the issuing company to provide the officer with—

(a) particulars of any bearer securities issued by the company,

(b) the names and addresses of the persons to whom the securities were issued, and

(c) details of the amounts issued to each person.

(3) The officer may, for the purposes of this Part, by notice require—

(a) any person to whom bearer securities were issued by the company, or

(b) any person to or through whom bearer securities issued by the company were subsequently sold or transferred,

to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities.

(4) In this section—

“ loan creditor ” has the meaning given by section 453, and

“ securities ” includes—

shares, stocks, bonds, debentures and debenture stock, and

any promissory note or other instrument evidencing indebtedness to a loan creditor of the company.

Section 18L Meaning of “augmented profits”

(1) For the purposes of this Part a company's “augmented profits” of an accounting period are—

(a) the company's taxable total profits of that period, plus

(b) any exempt distributions of a qualifying kind received by the company (“R”) that are not excluded.

(2) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(3) For the purposes of this section a distribution which R receives from a company (“C”) is excluded if—

(a) C is a 51% subsidiary of R or of a company of which R is a 51% subsidiary, or

(b) C is a trading company or relevant holding company that is a quasi-subsidiary of R.

(4) Section 18M—

(a) makes further provision for determining whether a company is a 51% subsidiary of another for the purposes of subsection (3), and

(b) defines expressions used in that subsection.

Section 18M Interpretation of section 18L(3)

(1) This section applies for the purposes of section 18L(3).

(2) In addition to meeting the requirements of section 1154(2), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

(a) B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and

(b) B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

(3) In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning share capital if—

(a) it owns the share capital indirectly,

(b) the share capital is owned directly by a company (“D”), and

(c) a profit on the sale of the shares would be a trading receipt for D.

(4) A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades.

(5) A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries.

(6) A company is a “quasi-subsidiary” of R if—

(a) it is owned by a consortium of which R is a member,

(b) it is not a 75% subsidiary of any company, and

(c) no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75% subsidiary of any company.

(7) A company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which—

(a) beneficially owns at least 5% of that capital,

(b) would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and

(c) would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

(8) The companies meeting those conditions are called the members of the consortium.

(9) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of this section as it applies for the purposes of section 151(4)(a) and (b).

Section 18N Close investment-holding companies

(1) For the purposes of this Part, a close company (“the candidate company”) is a close investment-holding company in an accounting period unless throughout the period it exists wholly or mainly for one or more of the permitted purposes set out in subsection (2).

There is an exception to this rule in subsection (5).

(2) The candidate company exists for a permitted purpose so far as it exists—

(a) for the purpose of carrying on a trade or trades on a commercial basis,

(b) for the purpose of making investments in land, or estates or interests in land, in cases where the land is, or is intended to be, let commercially (see subsection (3)),

(c) for the purpose of holding shares in and securities of, or making loans to, one or more companies each of which—

(i) is a qualifying company, or

(ii) falls within subsection (4),

(d) for the purpose of co-ordinating the administration of two or more qualifying companies,

(e) for the purpose of the making of investments as mentioned in paragraph (b)—

(i) by one or more qualifying companies, or

(ii) by a company which has control of the candidate company, or

(f) for the purpose of a trade or trades carried on on a commercial basis—

(i) by one or more qualifying companies, or

(ii) by a company which has control of the candidate company.

(3) For the purposes of subsection (2)(b), any letting of land is taken to be commercial unless the land is let to—

(a) a person connected with the candidate company (“a connected person”), or

(b) a person who is—

(i) the spouse or civil partner of a connected person,

(ii) a relative of a connected person, or the spouse or civil partner of a relative of a connected person,

(iii) a relative of the spouse or civil partner of a connected person, or

(iv) the spouse or civil partner of a relative of the spouse or civil partner of the connected person.

(4) A company falls within this subsection (see subsection (2)(c)(ii)) if—

(a) it is under the control of the candidate company or of a company which has control of the candidate company, and

(b) it exists wholly or mainly for the purpose of holding shares in or securities of, or of making loans to, one or more qualifying companies.

(5) If a company is wound up and was not a close investment-holding company in the accounting period that ends (by virtue of section 12(2) of CTA 2009) immediately before the winding up starts, the company is not treated for the purposes of this Part as being a close investment-holding company in the subsequent accounting period.

(6) In this section “ qualifying company ” means a company which—

(a) is under the control of the candidate company or of a company which has control of the candidate company, and

(b) exists wholly or mainly for either or both of the purposes mentioned in subsection (2)(a) or (b).

(7) In this section—

“ control ” has the meaning given by section 450, and

“ relative ” means brother, sister, ancestor or lineal descendant.

Section 19 Marginal relief

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Section 20 Company with only ring fence profits

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Section 21 Company with ring fence profits and other profits

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Section 22 The ring fence amount

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Section 23 The remaining amount

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Section 24 The lower limit and the upper limit

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Section 25 Associated companies

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Section 26 Section 25(3): treatment of certain non-trading companies

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Section 27 Attribution to persons of rights and powers of their associates

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Section 28 Associated companies: fixed-rate preference shares

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Section 29 Association through a loan creditor

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Section 30 Association through a trustee

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Section 31 Power to obtain information

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Section 32 Meaning of “augmented profits”

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Section 33 Interpretation of section 32(2) and (3)

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