Legalize / United Kingdom / Public General Act

Corporation Tax Act 2009

Type Public General Act

Publication 2009-03-26

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(2) Condition A is that a major interest in land in the United Kingdom is, or has been, acquired by the company for the purposes of a UK property business or a trade carried on by it.

(3) Condition B is that—

(a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

(b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i) 1 April 1998, and

(ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A) The Treasury may by order—

(a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

(4) Condition C is that the company incurs capital expenditure which is qualifying land remediation expenditure in respect of the land.

(5) For the company to obtain the relief it must make an election.

(6) The relief is that for corporation tax purposes the capital expenditure is allowed as a deduction in calculating the profits of the UK property business or the trade for the period in which the expenditure is incurred.

(7) For the purposes of this section capital expenditure incurred for the purposes of a UK property business or a trade by a company about to carry on the business or trade is to be treated as incurred by the company—

(a) on the first day on which it does carry it on, and

(b) in the course of doing so.

(8) Relief is not available under this section in relation to so much of the qualifying land remediation expenditure as represents capital expenditure in respect of which an allowance, other than an allowance under Part 2A of CAA 2001 (structures and buildings allowances), has been, or may be, made under the enactments relating to capital allowances.

Election under section 1147

1148

(1) An election under section 1147 must specify the accounting period in respect of which it is made.

(2) The election must be made by notice in writing to an officer of Revenue and Customs.

(3) The notice must be given before the end of the period of two years beginning immediately after the end of the accounting period to which the election relates.

Additional deduction for qualifying land remediation expenditure

1149

(1) A company is entitled to corporation tax relief for an accounting period if each of conditions A to D is met.

(2) Condition A is that a major interest in land in the United Kingdom is, or has been, acquired by the company for the purposes of a UK property business or a trade carried on by it.

(3) Condition B is that—

(a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

(b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i) 1 April 1998, and

(ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A) The Treasury may by order—

(a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

(4) Condition C is that the company carries on a UK property business or a trade in the accounting period.

(5) Condition D is that the company incurs qualifying land remediation expenditure in respect of the land which is allowable as a deduction in calculating for corporation tax purposes the profits of the business or the trade for the period.

(6) For the company to obtain the relief it must make a claim.

(7) The relief is an additional deduction in calculating the profits of the business or the trade for the period.

(8) The amount of the additional deduction is 50% of the qualifying land remediation expenditure.

No relief if company responsible for contamination

1150

(1) A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if the land is in a contaminated or derelict state wholly or partly as a result of any thing done, or omitted to be done, at any time by—

(a) the company, or

(b) a person with a relevant connection to the company (see section 1178).

(2) A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

(a) the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

(b) that person, or a person connected with that person, has a relevant interest in the land.

(3) For the purposes of subsection (2) a person has a relevant interest in land if the person—

(a) holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

(b) has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.

Chapter 3 — Land remediation tax credit

Entitlement and payment

Entitlement to and payment of tax credit

1151

(1) A company is entitled to a land remediation tax credit for an accounting period if it has a qualifying land remediation loss in the period (see section 1152).

(2) For the company to obtain a land remediation tax credit in respect of all or part of the qualifying land remediation loss it must make a claim.

(3) The amount of a land remediation tax credit to which the company is entitled is determined in accordance with section 1154.

(4) If a company claims a land remediation tax credit to which it is entitled for an accounting period, an officer of Revenue and Customs must pay to the company the amount of the credit.

This is subject to section 1155.

(5) See also section 1158, which restricts the carry forward of losses where a company claims a land remediation tax credit.

Meaning of “qualifying land remediation loss”

1152

(1) For the purposes of this Chapter a company has a “qualifying land remediation loss” in an accounting period if in the period—

(a) it obtains an additional deduction under section 1149 in calculating the profits of a UK property business or a trade, and

(b) it makes a UK property business loss in the business or a trading loss in the trade.

(2) The amount of the qualifying land remediation loss is—

(a) so much of the UK property business loss or trading loss as is unrelieved (see section 1153), or

(b) if less, 150% of the qualifying land remediation expenditure in respect of which the relief was obtained.

Amount of a loss which is “unrelieved”

1153

(1) The amount of a UK property business loss or trading loss that is “unrelieved” is the amount of the loss reduced by—

(a) any relief obtained by the company under section 62(1) to (3) of CTA 2010, or that was or could have been obtained by it making a claim under section 37(3)(a) of CTA 2010, to deduct the loss from total profits of the same accounting period,

(b) any other relief obtained by the company in respect of the loss, including relief under section 37(3)(b) of CTA 2010 (losses deducted from profits of an earlier accounting period), and

(2) No account is to be taken for this purpose of—

(a) any UK property business losses or trading losses brought forward from an earlier accounting period under section 45, 45A, 45B or 62(5) of CTA 2010, or

(b) any trading losses carried back from a later accounting period under section 37(3)(b) of CTA 2010 .

(3) Subsections (4) to (7) apply (instead of subsection (1)) to determine the amount of a UK property business loss that is “unrelieved” in an accounting period (“the relevant accounting period”) in a case where, as a result of section 87(3) of FA 2012, the loss is treated for the purposes of section 76 of that Act as a deemed BLAGAB management expense for the relevant accounting period.

(4) If in the relevant accounting period no amount falls to be carried forward to a subsequent accounting period under section 73 of FA 2012 (unrelieved expenses carried forward), no amount of the UK property business loss is unrelieved.

(5) If in the relevant accounting period there is an amount which falls to be carried forward to a subsequent accounting period under section 73 of FA 2012, the amount of the UK property business loss that is unrelieved is—

(a) the amount which so falls to be carried forward, or

(b) if less, the amount of the UK property business loss.

(6) In determining for the purposes of subsection (4) or (5) whether there is an amount which falls to be carried forward to a subsequent accounting period under section 73 of FA 2012, no account is to be taken of the amounts specified in subsection (7).

(7) Those amounts are amounts—

(a) brought forward from an earlier accounting period, and

(b) taken into account in calculating for the purposes of section 73 of FA 2012 the amount of adjusted BLAGAB management expenses of the company for the relevant accounting period as a result of—

(i) the previous application of section 73 or 93 of FA 2012, or

(ii) the carry forward to the relevant accounting period of an amount under section 391 of this Act (surplus deficit).

(8) If—

(a) the company is an insurance company, and

(b) it is treated under section 86 of FA 2012 as carrying on more than one UK property business,

references in this section to a UK property business loss are to be read in accordance with section 87(4) of FA 2012 (aggregation of losses).

Amount of tax credit

1154

(1) The amount of the land remediation tax credit to which a company is entitled for an accounting period is 16% of the amount of the qualifying land remediation loss for the period.

(2) The Treasury may by order replace the percentage for the time being specified in subsection (1) with a different percentage.

(3) An order under subsection (2) may contain incidental, supplemental, consequential and transitional provision and savings.

Supplementary

Payment of tax credit

1155

(1) This section applies if a land remediation tax credit for an accounting period is payable to a company.

(2) The amount payable in respect of—

(a) the land remediation tax credit, or

(b) interest on the credit payable under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

(3) So far as the amount is so applied, the duty of the officer of Revenue and Customs to pay the credit under section 1151(4) is discharged.

(4) Subsection (5) applies if the company's tax return for the accounting period is enquired into by an officer of Revenue and Customs.

(5) In that case—

(a) no payment in respect of the land remediation tax credit for the period need be made before the officer's enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998), but

(b) an officer may make a payment on a provisional basis of such amount as the officer thinks fit.

(6) No payment need be made in respect of the land remediation tax credit if the company has outstanding PAYE and NIC liabilities for the period.

(7) A company has outstanding PAYE and NIC liabilities for an accounting period if it has not paid to an officer of Revenue and Customs any amount that it is required to pay—

(a) under PAYE regulations, or

(b) in respect of Class 1 national insurance contributions,

for payment periods ending in the accounting period.

(8) “Payment period” means a period—

(a) which ends on the 5th day of a month, and

(b) for which the company is liable to account for income tax and national insurance contributions to an officer of Revenue and Customs.

Tax credit payment not income of company

1156

A payment in respect of a land remediation tax credit is not income of the company for any tax purposes.

Exclusion for capital gains purposes of certain expenditure

1157

(1) This section applies if in an accounting period a payment is made to a company in respect of a land remediation tax credit.

(2) The qualifying land remediation expenditure in respect of which the payment is made is to be treated as if it were excluded by section 39 of TCGA 1992 from the sums allowable under section 38 of that Act.

Restriction on losses carried forward where tax credit claimed

1158

(1) For the purposes of section 62 of CTA 2010 (relief for losses made in UK property business) a company's UK property business loss for an accounting period in which it claims a land remediation tax credit to which it is entitled is treated as reduced by the amount of the surrendered loss for the period.

(2) For the purposes of sections 45, 45A and 45B of CTA 2010 (relief of trading losses against future ... profits) a company's trading loss for an accounting period in which it claims a land remediation tax credit to which it is entitled is treated as reduced by the amount of the surrendered loss for the period.

(3) Subsection (4) applies (instead of subsection (1)) if in an accounting period—

(a) as a result of section 87(3) of FA 2012, a company's UK property business loss is treated for the purposes of section 76 of that Act as a deemed BLAGAB management expense for the accounting period,

(b) an amount falls to be carried forward to a subsequent accounting period under section 73 of FA 2012 (unrelieved expenses carried forward), and

(4) The amount which falls to be carried forward to a subsequent accounting period under section 73 of FA 2012 is treated as reduced by the amount of the surrendered loss for the period.

(5) References in this section to “the amount of the surrendered loss” for an accounting period are to the amount of any qualifying land remediation loss in respect of which a land remediation tax credit is claimed for the period.

Chapter 4 — Special provision for BLAGAB

...

Limitation on relief under Chapter 2

1159

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I minus E basis

Provision in respect of I minus E basis

1160

This Chapter applies if, for an accounting period, an insurance company is charged to tax in respect of its basic life assurance and general annuity business in accordance with the I - E rules.

Relief ...

Relief in respect of I minus E basis: enhanced expenses payable

1161

(1) A company is entitled to relief for an accounting period if conditions A, B and C are met.

(2) Condition A is that a major interest in land in the United Kingdom is a management asset of the company.

(3) Condition B is that—

(a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition by the company of a major interest in the land, and

(b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i) 1 April 1998, and

(ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A) The Treasury may by order—

(a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

(4) Condition C is that the company incurs qualifying land remediation expenditure in the accounting period in respect of the land ....

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The relief is that the company may treat ... the qualifying Chapter 4 expenditure as expenses payable which fall to be brought into account for the accounting period at Step 1 in section 76 of FA 2012 (deduction for expenses payable).

(7) For the purposes of this section land is a management asset of a company if it is—

(a) an asset provided for use or used for the management of basic life assurance and general annuity business carried on by the company, or

(b) an asset in respect of which expenditure is being incurred with a view to such use by the company.

Meaning of “qualifying Chapter 4 expenditure”

1162

(1) If a company is entitled to relief under section 1161 for an accounting period it is also entitled to relief under this section for the period.

(2) For the company to obtain the relief it must make a claim.

(3) The relief is that the company may treat 50% of the qualifying Chapter 4 expenditure for the purposes of section 76 of FA 2012 as deemed BLAGAB management expenses for the accounting period.

(4) For the purposes of this Chapter “the qualifying Chapter 4 expenditure” means—

(a) the company's qualifying land remediation expenditure for the accounting period, less

(b) the amount (if any) of the expenditure which, for the purposes of section 76 of FA 2012, is not an ordinary BLAGAB management expense of the company referable to the accounting period as a result of the application of section 77(2)(b) of that Act.

No relief if company responsible for contamination

1163

(1) A company is not entitled to relief under section 1161 or 1162 in respect of expenditure on land all or part of which is in a contaminated or derelict state if the land is in a contaminated or derelict state wholly or partly as a result of any thing done, or omitted to be done, at any time by—

(a) the company, or

(b) a person with a relevant connection to the company (see section 1178).

(2) A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

(a) the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

(b) that person, or a person connected with that person, has a relevant interest in the land.

(3) For the purposes of subsection (2) a person has a relevant interest in land if—

(a) the person holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

(b) has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.

BLAGAB company tax credits

Entitlement to tax credit

1164

(1) A company is entitled to a BLAGAB tax credit for an accounting period if it has a qualifying BLAGAB loss in the period (see section 1165).

(2) For the company to obtain a BLAGAB tax credit in respect of all or part of the qualifying BLAGAB loss it must make a claim.

(3) The amount of a BLAGAB tax credit to which the company is entitled is determined in accordance with section 1166.

(4) See also section 1168, which restricts the carry forward of expenses payable where a company claims a BLAGAB tax credit.

Meaning of “qualifying life assurance business loss”

1165

(1) For the purposes of this Chapter a company has a “qualifying BLAGAB loss” in an accounting period (“the relevant accounting period”) if in the period—

(a) it is entitled to relief under section 1161 or 1162, and

(b) an amount falls to be carried forward to a subsequent accounting period under section 73 of FA 2012 as excess BLAGAB expenses.

(2) In determining for the purposes of subsection (1)(b) whether there is an amount which falls to be carried forward to a subsequent accounting period under section 73 of FA 2012 as excess BLAGAB expenses, no account is to be taken of the amounts specified in subsection (3).

(3) Those amounts are amounts—

(a) brought forward from an earlier accounting period, and

(b) taken into account in calculating for the purposes of section 73 of FA 2012 the amount of adjusted BLAGAB management expenses of the company for the relevant accounting period as a result of—

(i) the previous application of section 73 or 93 of FA 2012, or

(ii) the carry forward to the relevant accounting period of an amount under section 391 of this Act (surplus deficit).

(4) The amount of the qualifying BLAGAB loss is—

(a) the amount which falls to be carried forward as mentioned in subsection (1)(b), or

(b) if less, 150% of the qualifying Chapter 4 expenditure in respect of which the relief was obtained.

Amount of tax credit

1166

(1) The amount of the BLAGAB tax credit to which a company is entitled for an accounting period is 16% of the amount of the qualifying BLAGAB loss for the period.

(2) The Treasury may by order replace the percentage for the time being specified in subsection (1) with a different percentage.

(3) An order under subsection (2) may contain incidental, supplemental, consequential and transitional provision and savings.

Payment of tax credit etc

1167

(1) The provisions mentioned in subsection (2) have effect in relation to a BLAGAB tax credit subject to the modifications set out in subsection (3).

(2) The provisions referred to in subsection (1) are—

section 1151(4) (payment of tax credit by officer of Revenue and Customs);

section 1155 (supplementary provision about payment of tax credit);

section 1156 (tax credit payment not income of company);

section 1157 (qualifying expenditure excluded for capital gains purposes).

(3) The modifications referred to in subsection (1) are as follows—

(a) for any reference to a land remediation tax credit substitute a reference to a BLAGAB tax credit, and

(b) in section 1157(2) for the reference to qualifying land remediation expenditure substitute a reference to qualifying Chapter 4 expenditure.

Restriction on carrying forward expenses payable where tax credit claimed

1168

(1) This section applies if a company claims a BLAGAB tax credit to which it is entitled for an accounting period.

(2) For the purposes of section 73 of FA 2012 the amount which may be—

(a) carried forward from the accounting period under that section as excess BLAGAB expenses, and

(b) brought into account in accordance with step 5 in section 76 of FA 2012,

is treated as reduced by the amount of the surrendered loss for the period.

(3) The “amount of the surrendered loss” for the period means the amount of the qualifying BLAGAB loss in respect of which the land remediation tax credit is claimed for the period.

Chapter 5 — Tax avoidance

Artificially inflated claims for relief or tax credit

1169

(1) To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be disregarded for the purposes mentioned in subsection (2).

(2) Those purposes are determining for an accounting period the amount of—

(a) any relief to which a company is entitled under Chapter 2,

(b) any land remediation tax credits to which a company is entitled under section 1151,

(c) any relief to which a company carrying on basic life assurance and general annuity business is entitled under section 1161 or 1162, and

(d) any BLAGAB tax credits to which such a company is entitled under section 1164.

(3) Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain—

(a) relief under Chapter 2 to which the company would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled,

(b) a land remediation tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled,

(c) relief under section 1161 or 1162 to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled, or

(d) a life assurance company tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.

(4) In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Chapter 6 — Supplementary

“Staffing costs”

1170

(1) For the purposes of this Part the staffing costs of a company are amounts to which any of subsections (2) to (5) applies.

(2) This subsection applies to an amount paid by the company to a director or an employee of the company which—

(a) is earnings consisting of money, and

(b) is paid because of the director's or employee's employment.

(3) This subsection applies to an amount paid by the company to a director or an employee of the company, other than an amount paid in respect of benefits in kind, if—

(a) the amount is paid in respect of expenses paid by the director or employee, and

(b) the amount is paid because of the director's or employee's employment.

(4) This subsection applies to secondary Class 1 national insurance contributions paid by the company.

(5) This subsection applies to contributions paid by the company to a pension fund operated for the benefit of directors or employees of the company.

(6) In subsection (5) “pension fund” means a scheme, fund or other arrangement established and maintained (whether in the United Kingdom or elsewhere) for the purpose of providing pension benefits.

For this purpose “scheme” includes a deed, agreement or series of agreements.

(7) In subsection (6) “pension benefits” means pensions, retirement annuities, allowances, lump sums, gratuities or other superannuation benefits (with or without subsidiary benefits).

Staffing costs attributable to relevant land remediation

1171

(1) This section applies for the purposes of this Part to identify the staffing costs of a company which are attributable to relevant land remediation.

(2) The costs which are so attributable are those paid to, or in respect of, directors or employees who are directly and actively engaged in relevant land remediation.

(3) Subsection (4) applies if a director (“D”) or employee (“E”) is partly engaged directly and actively in relevant land remediation.

(4) In that case—

(a) if the time D or E spends so engaged is less than 20% of D's or E's total working time, none of the staffing costs relating to D or E is treated as attributable to relevant land remediation,

(b) if the time D or E spends so engaged is more than 80% of D's or E's total working time, the whole of the staffing costs relating to D or E is treated as attributable to relevant land remediation, and

(c) in any other case, the appropriate proportion of the staffing costs relating to D or E is treated as attributable to relevant land remediation.

(5) Subsection (6) applies if persons provide services (such as secretarial or administrative services) in support of activities carried on by others.

(6) Those persons are not, as a result of providing those services, to be treated as themselves directly and actively engaged in those activities.

Expenditure on materials

1172

For the purposes of this Part expenditure on materials is attributable to relevant land remediation if the materials are employed directly in the relevant land remediation.

Expenditure incurred because of contamination

1173

(1) This section applies to identify cases in which the condition in section 1144(3) is to be treated as met (expenditure incurred because land in contaminated or derelict state).

(2) If the only reason that expenditure on the land is increased is that the land is in a contaminated or derelict state, the amount by which the expenditure is increased is to be treated as expenditure meeting the condition in section 1144(3).

(3) Subsection (4) applies—

(a) in the case of land in a contaminated state, if the main purpose of any activities is any of those specified in section 1146(3), or

(b) in the case of land in a derelict state, if the main purpose of any activities is any of those specified in section 1146A(3).

(4) Expenditure on such works, operations or steps is to be treated as meeting the condition in section 1144(3).

(5) This section does not affect the width of the provision made by section 1144(3).

Sub-contractor payments

1174

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

“Qualifying expenditure on sub-contracted land remediation”: connected persons

1175

(1) This section applies if—

(a) a company makes a sub-contractor payment,

(b) the company and the sub-contractor are connected, and

(c) in accordance with generally accepted accounting practice, the whole of the sub-contractor payment and all of the sub-contractor's relevant expenditure have been brought into account in determining the sub-contractor's profit or loss for a relevant period.

(1A) In this section, a “sub-contractor payment” means a payment made by the company to the sub-contractor in respect of relevant land remediation contracted out by the company to the sub-contractor.

(2) The amount of the sub-contractor payment which is “qualifying expenditure on connected sub-contracted land remediation” for the purposes of section 1144(5) is—

(a) the entire payment, or

(b) if less, an amount equal to the sub-contractor's relevant expenditure.

(3) “Relevant expenditure” of the sub-contractor means expenditure that—

(a) is incurred by the sub-contractor in carrying on or arranging for carrying on, on behalf of the company, the activities to which the sub-contractor payment relates,

(b) is not of a capital nature,

(d) is not subsidised.

(4) “Relevant period” means a period—

(a) for which accounts are drawn up for the sub-contractor, and

(b) that ends not more than 12 months after the end of the company's period of account in which the sub-contractor payment is, in accordance with generally accepted accounting practice, brought into account in determining the company's profit or loss.

(5) In the following sections, which apply for the purpose of determining whether a sub-contractor's expenditure meets the requirements of subsection (3)(c) and (d)—

(a) section 1170 (staffing costs), and

(b) section 1177 (subsidised expenditure),

references to a company are to be read as references to the sub-contractor.

(6) Any apportionment of expenditure of the company or the sub-contractor necessary for the purposes of this section is to be made on a just and reasonable basis.

“Qualifying expenditure on sub-contracted land remediation”: other cases

1176

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

“Subsidised expenditure”

1177

(1) For the purposes of this Part a company's expenditure is treated as subsidised to the extent that—

(a) a grant or subsidy is obtained in respect of the expenditure, or

(b) it is otherwise met directly or indirectly by a person other than the company.

(2) For the purposes of this a grant, subsidy or payment that is not allocated to particular expenditure is to be allocated to expenditure of the recipient on a just and reasonable basis.

Persons having a “relevant connection” to a company

1178

For the purposes of this Part a person has a “relevant connection” to a company in a case where the company's land is in a contaminated or derelict state wholly or partly as a result of any thing done, or omitted to be done, by the person if—

(a) the person is or was connected to the company when any such thing is or was done, or omitted to be done, by the person,

(b) the person is or was connected to the company at the time when a major interest in the land in question is or was acquired by the company, or

(c) the person is or was connected to the company at any time when relevant land remediation is or was undertaken (whether by the company itself or on its behalf).

Other definitions

1179

In this Part —

“controlled waters”—in relation to England and Wales, has the same meaning as in Part 3 of the Water Resources Act 1991 (c. 57),in relation to Scotland, has the same meaning as in section 30A of the Control of Pollution Act 1974 (c. 40), andin relation to Northern Ireland, means water in waterways and underground strata (as defined in Article 2(2) of the Water (Northern Ireland) Order 1999 (S.I. 1999/662 (N.I. 6)),

“pollution of controlled waters” means the entry into controlled waters of—any poisonous, noxious or polluting matter, orany solid waste matter,

... and

“UK property business loss”, in relation to a company, means a loss incurred by the company in carrying on a UK property business.

Part 15 — Film production

Chapter 1 — Introduction

Introductory

Overview of Part

1180

(1) This Part is about film production.

(2) Sections 1181 to 1187 contain definitions and other provisions about interpretation that apply for the purposes of this Part.

See, in particular, section 1182 which explains how a company comes to be treated as the film production company in relation to a film.

(3) Chapter 2 is about the taxation of the activities of a film production company and includes—

(a) provision for the company's activities in relation to its film to be treated as a separate trade, and

(b) provision about the calculation of the profits and losses of that trade.

(4) Chapter 3 is about relief (called “film tax relief”) which can be given to a film production company—

(a) by way of additional deductions to be made in calculating the profits or losses of the company's separate trade, or

(b) by way of a payment (a “film tax credit”) to be made on the company's surrender of losses from that trade.

(5) Chapter 4 is about the relief which can be given for losses made by a film production company in its separate trade including provision for certain such losses to be transferred to other separate trades.

(6) Chapter 5 provides—

(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and

(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.

Interpretation

“Film” etc

1181

(1) This section applies for the purposes of this Part.

(2) “Film” includes any record, however made, of a sequence of visual images that is capable of being used as a means of showing that sequence as a moving picture.

(3) Each part of a series of films is treated as a separate film, unless—

(a) the films form a series with not more than 26 parts,

(b) the combined playing time is not more than 26 hours, and

in which case the films are treated as a single film.

(4) References to a film include the film soundtrack.

(5) A film is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

“Film production company”

1182

(1) For the purposes of this Part “film production company” is to be read in accordance with this section.

(2) There cannot be more than one film production company in relation to a film.

(3) A company that (otherwise than in partnership)—

(a) is responsible—

(i) for pre-production, principal photography and post-production of the film, and

(ii) for delivery of the completed film,

(b) is actively engaged in production planning and decision-making during pre-production, principal photography and post-production, and

is the film production company in relation to the film.

(4) In relation to a qualifying co-production, a company that (otherwise than in partnership)—

(a) is a co-producer, and

(b) makes an effective creative, technical and artistic contribution to the film,

is the film production company in relation to the film.

(5) If there is more than one company meeting the description in subsection (3) or (4), the company that is most directly engaged in the activities referred to in that subsection is the film production company in relation to the film.

(6) If there is no company meeting the description in subsection (3) or (4), there is no film production company in relation to the film.

(7) A company may elect to be regarded as a company which does not meet the description in subsection (3) or (4).

(8) The election—

(a) must be made by the company by being included in its company tax return for an accounting period (and may be included in the return originally made or by amendment), and

(b) may be withdrawn by the company only by amending its company tax return for that accounting period.

(9) The election has effect in relation to films which commence principal photography in that or any subsequent accounting period.

“Film-making activities” etc

1183

(1) In this Part “film-making activities”, in relation to a film, means the activities involved in development, pre-production, principal photography and post-production of the film.

(2) If all or any of the images in a film are generated by computer, references in this Part to principal photography are to be read as references to, or as including, the generation of those images.

(3) The Treasury may by regulations—

(a) amend subsections (1) and (2),

(b) provide that specified activities are or are not to be regarded as film-making activities or as film-making activities of a particular description, and

(c) provide that, in relation to a specified description of film, references to film-making activities of a particular description are to be read as references to such activities as may be specified.

“Production expenditure”, “core expenditure” and “limited-budget film”

1184

(1) In this Part, in relation to a film—

“production expenditure” means expenditure on film-making activities in connection with the film, and

“core expenditure” means production expenditure on pre-production, principal photography and post-production.

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

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

“UK expenditure” etc

1185

(1) In this Part “UK expenditure”, in relation to a film, means expenditure on goods or services that are used or consumed in the United Kingdom.

(2) Any apportionment of expenditure as between UK expenditure and non-UK expenditure for the purposes of this Part is to be made on a just and reasonable basis.

(3) The Treasury may by regulations amend subsection (1).

“Qualifying co-production” and “co-producer”

1186

In this Part—

(a) “qualifying co-production” means a film that falls to be treated as a national film in the United Kingdom as a result of an agreement between Her Majesty's Government in the United Kingdom and any other government, international organisation or authority, and

(b) “co-producer” means a person who is a co-producer for the purposes of the agreement mentioned in paragraph (a).

“Company tax return”

1187

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1)).

Chapter 2 — Taxation of activities of film production company

Separate film trade

Activities of film production company treated as a separate trade

1188

(1) This Chapter applies for corporation tax purposes to a company that is the film production company in relation to a film.

(2) The company's activities in relation to the film are treated as a trade separate from any other activities of the company (including any activities in relation to any other film).

(3) In this Chapter the separate trade is called “the separate film trade”.

(4) The company is treated as beginning to carry on the separate film trade—

(a) when pre-production begins, or

(b) if earlier, when any income from the film is received by the company.

Calculation of profits or losses of separate film trade

1189

(1) This section applies for the purpose of calculating the profits or losses of the separate film trade.

(2) For the first period of account the following are brought into account—

(a) as a debit, the costs of the film incurred (and represented in work done) to date, and

(b) as a credit, the proportion of the estimated total income from the film treated as earned at the end of that period.

(3) For subsequent periods of account the following are brought into account—

(a) as a debit, the difference between the amount of the costs of the film incurred (and represented in work done) to date and the corresponding amount for the previous period, and

(b) as a credit, the difference between the proportion of the estimated total income from the film treated as earned at the end of that period and the corresponding amount for the previous period.

(4) The proportion of the estimated total income treated as earned at the end of a period of account is given by—

$$CT×I$where—C is the total to date of costs incurred (and represented in work done),T is the estimated total cost of the film, andI is the estimated total income from the film.$

Supplementary

Income from the film

1190

(1) References in this Chapter to income from the film are to any receipts by the company in connection with the making or exploitation of the film.

(2) This includes—

(a) receipts from the sale of the film or rights in it,

(b) royalties or other payments for use of the film or aspects of it (for example, characters or music),

(d) receipts by the company by way of a profit share agreement.

(3) Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.

Costs of the film

1191

(1) References in this Chapter to the costs of the film are to expenditure incurred by the company on—

(a) film-making activities in connection with the film, or

(b) activities with a view to exploiting the film.

(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.

(3) Expenditure that (apart from this subsection) would be regarded as of a capital nature only because it is incurred on the creation of an asset (the film) is treated as being of a revenue nature.

When costs are taken to be incurred

1192

(1) For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.

(2) Accordingly—

(a) payments in advance of work to be done are ignored until the work has been carried out, and

(b) deferred payments are recognised to the extent that the work is represented in the state of completion.

(3) The costs incurred on the film are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.

(4) If an obligation is linked to income being earned from the film, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.

Pre-trading expenditure

1193

(1) This section applies if, before the company began to carry on the separate film trade, it incurred expenditure on development of the film.

(2) The expenditure may be treated as expenditure of the separate film trade and as if incurred immediately after the company began to carry on that trade.

(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.

(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

Estimates

1194

Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

Chapter 3 — Film tax relief

Introductory

Availability and overview of film tax relief

1195

(1) This Chapter applies for corporation tax purposes to a company that is the film production company in relation to a film.

(2) Relief under this Chapter (“film tax relief”) is available to the company if the conditions specified in the following sections are met in relation to the film—

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

(aa) section 1196A (intended release or broadcast),

(b) section 1197 (British film), and

(3) Film tax relief is given by way of—

(a) additional deductions (see sections 1199 and 1200), and

(b) film tax credits (see sections 1201 to 1203).

(3A) But film tax relief is not available in respect of any expenditure if—

(a) the company is entitled to an R&D expenditure credit under Chapter 1A of Part 13 in respect of the expenditure, ...

(b) the company has obtained relief under Chapter 2 of Part 13 (relief for loss-making, R&D-intensive SMEs) in respect of the expenditure , or

(c) relief is available to the company under Chapter 3 of Part 15A (television tax relief) in respect of the expenditure.

(4) Sections 1204 to 1207 contain provision about unpaid costs, artificially inflated claims and confidentiality of information.

(5) In this Chapter “the separate film trade” means the company's separate trade in relation to the film (see section 1188).

(6) See Schedule 18 to FA 1998 (in particular, Part 9D) for information about the procedure for making claims for film tax relief.

Conditions of relief

Intended theatrical release

1196

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

British film

1197

The film must be certified by the Secretary of State as a British film under Schedule 1 to the Films Act 1985 (c. 21).

UK expenditure

1198

(1) At least 10% of the core expenditure on the film incurred—

(a) in the case of a British film other than a qualifying co-production, by the company, and

(b) in the case of a qualifying co-production, by the co-producers,

must be UK expenditure.

(2) The Treasury may by regulations amend the percentage specified in subsection (1).

Additional deductions

Additional deduction for qualifying expenditure

1199

(1) If film tax relief is available to the company, it may (on making a claim) make an additional deduction in respect of qualifying expenditure on the film.

(2) The deduction is made in calculating the profit or loss of the separate film trade.

(3) In this Chapter “qualifying expenditure” means core expenditure on the film that falls to be taken into account under Chapter 2 in calculating the profit or loss of the separate film trade for tax purposes.

(4) The Treasury may by regulations—

(a) amend subsection (3), and

(b) provide that expenditure of a specified description is or is not to be regarded as qualifying expenditure.

Amount of additional deduction

1200

(1) For the first period of account during which the separate film trade is carried on, the amount of the additional deduction is given by—

$$E×R$where—E is—(a) so much of the qualifying expenditure as is UK expenditure, or(b) if less, 80% of the total amount of qualifying expenditure, andR is the rate of enhancement (see subsection (3)).$

(2) For any period of account after the first, the amount of the additional deduction is given by—

$$(E×R)-P$where—E is—(a) so much of the qualifying expenditure incurred to date as is UK expenditure, or(b) if less, 80% of the total amount of qualifying expenditure incurred to date,R is the rate of enhancement (see subsection (3)), andP is the total amount of the additional deductions given for previous periods.$

(3) The rate of enhancement is 100%.

(4) The Treasury may by regulations amend the percentage specified in subsection (1) or (2).

Film tax credits

Film tax credit claimable if company has surrenderable loss

1201

(1) If film tax relief is available to the company, it may claim a film tax credit for an accounting period in which it has a surrenderable loss.

(2) The company's surrenderable loss in an accounting period is—

(a) the company's available loss for the period in the separate film trade, or

(b) if less, the available qualifying expenditure for the period.

(2A) The company's available loss for an accounting period is given by—

$$L+RUL$where—L is the amount of the company's loss for the period in the separate film trade, andRUL is the amount of any relevant unused loss of the company.$

(2B) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—

(a) surrendered under section 1202(1), or

(b) carried forward under section 45 or 45B of CTA 2010 and set against profits of the separate film trade.

(3) For the first period of account during which the separate film trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1200(1).

(4) For any period of account after the first, the available qualifying expenditure is given by—

$$E-S$where—E is the amount that is E for that period for the purposes of section 1200(2), andS is the total amount previously surrendered under section 1202(1).$

(5) If a period of account of the separate film trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

Surrendering of loss and amount of film tax credit

1202

(1) The company may surrender the whole or part of its surrenderable loss in an accounting period.

(2) If the company surrenders the whole or part of that loss, the amount of the film tax credit to which it is entitled for the accounting period is given by—

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

(4) The company's available loss for the accounting period is reduced by the amount surrendered.

Payment in respect of film tax credit

1203

(1) If the company—

(a) is entitled to a film tax credit for an accounting period, and

(b) makes a claim,

the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay to the company the amount of the credit.

(2) An amount payable in respect of—

(a) a film tax credit, or

(b) interest on a film tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.

(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a film tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of a film tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a) under PAYE regulations,

(b) under section 966 of ITA 2007 (visiting performers), or

(c) in respect of Class 1 contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4) or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7).

(5) A payment in respect of a film tax credit is not income of the company for any tax purpose.

Miscellaneous

No account to be taken of amount if unpaid

1204

(1) In determining for the purposes of this Chapter the amount of costs incurred on a film at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.

(2) This is without prejudice to the operation of section 1192.

Artificially inflated claims for additional deduction or film tax credit

1205

(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period—

(a) any additional deduction which a company may make under this Chapter, and

(b) any film tax credit to be given to a company.

(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain—

(a) an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled, or

(b) a film tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.

(3) “Arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Confidentiality of information

1206

(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (c. 11) (restriction on disclosure by Revenue and Customs officials) does not prevent disclosure to the Secretary of State for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (1A).

(1A) The provisions referred to in subsection (1) are—

(a) sections 1216CB to 1216CD (certification of relevant programmes as British),

(b) sections 1217CB to 1217CD (certification of video games as British), and

(2) Information so disclosed may be disclosed to the British Film Institute.

(2A) The Treasury may by order amend subsection (2)—

(a) so as to substitute for the person or body specified in that subsection a different person or body, or

(b) in consequence of a change in the name of the person or body so specified.

(3) A person to whom information is disclosed under subsection (1) or (2) may not otherwise disclose it except—

(a) for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (1A),

(b) if the disclosure is authorised by an enactment,

(d) for the purposes of a criminal investigation or legal proceedings (whether criminal or civil) connected with the operation of any of Parts 15 to 15B of this Act or Schedule 1 to the Films Act 1985,

(e) with the consent of the Commissioners for Her Majesty's Revenue and Customs, or

(f) with the consent of each person to whom the information relates.

Wrongful disclosure

1207

(1) A person (“X”) commits an offence if—

(a) X discloses revenue and customs information relating to a person (as defined in section 19(2) of the Commissioners for Revenue and Customs Act 2005 (c. 11)),

(b) the identity of the person to whom the information relates is specified in the disclosure or can be deduced from it, and

(2) If a person (“Y”) is charged with an offence under subsection (1), it is a defence for Y to prove that Y reasonably believed—

(a) that the disclosure was lawful, or

(b) that the information had already and lawfully been made available to the public.

(3) A person guilty of an offence under subsection (1) is liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both, or

(b) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum or both.

(3A) In the application of this section in England and Wales, the reference in subsection (3)(b) to 12 months is to be read as a reference to the general limit in a magistrates’ court (or to 6 months in relation to an offence committed before 2 May 2022).

(4) A prosecution for an offence under subsection (1) may be brought in England and Wales only by or with the consent of the Director of Public Prosecutions.

(5) A prosecution for an offence under subsection (1) may be brought in Northern Ireland only—

(a) by the Commissioners for Her Majesty's Revenue and Customs, or

(b) with the consent of the Director of Public Prosecutions for Northern Ireland.

(6) In the application of this section—

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

(b) in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a reference to 6 months.

Chapter 4 — Film losses

Application of sections 1209 and 1210

1208

(1) Sections 1209 and 1210 apply to a company that is the film production company in relation to a film.

(2) In those sections—

“the completion period” means the accounting period of the company—in which the film is completed, orif the company does not complete the film, in which it abandons film-making activities in relation to the film,

“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which the company, or any other person, is chargeable to tax,

“pre-completion period” means an accounting period of the company before the completion period, and

“the separate film trade” means the company's separate trade in relation to the film (see section 1188).

Restriction on use of losses while film in production

1209

(1) This section applies if in a pre-completion period a loss is made in the separate film trade.

(2) The loss is not available for loss relief except to the extent that it may be carried forward under section 45 or 45B of CTA 2010 to be deducted from profits of the separate film trade in a subsequent period.

(3) If the loss is carried forward under section 45 or 45B of CTA 2010 and deducted from profits of the separate film trade in a subsequent period, the deduction is to be ignored for the purposes of section 269ZB of CTA 2010 (restriction on deductions from trading profits).

Use of losses in later periods

1210

(1) This section applies to the following accounting periods of the company (“relevant later periods”)—

(a) the completion period, and

(b) any subsequent accounting period during which the separate film trade continues.

(2) Subsection (3) applies if a loss made in the separate film trade is carried forward under section 45 or 45B of CTA 2010 from a pre-completion period to a relevant later period.

(3) So much (if any) of the loss as is not attributable to film tax relief (see subsection (6)) may be treated for the purposes of section 37 and Part 5 of CTA 2010 as if it were a loss made in the period to which it is carried forward.

(4) Subsections (5) and (5A) apply if in a relevant later period a loss is made in the separate film trade.

(5) The amount of the loss that may be—

(a) deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or

(ab) carried forward under section 45A of that Act to be deducted from the total profits of a later period,

(b) surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to film tax relief (see subsection (6)).

(5A) A deduction under section 45 or 45B of CTA 2010 which is made in respect of so much of the loss as is attributable to film tax relief is to be ignored for the purposes of section 269ZB of that Act (restriction on deductions from trading profits).

(6) The amount of a loss in any period that is attributable to film tax relief is calculated by deducting from the total amount of the loss the amount there would have been if there had been no additional deduction under Chapter 3 in that or any earlier period.

(7) This section does not apply to a loss to the extent that it is carried forward or surrendered under section 1211.

Terminal losses

1211

(1) This section applies if—

(a) a company (“company A”) is the film production company in relation to a qualifying film,

(b) company A ceases to carry on its separate trade in relation to that film (“trade X”) (see section 1188), and

(c) if company A had not ceased to carry on trade X, it could have carried forward an amount under section 45, 45A or 45B of CTA 2010 to be set against profits of ... a later period (“the terminal loss”).

(2) If on cessation of trade X company A—

(a) is the film production company in relation to another qualifying film, and

(b) is carrying on its separate trade in relation to that film (“trade Y”),

it may (on making a claim) make an election under subsection (3).

(3) The election is to have the terminal loss (or a part of it) treated—

(a) in a case where the loss could have been carried forward under section 45 of CTA 2010 had trade X not ceased, as if it were a loss carried forward under that section to be set against the profits of trade Y of the first accounting period beginning after the cessation and so on, and

(b) in a case where the loss could have been carried forward under section 45A or 45B of CTA 2010 had trade X not ceased, as if it were a loss made in trade Y which has been carried forward under section 45B of that Act to the first accounting period beginning after the cessation.

(4) Subsection (5) applies if on cessation of trade X—

(a) there is another company (“company B”) that is the film production company in relation to a qualifying film,

(b) company B is carrying on its separate trade in relation to that film (“trade Z”), and

(5) Company A may surrender the terminal loss (or a part of it) to company B.

(6) On the making of a claim by company B the amount surrendered is treated—

(a) in a case where the amount could have been carried forward under section 45 of CTA 2010 had trade X not ceased, as if it were a loss carried forward under that section to be set against the profits of trade Z of the first accounting period beginning after the cessation and so on, and

(b) in a case where the amount could have been carried forward under section 45A or 45B of CTA 2010 had trade X not ceased, as if it were a loss made in trade Z which has been carried forward under section 45B of that Act to the first accounting period beginning after the cessation.

(7) The Treasury may, in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6), make provision by regulations corresponding, subject to such adaptations or other modifications as appear to them to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).

(7A) A deduction under section 45 or 45B of CTA 2010 which is made in reliance on this section is to be ignored for the purposes of section 269ZB of that Act (restriction on deductions from trading profits).

(8) “Qualifying film” means a film in relation to which the conditions for film tax relief are met (see section 1195(2)).

Chapter 5 — Provisional entitlement to relief

Introduction

1212

(1) In this Chapter—

“the company” means the film production company in relation to a film,

“the completion period” means the accounting period of the company—in which the film is completed, orif the company does not complete the film, in which it abandons film-making activities in relation to it,

“interim accounting period” means any earlier accounting period of the company during which film-making activities are carried on in relation to the film,

“interim certificate” and “final certificate” refer to certificates under Schedule 1 to the Films Act 1985 (c. 21) (certification of films as British films for purposes of film tax relief),

“the separate film trade” means the company's separate trade in relation to the film (see section 1188), and

“special film relief” means—film tax relief, orrelief under section 1211 (transfer of terminal losses from one qualifying film to another).

(2) The company's company tax return for the completion period must state that the film has been completed or that the company has abandoned film-making activities in relation to it (as the case may be).

Certification as a British film

1213

(1) The company is not entitled to special film relief for an interim accounting period unless its company tax return for the period is accompanied by an interim certificate.

(2) If an interim certificate ceases to be in force (otherwise than on being superseded by a final certificate) or is revoked, the company—

(a) is not entitled to special film relief for any period for which its entitlement depended on the certificate, and

(b) must amend accordingly its company tax return for any such period.

(3) If the film is completed by the company—

(a) its company tax return for the completion period must be accompanied by a final certificate,

(b) if that requirement is met, the final certificate has effect for the completion period and for any interim accounting period, and

(i) is not entitled to special film relief for any period, and

(ii) must amend accordingly its company tax return for any period for which such relief was claimed.

(4) If the company abandons film-making activities in relation to the film—

(a) its company tax return for the completion period may be accompanied by an interim certificate, and

(b) the abandonment of film-making activities does not affect any entitlement to special film relief in that or any previous accounting period.

(5) If a final certificate is revoked, the company—

(a) is not entitled to special film relief for any period, and

(b) must amend accordingly its company tax return for any period for which such relief was claimed.

The UK expenditure condition

1214

(1) The company is not entitled to special film relief for an interim accounting period unless—

(a) its company tax return for the period states the amount of planned core expenditure on the film that is UK expenditure, and

(b) that amount is such as to indicate that the condition in section 1198 (the UK expenditure condition) will be met on completion of the film.

If those requirements are met, the company is provisionally treated in relation to that period as if that condition was met.

(2) If such a statement is made but it subsequently appears that the condition will not be met on completion of the film, the company—

(a) is not entitled to special film relief for any period for which its entitlement depended on such a statement, and

(b) must amend accordingly its company tax return for any such period.

(3) When the film is completed or the company abandons film-making activities in relation to it (as the case may be), the company's company tax return for the completion period must be accompanied by a final statement of the amount of the core expenditure on the film that is UK expenditure.

(4) If that statement shows that the condition in section 1198 is not met, the company—

(a) is not entitled to special film relief for any period, and

(b) must amend accordingly its company tax return for any period for which such relief was claimed.

Film tax relief on basis that film is limited-budget film

1215

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Time limit for amendments and assessments

1216

Any amendment or assessment necessary to give effect to the provisions of this Chapter may be made despite any limitation on the time within which an amendment or assessment may normally be made.

Part 16 — Companies with investment business

Chapter 1 — Introduction

Overview of Part

1217

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“Company with investment business” and “investment business”

1218

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

Chapter 2 — Management expenses

Relief for expenses of management

Expenses of management of a company’s investment business

1219

(1) In calculating the corporation tax to which a company with investment business is liable for an accounting period, expenses of management of the company's investment business which are referable to that period are allowed as a deduction from the company's total profits.

(1A) A deduction under subsection (1) is to be made before any other deduction at Step 2 in section 4(2) of CTA 2010 (deductions from total profits).

(2) For the purposes of this section expenses of management are expenses of management of a company's investment business so far as—

(a) they are in respect of so much of the company's investment business as consists of making investments, and

(b) the investments concerned are not held for an unallowable purpose during the accounting period to which the expenses are referable.

(3) But—

(a) no deduction is allowed under this section for expenses of a capital nature, and

(b) no deduction is allowed under this section for expenses so far as they are otherwise deductible from total profits, or in calculating any component of total profits.

There is an exception to paragraph (a) in section 1221(1).

(4) Any apportionment needed for the purposes of subsection (2) must be made on a just and reasonable basis.

(5) The amount deductible under subsection (1) may be reduced under section 1222.

Meaning of “unallowable purpose”

1220

(1) For the purposes of section 1219, investments are held for an unallowable purpose during an accounting period so far as they are held during the period—

(a) for a purpose that is not a business or other commercial purpose of the company, or

(b) for the purpose of activities in respect of which the company is not within the charge to corporation tax.

(2) For the purposes of subsection (1)(a) investments are not held for a business or other commercial purpose if they are held directly or indirectly in consequence of, or otherwise in connection with, any arrangements for securing a tax advantage.

(3) In subsection (2) “arrangements for securing a tax advantage” means arrangements the main purpose, or one of the main purposes, of which is to secure—

(a) the allowance of a deduction (or increased deduction) under section 1219, or

(b) any other tax advantage.

(4) Any apportionment needed for the purposes of subsection (1) must be made on a just and reasonable basis.

(5) In this section—

(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

(b) “tax advantage” has the meaning given by section 1139 of CTA 2010.

Amounts treated as expenses of management

1221

(1) Section 1219(3)(a) (no deduction allowed for expenses of a capital nature) does not apply to amounts that are treated as expenses of management under—

(a) Chapter 3 (amounts treated as expenses of management),

(b) section 985(3) (share incentive plans: how relief is given),

(d) section 1000(3) (deduction for costs of setting up employee share ownership trust),

(e) section 1013(3) (employee share acquisitions: relief if shares acquired by employee or other person),

(f) section 1021(3) (employee share acquisitions: relief if employee or other person acquires option to obtain shares),

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

(h) section 196 of FA 2004 (employers' contributions to pension schemes), or

(i) section 814C(5) of CTA 2010 (treatment of payer of manufactured dividend),

or any other provision of the Corporation Tax Acts.

(2) Amounts that are treated as expenses of management under any provision listed in subsection (3) are deductible under section 1219 as if they were expenses of management of the company's investment business.

(3) The provisions are—

(a) section 999(4) (deduction for costs of setting up SAYE option scheme or CSOP scheme),

(b) section 1000(3) (deduction for costs of setting up employee share ownership trust),

(d) section 1235 (employees seconded to charities and educational establishments),

(e) section 1236 (payroll deduction schemes),

(f) section 1237 (counselling and other outplacement services),

(g) section 1238 (retraining courses),

(h) section 1239 (redundancy payments and approved contractual payments),

(i) section 1242 (additional payments),

(ia) section 1244A (contributions to flood and coastal erosion risk management projects),

(j) section 1245 (payments to Export Credits Guarantee Department).

Income from a source not charged to tax

1222

(1) This section applies to a UK resident company if—

(a) income arises to the company from a source not charged to tax,

(b) the company has the source in the course of carrying on its investment business, and

(2) This section applies to a non-UK resident company if—

(a) income arises to the company from a source not charged to tax,

(b) the company has the source in the course of carrying on its investment business through a permanent establishment in the United Kingdom,

(d) the income does not consist of exempt ABGH distributions.

(3) The amount of that income is deducted from the amount (if any) that would otherwise be deductible under section 1219 for the accounting period in which the income arises.

(4) In this section “exempt ABGH distribution” means a distribution which—

(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1) of CTA 2010, and

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

Carrying forward expenses of management and other amounts

1223

(1) This section applies if, in an accounting period of a company with investment business, any amount falling within subsection (2) cannot be deducted in full because—

(a) the profits from which the amount is deductible are insufficient, or

(b) in the case of an amount falling within subsection (2)(c)—

(i) a claim relating to the whole of the amount has not been made under subsection (3B), or

(ii) section 269ZD of CTA 2010 (restrictions on deductions from total profits) has effect for the accounting period, or

(iii) section 269CC of CTA 2010 (restriction on deductions for management expenses) has effect for the accounting period.

(2) The amounts are—

(a) expenses of management deductible under section 1219,

(b) qualifying charitable donations made in the accounting period, so far as they are made for the purposes of the company's investment business, and

(3) The excess is treated for the purposes of section 1219 as expenses of management deductible for the next accounting period.

(3A) But subsection (3) does not apply in relation to so much of the excess as is surrendered as group relief under Part 5 of CTA 2010 or as group relief for carried-forward losses under Part 5A of that Act.

(3B) A deduction in respect of the excess may be made under section 1219 for the next accounting period only on the making by the company of a claim.

(3C) A claim may relate to the whole of the excess or to part of it only.

(3D) A claim must be made—

(a) within the period of two years after the end of the next accounting period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(3E) Subsection (1A) of section 1219 does not apply in relation to a deduction in respect of the excess made for the next accounting period.

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

(5) See also section 63 of CTA 2010 (which is about unused losses made in a UK property business).

Accounting period to which expenses are referable

1224

(1) Sections 1225 to 1227A explain which is the accounting period to which expenses of management are referable.

(2) But those sections do not affect any provision—

(a) in Chapter 3, or

(b) elsewhere in the Corporation Tax Acts,

which provides for amounts to be treated as expenses of management referable to an accounting period.

Accounts conforming with GAAP

1225

(1) If—

(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

the expenses of management are referable to that accounting period.

(2) If—

(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

the expenses of management are apportioned between any accounting periods that fall within the period of account (and are referable to accounting periods so far as they are apportioned to them).

(3) An apportionment under subsection (2) must be made in accordance with section 1172 of CTA 2010 (time basis) or, if it appears that that method would work unreasonably or unjustly, on a just and reasonable basis.

Accounts not conforming with GAAP

1226

(1) Subsection (2) applies if—

(a) a company incurs expenses of management, and

(b) the company draws up accounts for a particular period of account, and

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

(d) they are not debited in those accounts in accordance with generally accepted accounting practice.

(2) The expenses of management are referable to the accounting period to which they would have been referable under section 1225(1) or (2) if they had been debited in those accounts in accordance with generally accepted accounting practice.

Accounts not drawn up

1227

(1) If—

(a) a company does not draw up accounts, or does not draw them up for a particular period, and

(b) as a result, expenses of management are not referable to an accounting period under section 1225 or 1226,

take the following steps to determine the accounting period to which they are referable.

(2) The steps are—

Step 1

Assume that for each accounting period of the company that does not coincide with, or fall within, any period of account there is a period of account that coincides with it.

Step 2

If it would be in accordance with UK generally accepted accounting practice to debit the expenses of management, or any part of them, in accounts drawn up by the company for that deemed period of account, assume that they are so debited.

Step 3

Making those assumptions, apply section 1225(1).

Claw back of relief

Credits that reverse debits

1228

For the purposes of sections 1229 and 1230, a credit reverses the whole or part of a debit in any case where the credit falls to be made because—

(a) the sum represented in whole or in part by the debit is paid and then wholly or partly repaid, or

(b) the sum represented by the debit is never paid.

Claw back of relief

1229

(1) This section applies if—

(a) a credit is brought into account by a company in a period of account (“the period of the credit”),

(b) the credit reverses (in whole or in part) a debit brought into account in a previous period of account of the company,

(c) the debit (or part of it) represents expenses of management deductible under section 1219 for an accounting period which ends before, or at the same time as, the period of the credit, and

(d) the expenses of management are not expenses brought forward to that period under section 1223.

For cases involving an absence of accounts see also section 1231.

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