307 Corporation tax: allowances and charges in taxing a trade

Summary

This section provides that, in computing a company’s trading profits assessable to corporation tax, capital allowances are to be treated as trading expenses and balancing charges as trading receipts. A company may, if it so desires, disclaim its entitlement to an industrial building (initial) allowance under section 271 and to initial allowances under sections 283 (machinery or plant) and 303 (dredging).

Details

General

(1) In computing for corporation tax purposes a company’s profits for any accounting period, there are to be made in accordance with the rules of this section and section 308 such deductions and additions as are necessary to give effect to the provisions of the Tax Acts relating to capital allowances and balancing charges.

Capital allowances and balancing charges in taxing a trade

(2)(a) In the case of a trade, allowances are to be treated as trading expenses and balancing charges as trading receipts. (Thus, any excess of capital allowances over trading income would create a loss which would be available for relief under section 396 or 397.) It follows, therefore, that the capital allowances are granted as a matter of course, but certain allowances may be disclaimed (see subsection (2)(b)).

Option to disclaim certain allowances

(2)(b)(i) A company may, by notice in writing to the inspector, disclaim certain capital allowances. These are an industrial building (initial) allowance under section 271 and initial allowances under sections 283 (machinery or plant) and 303 (dredging). [A company might wish to disclaim the allowance to avoid creating a trading loss in a year in which it has no other income with which to absorb the loss.] The notice to disclaim must be given to the inspector within 2 years after the end of the accounting period for which the allowance would otherwise have been made.

(2)(b)(ii) The notice must be accompanied by a certificate signed by the claimant giving such particulars as show that the allowance would have been made if no notice were given.

(2)(b)(iii) Where such a notice is given, the inspector may make an assessment on the company for the accounting period in question on the amount or further amount which in the inspector’s opinion ought to be charged.

Relevant Date: Finance Act 2019