Corporation Tax Act 2010 section 198

Payments and benefits linked to periods of less than 12 months

Section 198 prevents companies from exploiting the charitable donations relief cash limits in section 197 by linking payments or benefits to periods shorter than 12 months, and requires annualisation of those amounts before comparison with the limits.

• Where a benefit associated with a charitable payment relates to a period of less than 12 months, or involves rights to receive benefits over such a shorter period, the values must be annualised before being tested against the section 197 cash limits.
• Where benefits are received as part of a series linked to payments made at intervals of less than 12 months, both the benefit value and the payment amount are annualised.
• Where the benefit itself is not part of a recurring series but the payment is one of a series made at intervals of less than 12 months, only the payment amount is annualised.
• Annualisation is calculated by multiplying the actual value or amount by 365 and dividing by the number of days in the relevant shorter period (or the average number of days between payments, where payments are made at intervals of less than 12 months).