Corporation Tax Act 2010 section 356JJ

Activation of allowance: reference periods

Section 356JJ explains how to calculate the amount of cluster area allowance that becomes activated in any given reference period within an accounting period.

• The activated allowance for a cluster area in a reference period is the lower of two amounts: the company's relevant income from that cluster area in the reference period, or the total unactivated allowance attributable to that period and cluster area.
• Relevant income for the reference period is the portion of the company's total relevant income from the cluster area for the whole accounting period that arises specifically within the reference period.
• If unactivated allowance exceeds relevant income, the activated amount is capped at the income figure, meaning allowance can only be activated to the extent there is income to absorb it.
• Conversely, if relevant income exceeds unactivated allowance, the activated amount is limited to the available unactivated allowance, so income alone does not create additional allowance.