Corporation Tax Act 2010 section 425

Partner company's income and matching expense in different accounting periods

Section 425 deals with what happens when a company that carries on a plant or machinery leasing business in partnership undergoes a qualifying change of ownership, requiring the recognition of a notional income amount and a matching expense in separate accounting periods.

• Where a company leasing plant or machinery in partnership undergoes a qualifying change of ownership, its accounting period is forced to end on that day, and a notional income amount is recognised in that closing period.
• The notional income is treated as a receipt of the company's notional business and is included in the corporation tax profit calculation for the accounting period that ends on the day of the ownership change.
• On the following day, a new accounting period begins and the company is treated as incurring a matching expense, which is allowed as a deduction in calculating the profits of the notional business for that new period.
• The detailed rules for calculating the amount of the income and expense, and the treatment of any loss arising from the expense, are set out in supplementary sections 426 to 428.