Corporation Tax Act 2010 section 676AJ

Restriction on deduction of post-1 April 2017 expenses of management

Section 676AJ restricts the ability of a transferred company to deduct certain management expenses and capital allowances that arose before a change in ownership from profits earned after that change in ownership.

• Management expenses and capital allowances that first became deductible in accounting periods beginning on or after 1 April 2017 but before the change in ownership are classified as "relevant" expenses and allowances subject to restriction.
• Where the accounting period in which the ownership change occurs is split into two notional periods, management expenses and allowances are apportioned between those notional periods and treated as belonging to the notional period to which they are allocated.
• After the change in ownership, these relevant management expenses and relevant allowances cannot be deducted from "affected profits" — that is, profits of a type or from a source that the company did not have before the ownership change, or profits that have increased significantly.
• This restriction applies when calculating the taxable total profits of any accounting period of the transferred company that ends after the change in ownership took place.