Corporation Tax Act 2010 section 685

Apportionment of amounts

Section 685 sets out how various income, expense and relief amounts for an actual accounting period must be split between two notional (hypothetical) accounting periods when a change in company ownership triggers the restrictions in this Chapter.

• Adjusted non-trading loan relationship profits and deficits, capital allowances added to management expenses, and any residual profit-or-loss items are apportioned on a straightforward time basis according to the relative lengths of the two notional periods.
• Non-trading deficits carried forward, losses on intangible fixed assets carried forward, and excess management expenses carried forward are allocated entirely to the first notional accounting period (i.e. the period before the ownership change).
• Non-trading debits on debtor loan relationships and credits or debits on intangible fixed assets are apportioned by reference to when they actually accrued or would be recognised under generally accepted accounting practice, rather than simply by time.
• Where any of the prescribed apportionment methods would produce an unjust or unreasonable result, a different method that is just and reasonable must be used instead.