Corporation Tax Act 2010 section 705F

Apportionment of amounts

Section 705F sets out the rules for how various financial amounts from an actual accounting period must be split between two notional (theoretical) accounting periods when a company undergoes a change of ownership.

• Most amounts — including adjusted non-trading profits or deficits from loan relationships and any residual items used to calculate profits or losses — are apportioned on a simple time basis, proportionate to the length of each notional accounting period.
• Certain amounts are allocated entirely to the first notional accounting period: non-trading deficits carried forward from earlier periods and non-trading losses on intangible fixed assets carried forward.
• Non-trading debits on debtor relationships are apportioned either by reference to when the underlying amount accrued, or wholly to the first notional period, depending on which specific condition in section 705G is met.
• If any prescribed method of apportionment would produce an unjust or unreasonable result, a different method that is just and reasonable must be used instead.