Direct Tax Acts, Finance Act 2018

76 Computation of income: application of income tax principles
CTA76 s11(1), (2)(b) and (3) to (8); FA96 s132(2) and Sch5 PtII; FA11 s81 and Sch3

(1) Except where otherwise provided by the Tax Acts, the amount of any income shall for the purposes of corporation tax be computed in accordance with income tax principles, all questions as to the amounts which are or are not to be taken into account as income, or in computing income, or charged to tax as a person’s income, or as to the time when any such amount is to be treated as arising, being determined in accordance with income tax law and practice as if accounting periods were years of assessment.

(2) For the purposes of this section, “income tax law”, in relation to any accounting period, means the law applying to the charge on individuals of income tax for the year of assessment in which that accounting period ends, but does not include such of the enactments of the Income Tax Acts so applying as make special provision for individuals in relation to matters referred to in subsection (1).

(3) Accordingly, for the purposes of corporation tax, income shall be computed and the assessment shall be made under the like Schedules and Cases as apply for the purposes of income tax, and in accordance with the provisions applicable to those Schedules and Cases, but (subject to the Corporation Tax Acts) the amounts so computed for several sources of income, if more than one, together with any amounts to be included in respect of chargeable gains, shall be aggregated to arrive at the total profits.

(4) Nothing in this section shall be taken to mean that income arising in any period is to be computed by reference to any other period (except in so far as this results from apportioning to different parts of a period income of the whole period).

(5) Subject to section 77 and to any enactment applied by this section which expressly authorises such a deduction, no deduction shall be made for the purposes of the Corporation Tax Acts in computing income from any source -

(a) in respect of dividends or other distributions, or

(b) in respect of any yearly interest, annuity or other annual payment or any other payments mentioned in section 104 or 237(2), but not including sums which are, or but for any exemption would be, chargeable under Case V of Schedule D.

(6) Without prejudice to the generality of subsection (1), any provision of the Income Tax Acts, or of any other statute, which confers an exemption from income tax, provides for the disregarding of a loss, or provides for a person to be charged to income tax on any amount (whether expressed to be income or not, and whether an actual amount or not), shall, except where otherwise provided, have the like effect for the purposes of corporation tax.

(7) This section shall not have effect so as to apply for the purposes of corporation tax anything in [subsections (1), (2), (3), (4A), (5) and (6) of]1 section 71.

(8) Where by virtue of this section or otherwise any enactment applies both to income tax and to corporation tax -

(a) that enactment shall not be affected in its operation by the fact that income tax and corporation tax are distinct taxes but, in so far as is consistent with the Corporation Tax Acts, shall apply in relation to income tax and corporation tax as if they were one tax, so that, in particular, a matter which in a case involving 2 individuals is relevant for both of them in relation to income tax shall in a like case involving an individual and a company be relevant for such individual in relation to income tax and for such company in relation to corporation tax, and

(b) for that purpose, references in any such enactment to a relief from or charge to income tax or to a specified provision of the Income Tax Acts shall, in the absence of or subject to any express adaptation, be construed as being or including a reference to any corresponding relief from or charge to corporation tax or to any corresponding provision of the Corporation Tax Acts.

Go to Revenue Guidance Notes on TCA

Amendments

1 Inserted by FA11 s81 and Sch 3(1)(a) having effect as on and from the passing of Finance Act 2011 (6 February 2011)

Case Law

Accepted accounting practices subordinate to tax principles: to extent depreciation was included in cost of stock, it was disallowable – Trevor Small (HM Inspector of Taxes) v Mars UK Limited – Ch D [2005] EWHC 553 (Ch)

Accepted accounting practices subordinate to tax principles: to extent depreciation was included in cost of stock, it was disallowable – Mars UK Limited; Small (Insp. of Taxes) v – [2005] STC 958

Compounded interest income did not arise until paid over bank – Girvan (HM Inspector of Taxes) v Orange Personal Communications Services Ltd. [1998] DTC 567

Taxpayers entered into arrangements for acquisition and exploitation of IP rights and whether expenditure incurred wholly and exclusively for purposes of trade and revenue or capital expenditure. Acornwood LLP and others v Revenue and Customs Commissioners - [2014] SFTD 694

Revenue Guidance

Tax Treatment of Stocklending/Sale and Repurchase (repo) Transactions - eBrief No. 56/12 - 12 November 2012

Corresponding UK Tax Provision

Section 70, Income and Corporation Taxes Act 1988. Now re-enacted at various places in the Corporation Tax Act 2009. Refer to the Destination Table of that Act for details.

Sections referred to in text

section 71 [Foreign securities and possessions]

section 77 [Miscellaneous special rules for computation of income]

section 104 [Taxation of certain rents and other payments]

section 237 [Annual payments payable wholly out of taxed income]

Cross references

2 Interpretation of Tax Acts

77 Miscellaneous special rules for computation of income

79 Foreign currency: computation of income and chargeable gains

141 Distributions out of income from patent royalties

256 Interpretation (Chapter 4)

716 General annuity business

717 Pension business

739K Interpretation

845 Corporation tax: treatment of tax-free income of non-resident banks, insurance businesses, etc

730D Gain arising on a chargeable event

730E Declarations

739D Gain arising on a chargeable event

Sch 2C Irish real estate funds: Declarations