CTM06130 - Corporation Tax: company reconstructions: apportionment of profits and losses
ICTA88/S343 (9), (10) & (12)(a)
Computing the profits and losses of notional trades
The loss streaming rules (
CTM06120) require a computation of the
profits and losses of separate notional trades.
The losses and profits of those notional trades on are worked
out using normal taxation principles. Section 343 (9) as amended by
Section 343 (12)(a) simply provides that 'any necessary
apportionment shall be made of receipts or expenses’. In some
cases the apportionment can be made from branch or management
accounts. Where there are no such accounts, apportionment should be
made on any basis that produces a sensible result, for example
apportionment by:
- time,
- sales,
- square footage, or
- production costs.
Apportionment affecting two or more companies
Apportionment of profits or losses under Section 343 (9) can
affect two or more companies, typically on the division of losses
on the split of a trade. The effect of Section 343 (10) is to
ensure the same basis applies to all the affected companies.
In the event of a dispute all the companies concerned should
be consulted and made aware of their opportunity to be heard by, or
to make written representations to, the Commissioners.
Commissioners determine an apportionment dispute as if it
were an appeal. The rules of jurisdiction are set out in Section
343 (10) itself.
Any case that needs the Board’s direction under
subsection 10(b) should be submitted to CT&VAT (Technical).
Files of all the companies concerned should be sent with the report
that should set out:
- the nature and details of the dispute,
- full details of the Commissioners' Divisions concerned, and
- the reasons given by the parties for their choice of Division.
