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HMRC internal manual

Company Taxation Manual

Corporation Tax: accounting periods: apportionment

CTA09/S2 (1), CTA09/S8 (1), (2) and (5), CTA09/S52, CTA09/S1307, CTA10/S1119, CTA10/S1121 (1), CTA10/1172 (formerly ICTA88/S6 (1), ICTA88/S8 (3), ICTA88/S72, ICTA88/S832 (1), ICTA88/S834 (1) and (4)

CT is imposed for a ‘financial year’. A financial year starts on 1 April, and ends on the following 31 March. It is named after the calendar year in which it starts. So the financial year 2002 starts on 1 April 2002 and ends on 31 March 2003, and the financial year 2003 starts on 1 April 2003.

CT is charged by reference to accounting periods. Company profits arising in an accounting period are apportioned between the financial years in which the accounting period falls. The apportionment is made on a time basis (by reference to days), and no other basis is acceptable.

‘Period of account’ means the period for which a company prepares its accounts. Sometimes it is necessary to apportion the profits of a period of account to get the profits of an accounting period, most often because the period of account is longer than 12 months (see also CTM01510). Normally the apportionment is on a time basis. But the profits of an accounting period may be computed by reference to the transactions which took place in that accounting period where this gives a more accurate result.

Generally this will only apply where there are a few easily identifiable transactions. The transactions method was allowed in the case of Marshall Hus & Partners Ltd v Bolton (1980) 55TC539. In that case the company prepared one set of accounts to cover a period of more than five years. So one period of account covered six accounting periods. Apportionment by reference to the transactions of the each of the accounting periods gave fairer results than time apportionment.