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HMRC internal manual

Company Taxation Manual

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Corporation Tax: accounting periods: commencement

CTA09/S9 (1), CTA10/S1167 (formerly ICTA88/S12 (2), ICTA88/S832 (1))

An accounting period begins when a company first comes within the charge to CT. The most common circumstances when a company first comes within the charge to CT are when the company becomes resident in the UK, or acquires a source of income. After that, so long as the company remains within the charge to the tax, a new accounting period begins whenever an accounting period ends.

CTA10/S1167 (formerly ICTA88/S832 (1)) provides that ‘a source of income is within the charge to CT … if that tax - (a) is chargeable on the income arising from it, or (b) would be so chargeable if there were any income arising from it, and references to a person, or income, being within the charge to CT or IT are to be read in the same way’.

The case of Walker v Centaur Clothes Group Ltd (2000) 72TC379 involved a company which had paid a dividend when it did not have a source of income within the charge to CT (its trade had ceased and its only asset was an inter-company debt). It sought to carry back ACT despite the opening words of ICTA88/S239 (3), which said that ACT could be carried back ‘where in the case of any accounting period of a company there is an amount of surplus ACT’.

The argument that the company was prevented from carrying back the ACT because the dividend was not paid during an accounting period was rejected by the House of Lords. Being within the charge to CT does not imply the existence of a source. Becoming liable to pay ACT was enough to bring the company within the charge to tax, and to trigger the start of a new accounting period.

But Lord Hoffmann’s judgment should not be taken as meaning that ACT was CT.

This decision superseded the decision in the earlier Special Commissioners’ case of Aproline Ltd v Littlejohn [1995] SPC201.