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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: reversals


The timing of relief for the expenses of management incurred after 1 April 2004 now follows the accountancy treatment (CTM08560). It was therefore necessary to make provision to recoup relief where the debit for an expense of management is reversed in the accounts of a subsequent period.

Where a sum debited in the accounts has been allowed as an expense of management and the accounting entry is reversed in the accounts of a later period, an adjustment is made under Section 75B if the relief has not been already recovered under some other provision. The adjustment should be made for the most part in the accounting period in which the accounts reversal takes place, though there are detailed rules for less straightforward cases.

The adjustment should first reduce the management expenses available for the period, but not below nil. Any excess should be charged under Case VI of Schedule D for that period.

Only reversals made in accounting periods beginning on or after 1 April 2004 come within the rules. The earlier period in which the sum was allowed as an expense of management need not be one to which the FA04 changes apply. The straddling period provisions do not apply in the case of reversals. Any Case VI income chargeable under these provisions is not regarded as income under ICTA88/S842 (1)(a) when considering investment trust status (ICTA88/S842 (1AC)).