Section 599 — Corporation Tax Act 2010: Calculation of profits

Calculation of profits 599 1 This section is about the calculation of profits for the purposes of any provision of this Part which provides that profits are to be calculated in accordance with this section.

2 Profits are to be calculated in the same way as profits of a UK property business are calculated for the purposes of the charge to tax under Chapter 3 of Part 4 of CTA 2009 (as to which see, in particular, section 210 of that Act).

3 Section 211(1) of CTA 2009 (property businesses: disregard of credits and debits from loan relationships and derivative contracts) does not apply in respect of—

a a loan relationship so far as it relates to property rental business, b a hedging derivative contract so far as it relates to property rental business, or c embedded derivatives so far as the host contract is entered into for the purposes of property rental business.

4 For the purposes of subsection (3)—

a a derivative contract is hedging in relation to a company so far as—

i it is acquired as a hedge of risk in relation to an asset by the exploitation of which property rental business is conducted, or ii it is acquired as a hedge of risk in relation to a liability incurred in connection with property rental business, b a designation of a contract as wholly or partly hedging for the purposes of a company's accounts is conclusive, c “ embedded derivatives ” is to be read in accordance with section 584 or 586 (as the case may be) of CTA 2009, and d “ the host contract ” means—

i the contract mentioned in section 584(1)(a) of CTA 2009, or ii the contract mentioned in section 586(1)(a) of that Act, as the case may be.

5 In subsection (4)(a)(i) the reference to an asset includes a reference to—

a the value of an asset, and b profits attributable to it.

6 Profits are to be calculated without regard to items giving rise to credits or debits which would be within Part 7 of CTA 2009 (derivative contracts) but for section 589(2)(b) and (c) of that Act (exclusion of share-based and unit trust-based contracts).

7 Income and expenditure relating partly to property rental business and partly to residual business are to be apportioned on a just and reasonable basis.

8 Section 3(1) of CAA 2001 (claims for capital allowances) does not apply; and any allowance which could be claimed under that provision is to be made automatically and reflected in the calculation of profits.

9 No account is to be taken of Part 7ZA of this Act (restrictions on obtaining certain deductions in respect of carried-forward losses).