Corporation Tax Act 2009 section 1216BA

Calculation of profits or losses of separate programme trade

Section 1216BA sets out how to calculate the profits or losses of a separate programme trade for each period of account, using a formula that matches income recognition to the proportion of costs incurred to date.

• In the first period of account, costs incurred to date are brought in as a debit and a proportionate share of estimated total income is brought in as a credit
• In subsequent periods, only the incremental costs and incremental income (compared to the previous period) are brought into account
• The proportion of total estimated income treated as earned is calculated by dividing costs incurred to date by estimated total cost, then multiplying by estimated total income
• This approach ensures that profit recognition tracks the stage of completion of the programme, measured by reference to costs incurred