What is the reversal amount under Corporation Tax Act 2009 section 1230?

The reversal amount is the figure calculated when an accounting credit reverses a previous debit that was treated as a deductible management expense. It represents the portion of the credit subject to claw-back under section 1229, ensuring tax relief previously given on management expenses is recovered when the underlying expense is reversed.

How is the reversal amount calculated under section 1230?

The calculation follows three steps. First, identify how much of the accounting credit reverses the original debit. Second, reduce that figure proportionately if only part of the original debit qualified as deductible management expenses under section 1219. Third, exclude any part of the credit already brought into account in calculating taxable profits or losses.

What is the relevant accounting period for the reversal amount calculation?

The relevant accounting period is defined as the latest accounting period of the company that falls wholly or partly within the period to which the credit relates, as referred to in section 1229(1)(a). This anchors the reversal amount calculation to the correct time frame for the company's corporation tax computations.

Why does section 1230 reduce the reversal amount for credits already brought into account?

This reduction prevents double counting. If part of the reversing accounting credit has already been included in the company's taxable profit or loss calculation for the relevant or any earlier accounting period through another route, that part is excluded from the reversal amount so the same income is not taxed twice under the claw-back rules.

Corporation Tax Act 2009 section 1230

Meaning of "reversal amount"

Section 1230 defines how to calculate the "reversal amount" when an accounting credit reverses a previous debit that was treated as a deductible management expense.

The reversal amount starts with the portion of an accounting credit that reverses a previously recognised debit.
This amount is then reduced so that it only covers the part of the original debit that qualified as deductible management expenses under section 1219.
A further reduction excludes any part of the credit that has already been brought into account when calculating the company's corporation tax profits or losses for the relevant or any earlier accounting period.
The relevant accounting period is the latest accounting period of the company that falls wholly or partly within the period to which the credit relates.

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