Corporation Tax Act 2009 section 127D

Effect of claim for spreading of profits

Section 127D sets out how trading profits are adjusted when a farming company claims to spread compensation profits arising from the compulsory slaughter of animals over a period of time, rather than recognising them all in a single accounting period.

• All compensation for relevant animals slaughtered in the claim period is treated as a trading receipt of that period, regardless of when the compensation is actually determined or paid.
• The total compensation profit is then deducted from the trading profits of the claim period, reducing them by up to the full amount of the compensation profit (but not below nil).
• The amount deducted is spread equally over the three consecutive accounting periods following the claim period, with one third included in the trading profits of each of those periods.
• Where the total compensation profit exceeds the trading profits of the claim period, only the portion that reduces profits to nil is deducted and subsequently spread forward.