Corporation Tax Act 2009 section 321

Credits and debits recognised in equity

Section 321 ensures that loan relationship credits and debits which are recognised directly in equity (reserves) are still brought into account for corporation tax purposes, as though they had been recorded through the profit and loss account.

• Some accounting standards require certain loan relationship gains and losses to bypass the profit and loss account and be recognised directly in equity or reserves.
• This section overrides that accounting treatment for tax purposes, requiring those amounts to be brought into account as if they had gone through the profit and loss account.
• Without this provision, amounts taken straight to reserves could escape the corporation tax computation entirely, creating an unintended gap in the tax base.
• The rule applies to both credits (gains) and debits (losses) arising on loan relationships that are recognised in equity rather than in profit or loss.