Corporation Tax Act 2009 section 325

Restriction on credits resulting from reversal of disallowed debits

Section 325 prevents a company from recognising a taxable credit when a previously disallowed revaluation debit on a connected-party loan relationship is reversed.

• Where a debit has been disallowed under section 324(1), any subsequent credit arising from the reversal of that debit must also be excluded from the loan relationships tax computation.
• This restriction does not apply where the company uses fair value accounting for the loan relationship in question.
• The rule ensures symmetry: if a downward revaluation loss was not allowed as a deduction, the corresponding upward revaluation gain should not be taxed either.
• Separate transitional provisions in paragraph 61 of Schedule 2 deal with credits arising from the reversal of debits that were disallowed in accounting periods beginning before 1 January 2005.