Corporation Tax Act 2009 section 400

Adjustments for changes in index

Section 400 deals with how the carrying value of index-linked gilt-edged securities is adjusted to reflect changes in the relevant prices index, so that inflation-related movements do not give rise to taxable profits or allowable losses.

• Where the value of an index-linked gilt must be measured at two different times and the relevant prices index has changed between those times, the carrying value at the earlier time is adjusted by the same percentage as the index movement — increased if the index rose, decreased if it fell
• The upward adjustment rule is subject to the relevant hedging scheme provisions in sections 400A to 400C, which may modify the treatment where the company has hedged its index-linked position
• The percentage change in the relevant prices index is normally calculated by comparing the index for the month of the earlier time with the index for the month of the later time, but if the earlier time is the start of an accounting period that begins on the first day of a month, the previous month's index is used instead
• The Treasury has the power to make orders disapplying or replacing these adjustments for particular descriptions of index-linked gilts, although any such order cannot apply to securities issued before the order was made