Corporation Tax Act 2010 section 1087

Chargeable payments not deductible in calculating profits

Section 1087 deals with the corporation tax treatment for the payer of a chargeable payment made within five years after an exempt distribution, preventing the payer from deducting the payment when calculating profits.

• A chargeable payment made within five years of an exempt distribution is treated as a distribution for corporation tax purposes
• Because it is treated as a distribution, the payer cannot deduct the payment when calculating its taxable profits, in line with section 1305 of CTA 2009
• This non-deductibility applies regardless of how the payment is treated in the hands of the recipient
• If the recipient is a company, it is still chargeable to corporation tax on the amount received under section 1086, despite the payment being classified as a distribution from the payer's perspective