Corporation Tax Act 2010 section 324

Special rule for straddling periods

Section 324 sets out how to calculate the ring fence loss for the purposes of ring fence expenditure supplement where a company's accounting period straddles 1 January 2006 and is split into a deemed accounting period beginning on that date.

• Where a company's accounting period spans 1 January 2006, a deemed accounting period is created starting on that date, and a five-step process determines the ring fence loss attributable to it.
• Losses attributable to qualifying exploration and appraisal (E&A) allowances under the old Schedule 19B rules are stripped out first, followed by losses attributable to E&A allowances on expenditure incurred from 1 January 2006 onwards.
• The remaining loss after those deductions is time-apportioned to the deemed accounting period based on the proportion of days it represents within the straddling period.
• The ring fence loss for the deemed accounting period is then the time-apportioned amount plus the post-1 January 2006 E&A allowances amount.