Corporation Tax Act 2010 section 356HA

Reduction of allowance if equity disposed of

Section 356HA sets out how to calculate the reduction in a company's unactivated onshore allowance for a reference period and site when the company disposes of part or all of its equity interest in the licensed area.

• When a company disposes of equity in a licensed area, its unactivated onshore allowance must be reduced proportionally to reflect the share of equity given up.
• The reduction is calculated using the formula F × (E1 − E2) / E1, where F is the pre-transfer total of unactivated allowance, E1 is the company's equity share immediately before disposal, and E2 is its equity share immediately after disposal.
• The pre-transfer total of unactivated allowance for a reference period is the sum P + Q, being the same components used in the general calculation of unactivated allowance under section 356GD.
• The deduction is applied in the calculation of the total unactivated allowance attributable to the relevant reference period and site, ensuring allowances are not retained for equity interests the company no longer holds.