Corporation Tax Act 2010 section 420

Exception: companies carrying on business ceasing to share in its profits

Section 420 provides an exception to the income and matching expense rules in section 417, where all the companies carrying on a business in partnership cease to have any interest in the business on the same day.

• The exception applies only when three conditions (A, B and C) are all satisfied simultaneously.
• Condition A requires that by the end of the relevant day, none of the companies involved in the business retains any share in its profits or losses.
• Condition B requires that, as a consequence of what happens on that day, the disposal value of all plant and machinery used in the business (on which capital allowances have been claimed) must be brought into account under section 61 of the Capital Allowances Act 2001.
• Condition C requires that the disposal value brought into account for all the plant and machinery is the open market price on that day.