Corporation Tax Act 2010 section 424

The amount of expense

Section 424 determines how to calculate the amount of expense that another company is treated as incurring when there is a qualifying change in a partner company's interest in a leasing business carried on in partnership.

• When a qualifying change occurs, the partner company is treated as receiving income and the other company as incurring a matching expense under section 417, provided the other company's profit-sharing percentage increases as a direct result of that change.
• The expense the other company can claim is normally limited to the "appropriate percentage" of the partner company's deemed income, calculated as the ratio of the other company's percentage share increase (attributable to the change) to the partner company's percentage share decrease.
• If the other company ends up carrying on the business alone (rather than in partnership), its expense simply equals the full amount of the partner company's deemed income.
• An increase from a nil share — for example where a company becomes a new partner — counts as an increase for the purposes of this calculation.