Corporation Tax Act 2010 section 505

Adjustment if section 504(1) and (2) applied to single transaction

Section 505 prevents double counting where both subsections (1) and (2) of section 504 apply to the same transaction, ensuring that the amount treated as non-charitable expenditure is not inflated beyond the actual amount involved.

• Where a single transaction triggers both section 504(1) and section 504(2), there is a risk that the same amount could be counted twice as non-charitable expenditure.
• Section 505 provides an adjustment mechanism so that the total non-charitable expenditure recognised does not exceed the actual amount of the transaction in question.
• Without this safeguard, a charity could face an excessive tax charge that bears no relation to the true economic value of the transaction.
• The equivalent rule for income tax purposes is found in section 552 of the Income Tax Act.