Corporation Tax Act 2010 section 687

Adjustment to balancing charges if relief is restricted

Section 687 adjusts the calculation of balancing charges on capital allowances where a change in company ownership has triggered restrictions on loan relationship debits, non-trading deficits or management expenses.

• The section applies where loan relationship debits have been restricted under section 679, or deductions from total profits have been restricted under section 680 or 682, following a change in company ownership.
• When calculating balancing charges after the ownership change, any capital allowances given for the company's trade in accounting periods beginning before the change must be ignored — this prevents the balancing charge from being inflated by allowances that were effectively denied through the restriction rules.
• However, if the capital allowance was actually used — that is, it was set against profits of the period in which it arose or a later period still before the ownership change — then it is not disregarded and remains part of the balancing charge calculation.
• Where it is necessary to determine whether an allowance was used before the change, any loss attributable to a capital allowance is treated as relieved before any loss not attributable to such an allowance.