What does section 705B of the Corporation Tax Act 2010 require?

Section 705B requires the accounting period in which a change of company ownership occurs to be notionally split into two separate periods. The first notional period ends on the date of the ownership change, and the second covers the remainder. This split enables HMRC to apply shell company relief restrictions to the correct notional period.

How is the accounting period split under section 705B when a shell company changes ownership?

The first notional accounting period runs from the start of the actual accounting period up to and including the date of the ownership change. The second notional accounting period covers from the day after the change through to the period end. This allows relief restrictions to be applied separately to each notional period.

How are profits and losses apportioned between the two notional accounting periods?

Once the accounting period is notionally divided, relevant amounts such as profits, losses, and other figures are apportioned between the two notional periods using the rules in section 705F. This may include time-based apportionment, ensuring the correct figures are used when determining whether relief is restricted in each notional period.

What do the terms 'actual accounting period' and 'notional accounting periods' mean in this chapter?

The 'actual accounting period' is the single accounting period in which the change in ownership takes place. The 'notional accounting periods' are the two deemed periods created by the notional split under section 705B. These defined terms carry these specific meanings throughout the chapter on shell company relief restrictions.

Corporation Tax Act 2010 section 705B

Notional split of accounting period in which change in ownership occurs

Section 705B requires the accounting period in which a change of company ownership occurs to be notionally split into two separate periods for the purposes of restricting relief in shell companies.

The accounting period containing the ownership change (the "actual accounting period") is treated as two separate "notional accounting periods"
The first notional period ends on the date the change in ownership takes place, and the second covers the remainder of the accounting period
Relevant amounts for the actual accounting period are apportioned between the two notional periods in accordance with the rules set out in section 705F
The terms "actual accounting period" and "notional accounting periods" carry these meanings throughout the chapter

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