Does a write-off of government investment affect a company's trading deductions under United Kingdom corporation tax law?

No. Section 96 of the Corporation Tax Act 2010 confirms that a company may still deduct allowable expenses when calculating trading profits even though an amount of government investment has been written off. The write-off does not disqualify or reduce the trading deductions the company is otherwise entitled to claim.

Are capital allowances and chargeable gains computations affected when government investment is written off?

No. Section 96 provides that a write-off of government investment does not mean a company's expenditure has been met by a public body. This protects capital allowances claims under the Capital Allowances Act 2001 and chargeable gains computations under the Taxation of Chargeable Gains Act 1992 from being disturbed by the write-off.

How does section 96 interact with the loan relationships priority rule in CTA 2009?

Section 96 overrides the loan relationships priority rule in section 464(1) of CTA 2009 where necessary. This ensures that when government investment is written off by extinguishing a loan relationship, the loss relief reduction rules in section 92 of CTA 2010 still apply to reduce the company's available loss relief as intended.

What happens to a company's loss relief when government investment including a loan element is written off?

Under section 92, the company's available loss relief is reduced by the amount of government investment written off. Section 96 ensures this reduction applies even to the loan element of the write-off, overriding the normal loan relationships priority rule that would otherwise prevent section 92 from operating on that portion.

Corporation Tax Act 2010 section 96

Interaction with other tax provisions

Section 96 ensures that the write-off of government investment does not inadvertently trigger adverse consequences under other tax provisions, preserving a company's entitlement to trading deductions, capital allowances, and chargeable gains treatment.

A company may still deduct expenses when calculating trading profits even though an amount of government investment in it has been written off.
Expenditure is not treated as having been met by a public body simply because government investment has been written off, so capital allowances and chargeable gains computations are unaffected.
The write-off of government investment that involves extinguishing a loan relationship (in whole or in part) does not prevent the loss relief reduction rules in section 92 from applying.
The loan relationships priority rule in section 464(1) of CTA 2009 is overridden where necessary to allow section 92 to operate on the write-off.

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