CTM02020 – Corporation Tax: Calculation of Income: IT Law: Pre-Tax Legislation Rewrite – HMRC Internal Handbook

Income Tax Act (IR)

The concept of “computer law” was necessary when the corporate income tax burden was calculated by reference to income tax principles (see CTM02010). This concept meant that, for any accounting period, the law applicable to individuals for the IT tax year in which this period ended also applied to the income of IT companies for CIT purposes. This:

• included any IT legislation that made a special provision for businesses, e.g. ICTA88/S402 (6), which provided that a payment under group relief should not be taken into account in computing income, and
• excluded any computer law providing for special provisions for individuals.

Any provision of the income tax laws which exempted certain income from IT or provided that a person was to be charged to IT on any amount had the same effect for CT.

Revenue has been calculated by reference to revenue generated during the accounting period. Thus, the computer law on base periods had no relevance to CT.

The effect of this was that:

• amounts that were or were not to be taken into account in computing income,
• the amounts to be set off against a person’s income, and
• when any of these amounts occurred,

have been determined under computer law and practice as if the accounting periods were fiscal years.