Commentary on Sections Overview Section 243: Consequences of deduction notices
487.This section sets out the consequences of a deduction notice being given. It is based on section 25(1), (2) and (14) to (16) of F(No 2)A 2005.
488.Subsection (1) says when this section applies.
489.Subsection (2) obliges the company to calculate (or recalculate) its income or chargeable gains for the purposes of corporation tax or its liability to corporation tax.
490.Subsection (3) stipulates that the calculation (or recalculation) must be done in accordance with the rule against double deduction (section 244) and, if appropriate, the rule against deduction for untaxable payments (section 248).
491.If the company considers that the deduction scheme conditions are in fact not met in relation to the transaction specified in the deduction notice, the company can make (or decide not to amend) its company tax return on the basis that the deduction notice is invalid. It is then up to HMRC to open an enquiry into the return if it considers the notice still to be valid.
492.If, however, the company concedes that the deduction notice is valid, it can adjust its company tax return. Subsection (4) provides that (so far as the scheme specified in the deduction notice is concerned) the company is treated as having complied with subsections (2) and (3) if it incorporates “the necessary relevant adjustments” in its company tax return for the accounting period specified in the notice.
493.Subsection (5) defines when adjustments are “relevant”.
494.Subsection (6) defines when relevant adjustments are “necessary”.