Commentary on Sections Part 2: Charge to corporation tax: basic provisions Overview Section 2: Charge to corporation tax
37.This section provides the charge to corporation tax on profits. It is based on section 6(1) and (4) and section 9(1) and (4) of ICTA.
38.Subsection (1) states that corporation tax on profits is charged for a financial year for which an Act provides. It is based on the two overlapping propositions in section 6(1) of ICTA.
39.Under subsection (2) “profits” in Part 2 means “income and chargeable gains, except in so far as the context otherwise requires”. This interpretation derives from section 6(4) of ICTA. This Act amends section 6(4) of ICTA in Schedule 1.
40.Chargeable gains are defined in section 1(1) of TCGA. In subsection (3) “ the charge to corporation tax on income” is introduced as a label. The expression is defined for corporation tax purposes as a result of an amendment to section 834(1) of ICTA made by Schedule 1 to this Act.
41.Subsection (4) provides that the charge to corporation tax on income in effect depends on there being another provision of the Corporation Tax Acts that applies it.
42.This subsection is based on section 9(1) and (4) of ICTA. Section 9(1) in effect controls the meaning of “income” in section 6 of ICTA. As noted in the overview, this Act will complete the split between income tax and corporation tax and the formulation in section 9(1) of ICTA is no longer apposite since its wording is adapted to the circumstances of applying one body of tax law (income tax principles) for the purposes of another tax (corporation tax).
43.The effect of section 9 of ICTA is that the scope of the charge to income tax determines what is income for corporation tax purposes (except as otherwise provided by the Tax Acts). Income tax, although primarily a charge to tax on things which would be regarded as income in its ordinary sense, is not exclusively a charge on such things. Section 9(4) provides that anything that is within the charge to income tax is within the charge to corporation tax on income “whether expressed to be income or not and whether an actual amount or not”.
44.So the effect of section 9 of ICTA is that (subject to the provisions of the Corporation Tax Acts) the charge to corporation tax on income is driven by the particular heads of the charge to income tax.
45.The purpose of this section is to achieve an equivalent effect, so that the charge to corporation tax on income is driven by the particular heads of the charge to corporation tax on income. In this way the section substitutes the provisions of the Corporation Tax Acts for the income tax provisions. For example section 35 applies the charge to corporation tax on income to the profits of a trade.