Section 874 | Charge to corporation tax

(1)The company obtaining the capital sum is to be treated as receiving, at the time the sum is obtained, an amount—

(a)which is equal to the chargeable amount, and

(b)to which the charge to corporation tax on income applies.

(2)The chargeable amount is—

(a)the amount of the payment for which a deduction by way of relevant tax relief is allowed, or

(b)the total amount of such payments (if more than one).

(3)But subsections (1) and (2) have effect subject to—

(a)subsections (4) to (7), and

(b)section 875(3) (hire-purchase agreements).

(4)The chargeable amount is not to exceed the capital sum (but see section 875(4)).

(5)Subsection (6) applies if—

(a)the charge to corporation tax on income is applied by this section in respect of a capital sum, and

(b)a payment or part of a payment is taken into account in deciding the chargeable amount in respect of the sum.

(6)The payment or part must be left out of account in deciding—

(a)whether the charge to corporation tax on income is to be applied by this section in respect of another capital sum, and

(b)the chargeable amount in respect of the other sum (if the charge is to be applied in respect of the other sum).

(7)The order in which subsections (5) and (6) are applied is the order in which capital sums are obtained.