BIM45125 - Specific deductions: Flood and erosion projects: Refunds and compensation

S86A (6) and (7) Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005)

S86A (6) and (7) Corporation Tax Act 2009 (CTA 2009)

If a deduction against trading profits has been made under these provisions in relation to a contribution, and the contributor or a connected person receives, in money or money’s worth:

• a refund of any part of the contribution (if the contribution is a sum of money) or
• compensation for any part of the contribution (if the contribution is the provision of services)

then the amount of, or an amount equal to the value of, the refund or compensation (so far as not otherwise brought into account in calculating the profits of the trade) is brought into account in calculating the profits of the trade on the date on which the refund or compensation is received.

Alternatively, if the trade has permanently ceased, the receipt is brought into account as a post-cessation receipt of the trade so far as it has not otherwise been brought into account in calculating the profits of the trade or as a post cessation receipt. For more on the taxation of post-cessation receipts see BIM90010.