LAM04300 - Calculating ‘E’ adjusted BLAGAB management expenses: Step 4: Calculate the basic amount: FA12/S76

Step 4 calculates the basic amount of BLAGAB management expenses as follows:

• add ordinary BLAGAB management expenses from step 1, as adjusted at step 2, and
• deemed management expenses from step 3 then
• deduct any “expenses reversed in the accounting period” and
• deduct any BLAGAB trade loss relieved for the accounting period

The deductions for expenses reversed and BLAGAB trade loss relieved can make ‘E’ negative.

An example calculation is set out in LAM04500

FA12/S78(4) defines ‘expenses reversed in the accounting period’ as those which were:

‘relieved in any previous accounting period in accordance with step 1 (as read with step 2) or step 3 of s76’

but which are subsequently reversed in the accounting period’.

The use of the word ‘relieved’ is significant. It is only expenses which have actually been relieved which are treated as reversed: acquisition expenses which have been spread but have not yet been relieved are not treated as reversed.

FA12/S79(9) separately provides that any acquisition expenses reversed in an accounting period or an earlier accounting period must not count as deemed acquisition expenses for the accounting period in question. This ensures that, while the adjustment at Step 4 of FA12/S76 claws back any relief which has been given, no further relief is given. See example LAM04120.

BLAGAB trade loss relieved for the accounting period means a BLAGAB trade loss

• relieved against total income of the accounting period (CTA10/S37) –FA12/123
• group relieved under CTA10/Part5/CH4 FA12/S125
• brought forward from the previous accounting period and relieved against total profits under FA12/S124B

Guidance on BLAGAB trade losses is in LAM07310.