835AZ. Relevant profit and loss

(1) Subject to subsections (2) and (3), “relevant profit”, in respect of a relevant entity and an accounting period, means—

(a) the amount of the profits on which corporation tax falls finally to be borne, and

(b) the amount of the gains or losses on a relevant disposal (within the meaning of section 648),

reduced by the amount, if any, of—

(i) the amount of the excess referred to in subsection (2) of section 243B, to the extent relief may be claimed under that subsection, ^[2]>but for this Part, and^<[2][2]>but for this Part,^<[2]

(ii) the amount of the excess referred to in subsection (2) of section 396B, to the extent relief may be claimed under that subsection, ^[3]>but for this Part.^<[3][3]>but for this Part, and^<[3]

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(iii) the amount of the excess referred to in subsection (2) of section 420B as it relates to interest on a loan to which section 247(4G) applies, to the extent relief may be claimed under that subsection, but for this Part.

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(2) Where an amount of charge, income, expense, gain or loss used to calculate an amount referred to in subsection (1) is subject to corporation tax or provides relief at the P rate, that amount shall be adjusted for the purpose of calculating ‘relevant profit’ under subsection (1) as follows:

A_adj = A_act x (P rate/T rate)

where—

A_adj is the adjusted amount of charge, income, expense, gain or loss, as the case may be, and

A_act is the actual amount of charge, income, expense, gain or loss, as the case may be.

(3) Where an amount of charge, income, expense, gain or loss used to calculate an amount referred to in subsection (1) is subject to corporation tax or capital gains tax or provides relief at the CGT rate, that amount shall be adjusted for the purpose of calculating ‘relevant profit’ under subsection (1) as follows:

A_adj = A_act x (CGT rate/T rate)

where—

A_adj is the adjusted amount of charge, income, expense, gain or loss, as the case may be, and

A_act is the actual amount of charge, income, expense, gain or loss, as the case may be.

(4) For the purpose of calculating relevant profit under subsection (1), no account shall be taken of—

(a) any relief for losses, or excesses, as the case may be, carried forward from a previous accounting period under section 396(1), 399(1) or 399(2),

(b) any relief for losses or excesses, as the case may be, carried back from a subsequent accounting period under section 396(2), 396A(3), 396B(3), 397(1) or 399(2), or

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(c) amounts set off under section 420 (other than interest treated as a charge on income that may be set off under section 420(6), but for this Part) or 420A.

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(c) amounts set off under section 420 or 420A other than:

(i) interest treated as a charge on income that may be set off under section 420(6), but for this Part,

(ii) expenses of management that may be set off under section 420(3), but for this Part, and

(iii) interest treated as a charge on income that may be set off under section 420A(3), but for this Part.

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(5) Subject to subsection (6), for the purpose of calculating relevant profit under subsection (1) of a relevant entity carrying on a qualifying longterm infrastructure project, no account shall be taken of any income or expenses directly connected with a qualifying long-term infrastructure project.

(6) Where a relevant entity carries on both a qualifying long-term infrastructure project and activities other than a qualifying long-term infrastructure project, income and expenses shall be apportioned between the qualifying long-term infrastructure project and those other activities on a just and reasonable basis.

(7) The amount of relevant loss for an accounting period shall be calculated in the like manner as relevant profit would have been calculated and for these purposes the reference in subsection (1) to an amount of profits on which corporation tax falls finally to be borne shall be read as a reference to the amount of losses, after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given from or against profits, including deductions and reliefs which under any provision are treated as reducing profits for those purposes.