Taxes Consolidation Act 1997 section 78

Computation of companies' chargeable gains

Section 78 sets out the mechanism for including a company's chargeable gains in its corporation tax computation, by converting the gains into an amount that, when taxed at the corporation tax rate, produces the same tax as if capital gains tax had been charged directly.

• A company's chargeable gains are computed using capital gains tax principles, with accounting periods treated as years of assessment, and a notional capital gains tax is calculated on the net gains after deducting allowable losses (current and carried forward).
• The notional capital gains tax is then "grossed up" at the corporation tax rate to arrive at an amount which, when included in the company's total profits and charged to corporation tax, yields the same tax as the notional capital gains tax.
• Where an accounting period straddles two financial years with different corporation tax rates, a blended rate is calculated by weighting each rate according to the length of the accounting period falling in each financial year.
• Gains on the disposal of development land are excluded from this mechanism and remain subject to capital gains tax rather than corporation tax, and references to income tax in the Capital Gains Tax Acts are read as references to corporation tax for companies.