Taxation in the United Kingdom/Legislation/Section 8 of the Income and Corporation Taxes Act 1988

Subsection (1) provides that, subject to an explicit exception in the Corporation Tax Acts, companies are taxed on their worldwide profits.

Subsection (2) makes it clear that a company is taxable on all profits accruing to its benefits, including profits of trusts and partnerships, if it would be taxed on them if it received the profits direct. Except in the case where the company is being wound up (where it receives profits for the benefit of its creditors or members, as appropriate), it is not taxed on profits it receives in a fiduciary capacity. This subsection (which is well supported by case law) effectively states that for tax purposes you look at beneficial, not legal, ownership of profits.

Subsection (3) provides that corporation tax is computed and chargeable by reference to accounting periods, although tax is charged by reference to financial years. The profits of accounting periods are apportioned between the financial years in which the accounting period falls.