(1) The Principal Act is amended in Chapter 5 of Part 12 -

(a) in section 422, by the substitution of the following subsection for subsection (2):

"(2) Where an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide -

(a) the amount which may -

(i) be set off against the total profits under section 420,

(ii) under subsection (3) of section 420A, be set off against income specified in subparagraph (i), (ii) or (iii) of paragraph (a) of that subsection, or

(iii) reduce the relevant corporation tax under subsection (3) of section 420B,

of the claimant company for the corresponding accounting period, shall be reduced by applying the fraction -

(if that fraction is less than unity), and

(b) the amount of -

(i) the total profits against which the amount mentioned in paragraph (a)(i) (as reduced where so required) may be set off,