Restrictions on the use of losses following company takeover
Published by a LexisNexis Tax expert
Last updated on 17/10/2019

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Restrictions on the use of losses following company takeover
  • Function of the Part 14 rules
  • Scope of the Part 14 rules
  • Major change in the trade
  • Coronavirus (COVID-19) pandemic—HMRC guidance
  • Meaning of major change in the nature or conduct of the trade—statute
  • Meaning of major change in the nature or conduct of the trade—HMRC guidance
  • Meaning of major change in the nature or conduct of the trade—case law
  • Apportionment of accounting periods
  • Profit buying
  • More...

Restrictions on the use of losses following company takeover

Part 14 of the Corporation Tax Act 2010 (CTA 2010) (the Part 14 rules) contains anti-avoidance provisions designed to stop a profitable organisation from reducing its corporation tax liability by acquiring a company with accumulated losses (a loss company) and setting these losses off against its own profits. This practice is sometimes known as loss-buying (although this should not be confused with the rules on buying capital losses, for which see Practice Note: Pre-entry capital losses).

There are also rules, introduced by the Finance Act 2013 (FA 2013), that can restrict a company's use of losses that arise after a takeover (the deduction transfer targeted anti avoidance rule (TAAR)).

The Part 14 rules restrict the use of a number of types of carried forward losses and other amounts following a company takeover, including:

  1. trading losses

  2. non-trading loan relationship debits and deficits

  3. non-trading losses on intangible fixed assets

  4. management expenses, and

  5. UK and overseas property business losses

For an explanation of the ways in which a company can use these losses and other amounts to reduce its profits in a situation that does not involve a company takeover, see Practice Notes:

  1. Corporation tax loss relief—trading losses

  2. Taxation of loan relationships—Bringing credits and debits into account—trading vs non-trading profits and losses

  3. How intangible fixed assets are taxed—basic principles—Taxation of non-trading

Related documents:
Key definition:
Following definition
What does Following mean?

The process of following the same trust asset as it moves from hand to hand.

Popular documents