The following Tax guidance note provides comprehensive and up to date legal information covering:
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:
non-trading loan relationship debits and deficits
non-trading losses on intangible fixed assets
management expenses, and
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:
Corporation tax loss relief—trading losses
Taxation of loan relationships — Bringing credits and debits into account—trading vs non-trading profits and losses
How intangible fixed assets are taxed—basic principles—Taxation of non-trading intangible fixed
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