Transfer of a trade under common ownership

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

  • Transfer of a trade under common ownership
  • When do the succession rules apply?
  • Transfer of a trade
  • Parts of trades
  • The ownership condition
  • Individual owners
  • Companies in liquidation
  • The tax condition
  • The succession rules—trading losses
  • Parts of trades
  • More...

Transfer of a trade under common ownership

Sometimes the restructuring of a business will involve a company transferring an existing trade to a different company under the same ownership.

Where certain conditions are met, rules in Chapter 1, Part 22 of the Corporation Tax Act 2010 have the effect that the acquiring (successor) company steps into the shoes of the disposing (predecessor) company as regards trading losses and capital allowances. These are sometimes known as the rules on successions to a trade, or the succession rules. Where the succession rules apply, they are mandatory.

This Practice Note looks at the tax implications of transferring a trade without a change in its ultimate ownership (such as a transfer within a group), including the conditions that must be met for the succession rules to apply, and the effect of the rules on trading losses in particular. The capital allowances aspects of the rules are considered in more detail in Practice Note: Capital allowances and company reconstructions.

Depending on the type of assets that make up the trade, a transfer may trigger charges under the rules on chargeable gains, intangibles, loan relationships, derivatives, stamp taxes and/or VAT. If the transfer takes place within a corporate group, relief would normally be available. For more details, see Practice Note: Intra-group asset transfers.

The succession rules only apply to trading losses and capital allowances, and

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