Commentary

D1.1126 Change in ownership and major change in trade or business—restriction of losses

Corporate tax
Corporate tax | Commentary

D1.1126 Change in ownership and major change in trade or business—restriction of losses

Corporate tax | Commentary

D1.1126 Change in ownership and major change in trade or business—restriction of losses

Anti-avoidance provisions restrict the use of certain losses if following a change in ownership there is a major change in the nature or conduct of a trade or business. For details of what constitutes a change of ownership see 'Meaning of change of ownership' in D1.1125 and for an explanation of a major change in the nature or conduct of a trade or, for post 1 April 2017 losses, a business see 'Meaning of major change in the nature or conduct of a trade or business' in D1.1125. The circumstances that these restrictions are designed to prevent are sometimes known as loss buying as they are at aimed at companies who acquire a company with historical losses and then use those losses against its own profits.

The original rules are set out in CTA 2010, ss 673–676 (Ch 2) for trading losses and CTA 2010, ss 677–691 (Ch 3) for non-trading losses and reliefs, these were then extended to incorporate the changes in relief for carried forward losses post 1 April 2017 (see D1.1106), these additional rules are in CTA 2010, ss 676AA–676AL (Ch 2A). Chapter 2 and 3 take priority over Chapter 2A where a loss or other amount meets the conditions of both Chapter 2A and either Chapter 2 or 31.

For details of the anti-avoidance rules for non-trading losses and reliefs under CTA 2010, ss 677–691, (Ch 3) see the following:

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    •     excess management

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