Commentary

D1.1127 Change in ownership of company and transfer of a trade or an asset

Corporate tax
Corporate tax | Commentary

D1.1127 Change in ownership of company and transfer of a trade or an asset

Corporate tax | Commentary

D1.1127 Change in ownership of company and transfer of a trade or an asset

Change in ownership and transfer of trade

Often a trade is transferred into another group company and if the trade is loss making the losses would transfer with the trade under the provisions of CTA 2010, ss 940A–953, Pt 22, Ch 1 (see D6.317) as long as all relevant conditions are met. The losses can then be relieved in the periods following the transfer of trade. There are restrictions on the utilisation of these transferred losses where there is also a change in the ownership of the company (see D1.1125) as detailed below1. These loss buying restrictions are intended to prevent companies using a transfer of trade within a group to circumvent other loss buying rules such as the restriction on group relief for carried forward losses ('Change in ownership and group relief for pre-acquisition carried forward losses' in D2.253).

There is no requirement for a major change in the nature of the trade or business of the company to have happened, in this situation the restrictions detailed at D1.1126 would apply.

There are two restrictions on the utilisation of losses when the conditions listed below apply, the restrictions are:

  1.  

    •     on post 1 April 2017 carried forward trade losses against total profits2 (D1.1106), and

  2.  

    •     on the surrender of carried forward trade losses available for group relief3 (D2.209, D2.264)

The restrictions in both cases are only for losses incurred before the change in ownership of

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