Commentary

D6.310 Implications for the predecessor and successor on the transfer of a trade

Corporate tax
Corporate tax | Commentary

D6.310 Implications for the predecessor and successor on the transfer of a trade

Corporate tax | Commentary

Transfer of a trade—general

D6.310 Implications for the predecessor and successor on the transfer of a trade

On a transfer of a trade, or part of a trade from one company (the predecessor) to another (the successor), there are often a variety of tax issues to consider. The tax consequences depend on the types(s) of assets being transferred as well as on the level of ownership that exists between the two companies.

The impact of the transfer of a trade (or part trade) on the following areas is discussed below:

  1.  

    •     cessation and commencement treatment of the two companies

  2.  

    •     trading losses and patent box losses of the transfer

  3.  

    •     capital allowances

  4.  

    •     intangible fixed assets

  5.  

    •     capital gains

It should be noted that these issues are relevant not only to intra-group transfers, but also to transfers between unrelated companies. The details are included here on the basis that trade transfers are usually done intra-group.

Additional rules apply to trade transfers where there is 75% common ownership between the companies concerned. In such cases, special rules apply to preserve capital allowances and trading losses from the predecessor to the successor company. Where relevant, these rules apply automatically. See D6.315 for further details.

  1.  

    (a)     Cessation of trade:

    1.  

      (1)     assuming the predecessor company has no other trading activity the trade will be treated as discontinued by the

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