The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
It is often necessary to transfer a trade between companies under common ownership without a change in ownership before or after a company sale or acquisition, or as part of a general group restructuring operation.
The succession to trade rules enable trades to be transferred under common 75% ownership with the ability to carry forward tax losses into the successor company and a tax-neutral transfer for capital allowances purposes. The transfer of a trade between group members is commonly also referred to as a ‘hive down’, ‘hive up’ or ‘hive across’, depending upon the group structure in question. Without rules to the contrary, the trade would be treated as permanently ceased in the transferor company, resulting in losses being lost and balancing adjustments in the capital allowances pools. The succession to trade rules only apply to transfers between companies and not to an individual or partnership comprised of individuals.
The losses transferred to the successor company can be utilised as follows:
against profits of the trade to which the company has succeeded provided the losses were generated pre-1 April 2017 which have not been relieved under CTA 2010, s 37 (against total profits) or CTA 2010, s 45F (terminal losses)
against future total profits of the company provided the losses were post-1 April 2017 and were either incurred in the accounting period in which the predecessor ceased to carry on the trade or carried forward to that period and they have not been relieved against total profits or group relieved
group relieved provided the losses were post-1 April 2017 and were either incurred in the accounting period in which the predecessor ceased to carry on the trade or carried forward to that period and they have not been relieved against total profits or previously group relieved
CTA 2010, ss 944, 944A
From 1 April 2017, terminal losses cannot be claimed by the predecessor where that loss was made in the transferred
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