Section 676EB — Corporation Tax Act 2010: Restriction on use of trade losses carried-forward on transfer of trade

Restriction on use of trade losses carried-forward on transfer of trade 676EB 1 Subsection (2) applies if—

a the transferred company transfers a trade to another company (“ the successor company ”) within the period of 8 years beginning 3 years before the change in ownership, b the transfer is a transfer to which Chapter 1 of Part 22 applies, and c the transferred company and the successor company are not related to one another both immediately before the change in ownership and at the time of the transfer.

2 A loss made by the transferred company in the transferred trade in an accounting period beginning before the change in ownership may not be deducted under section 45A or 303C from the relevant profits of an accounting period of the successor company ending after the change in ownership.

3 Profits of an accounting period of the successor company ending after the change in ownership are “relevant profits” if and so far as—

a they arise before the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs, and b they cannot fairly and reasonably be attributed to the carrying on by the successor company of the transferred trade.

4 If an accounting period of the transferred company begins before, and ends after the change in ownership, then for the purposes of subsection (2)—

a the accounting period is treated as two separate accounting period, the first ending with the change and the second consisting on the remainder of the period, and b a loss made in the trade in the accounting period is apportioned to the two periods.

5 If an accounting period of the successor company begins before, and ends after, the anniversary mentioned in subsection (3), then for the purposes of that subsection—

a the accounting period is treated as two separate accounting periods, the first ending with that date and the second consisting of the remainder of the period, and b the profits of the accounting period are apportioned to the two periods.

6 Any apportionment under subsection (4)(b) or (5)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.

7 But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.