CTM04620 | Corporation Tax: trading losses - relief against total profits: restriction of relief for uncommercial trading - meaning of ‘larger undertaking’

CTA10/S44 (2)

The disallowance of relief for uncommercial trading losses (see CTM04600) does not apply where:

• the trade forms part of a larger undertaking, and

• it is carried on with a view to profits in the undertaking as a whole.

There is no tax law definition of ‘undertaking’, but in company law (CA06/S1161) it means a body corporate or partnership, and an unincorporated association carrying on a trade or business, with or without a view to profit. In tax law it should be taken to mean ‘trading undertaking’. There are no decided cases on whether a larger undertaking:

• can embrace the trades of several companies in a group, or

• is confined to the activities of a single company.

In a straightforward case it may be accepted that a loss is available for set-off by way of group relief, provided the ordinary group relief rules are satisfied. Group relief is dealt with at CTM80100 onwards. An example of a straightforward case is where a manufacturing company in a group sells its products cheaply to a fellow group member wholesaling company. In a case like this the manufacturing company's loss may be accepted as available for set-off by way of group relief against the correspondingly inflated profit of the wholesaler.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000).