CTM06010 | Corporation Tax: company reconstructions: common ownership
From HM Revenue & Customs · Company Taxation Manual
applies where there is a transfer of a trade (or part-trade) and the companies concerned are in common ownership.
defines a test of common ownership between the predecessor and successor companies in terms of ownership of the transferred trade. extends this to the ownership of the ordinary share capital (defined at ) of the companies concerned. The requisite degree of common ownership is 75 per cent. Tests of ownership and are dealt with at .
If the conditions at CTA10/S940C (a) and (b) are met then applies, modifying the normal cessation and commencement rules ().
75 per cent test
provides that there is common ownership of a trade if the same person or persons owned at least 75 per cent of the trade both:
at some time within one year before the transfer of the trade, and
on or at any time within two years after that transfer.
does not lay down any minimum period throughout which the predecessor and successor companies must be in common ownership. There is guidance on this at .
For the guidance on the interpretation of ‘persons’ for the purposes of , see .
Company must be within charge to Corporation Tax (CT)
contains the condition that throughout the period defined in the trade must have been carried on by a company or companies within the charge to CT.
This definition brings within the scope of companies that are:
non-resident, and
chargeable to CT in respect of a trade carried on in the UK through a permanent establishment (see and onwards).
There is guidance on non-resident companies generally at onwards.
Part trades
The common ownership test is defined in terms of a trade. The same rules apply when only partof a trade is transferred - see in particular , and .