CTM06110 | Corporation Tax: company reconstructions: without change in ownership - effects
From HM Revenue & Customs · Company Taxation Manual
and S948
When the conditions of are satisfied there are modifications to the normal cessation and commencement treatment of:
capital allowances;
trading losses carried forward;
trading losses carried back.
Each of these is dealt with in turn below.
For all other purposes the normal cessation and commencement rules (see ) apply.
Capital allowances:
deals with capital allowances. In the computations of both the predecessor and successor companies, the consideration given for the assets transferred with the trade or part-trade is ignored. The disposal value when the successor sells these assets is calculated as if the successor had always carried on the trade or part-trade inherited from the predecessor.
Guidance on the calculation of capital allowances for accounting periods in which the transfer takes place is at .
does not apply where the successor is a dual resident investing company. There is guidance on a dual resident investment company at .
Trading losses carried forward:
Any unused trading losses of the predecessor are allowed against the successor's future income from the same trade or part-trade under . The amount available is the loss that remains after
any sideways loss or group relief claims in respect of the predecessor's loss, and
the application of the relevant liabilities restriction ().
Guidance on how losses are identified and allowed where the successor has an existing trade and/or the part-trade rules apply is at and .
Where a company transfers its trade to a partnership of companies of which it is a member it can:
carry forward its losses under , and
set them against its share of the partnership profits.
The same applies where a company partner begins to carry on the trade alone.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Trading losses carried back:
disapplies the rule at which normally allows a carry back of up to three years on cessation. The usual 12 month carry back limit at therefore applies.