CTM06305 | Corporation Tax: loss-buying: introduction
From HM Revenue & Customs · Company Taxation Manual
counters ‘loss-buying’, where a person buys a trading company wholly or partly for its unused trading losses rather than solely for the inherent value of its trade or assets. The new owner usually introduces new activity into the company, but in such a way that it would be difficult to persuade a Tribunal that one trade had ceased and a new one commenced. Thus, but for , the company would keep its entitlement to relief for losses brought forward. applies where either:
within any specified period there is both:
a change in the ownership of a company ( and ), and
a major change in the nature or conduct of a trade carried on by the company ( and ),
or
there is a change in ownership of a company at a time when the scale of its trading activities has become small or negligible ().
Where the conditions of are satisfied all the company's unused carried-forward trading losses as at the date of the change of ownership are cancelled ().
For accounting periods ending before 1 April 2017, the specified period is 3 years beginning no more than 3 years before the change in ownership.
For accounting periods beginning on or after 1 April 2017, the specified period is 5 years beginning no more than 3 years before the change in ownership occurs. This longer period only applied however where both the change in ownership and the major change in the nature or conduct of the trade occur on or after 1 April 2017 (F(2)A17//PARA72).
Where an accounting period begins before and ends on or after 1 April 2017, it is divided so that the period that falls before 1 April 2017 and the period that falls on or after that date are treated as two separate accounting periods (F(2)A17//), see .
sets out the rules governing change in ownership of a company - see . Reliefs other than trading losses may be restricted.