CTM06815 | Corporation Tax: loss buying: restriction of group relief for carried-forward losses: introduction
From HM Revenue & Customs · Company Taxation Manual
restricts group relief for carried forward losses following a change in company ownership. The change in ownership must take place on or after 1 April 2017.
The restriction applies both to the company whose ownership has changed (the transferred company) and to any co-transferred companies. It applies only to losses incurred before the change in ownership ().
The general rule is that these losses cannot be surrendered for group relief for carried-forward losses against any profits that arise within five years of the end of the accounting period of the transferred company in which the change in ownership occurs ( and S676CE).
However, other companies within the group are not prevented from surrendering losses incurred in any period to transferred or co-transferred companies.
Companies may need to apportion amounts in order to determine the losses restricted by and the profits affected. They should do so following the method set out in legislation for each of the following two periods:
the accounting period (AP) in which the change in ownership occurs, and
the AP in which the fifth anniversary of the change in ownership occurs.
Note that, unlike , which restricts the use of losses where there has been a major change in a company's business, CHAPTER2C applies even if the transferred company's business is unchanged.
Companies in the same group before the change in ownership
In most circumstances, the restriction does not apply to companies that met the group relief group condition ( and S188FB, ), immediately before the change in ownership occurred.
These companies were already able to surrender or claim losses to or from one another before the change. does not prevent companies from obtaining group relief for carried-forward losses in a way that was available to them before the change in ownership.
For example:
On 1 December 2020, company A and company B are in the same group for the purposes of group relief for carried-forward losses. Each is able to surrender losses to the other for this relief;
On 2 December 2020, both companies are acquired by company Z;
For the five years to 2 December 2025, neither company A nor company B will be able to surrender losses incurred before the change in ownership, on 2 December 2020, to company Z;
However, company A and company B are still able to surrender losses incurred before the change between each other.
This is subject to further restrictions in CTA10/CHAPTER2A, which apply if there is a major change in the trade or business of a transferred or co-transferred company (in this case, either or both of company A and company B).
Nothing in prevents company A and company B from surrendering losses incurred after the change to company Z. Nor does CHAPTER2C prevent company Z from surrendering losses incurred in any period to either of company A and company B.
Consortia
to S676/CD
Companies that were able to surrender losses to one another for group relief for carried-forward losses because they met one of the consortium conditions ( to S676CD) immediately before the change in ownership, and did not meet the group condition, are subject to specific rules.
These control the amount of relief a transferred company, previously owned by a consortium, can claim and surrender as group relief for carried-forward losses following the change in ownership ().