CTM07010 | Transfer of deductions – Introduction
From HM Revenue & Customs · Company Taxation Manual
The transfer of deduction rules were introduced by for 'qualifying changes' of ownership on or after 20 March 2013 (). The rules were introduced to bring the treatment of unrealised expenses in line with the long-standing change of ownership rules for crystallised losses.
In broad terms the rules prevent deductions where a company changes ownership with expenses that have not yet been recognised for tax, but are ‘highly likely’ () to be deducted at a later point after the change.
The rules are split into two areas:
The loss shifting rules in operate where the deductible amounts would crystallise and be used against a company’s total profits (under ) or be surrendered as group relief (under ) () or surrendered as group relief for carried-forward losses (under ).
The profit shifting rules in CTA/SS730D operate where arrangements put profits into a company after a qualifying change and that company has deductible amounts ()
Both of these are subject to a motive test ().
The rules were introduced alongside an enhancement to the anti-Capital Allowance buying rules in .