Section 676EC | Restriction on surrender of trade losses carried forward on transfer of trade ^F1

(1)This section applies if—

(a)the transferred company or a co-transferred company transfers a trade to another company (“the successor company”) within the period of 8 years beginning 3 years before the change in ownership,

(b)the transfer is a transfer to which Chapter 1 of Part 22 applies, and

(c)another company (“the claimant company”) would, apart from this section, be eligible under Part 5A to make a relevant claim for group relief for carried-forward losses.

(2)For the purposes of this section a claim for group relief for carried forward-losses is a relevant claim if it is—

(a)for an accounting period ending after the change in ownership, and

(b)in respect of an amount surrendered by the successor company which is an amount of a loss—

(i)made in the trade by the transferred company or the co-transferred company in an accounting period beginning before the change in ownership, and

(ii)carried forward to the surrender period of the successor company under section 45A(3), 303B(2) or 303D(3).

(3)The general rule is that the relief is not available.

(4)Subsection (3) does not affect the giving of group relief for carried-forward losses by the making of a deduction under section 188CK(1) from the total profits of the claimant company which arise after the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs.

(5)Subsection (3) does not affect the availability of relief under Part 5A if immediately before the change in ownership the group condition was met in relation to the claimant company and the transferred company.

(6)If an accounting period of the transferred company or co-transferred company begins before, and ends after the change in ownership, then for the purposes of subsection (2)(b)—

(a)the accounting period is treated as two separate accounting period, the first ending with the change and the second consisting on the remainder of the period, and

(b)a loss made in the trade in the accounting period is apportioned to the two periods.

(7)If an accounting period of the claimant company begins before, and ends after, the anniversary mentioned in subsection (4), then for the purposes of that subsection—

(a)the accounting period is treated as two separate accounting period, the first ending with that date and the second consisting of the remainder of the period, and

(b)the profits of the accounting period are apportioned to the two periods.

(8)Any apportionment under subsection (6)(b) or (7)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.

(9)But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.