BLM80380 - Sale of lessor companies and similar arrangements: change of ownership: exceptions to qualifying change of ownership: election out of charge: restrictions on losses - Examples
This guidance applies where the relevant day falls on or after 5 December 2009 and before 23 March 2011.
Example 1
A Ltd has elected out of the charge and is now a member of X Group.
The tax computation of A Ltd shows:
Trade profits 100 - the relevant activity
Loan relationship deficit 50
Capital gains 30
The loan relationship deficit can be utilised against the capital gain but cannot be utilised against the profits of the relevant activity.
Example 2
The tax computation of A Ltd shows:
Trade profits 100 - the relevant activity
Capital gains 30
Claim to group relief 130
Group relief is not available against profits of the relevant activity therefore the set off of group relief will be restricted to 30 - covering the capital gain.
Example 3
The tax computation of A Ltd shows:
Current year:
Trade loss 50 - the relevant activity
Capital gains 30
Previous year:
Trade profits 10 - the relevant activity
The loss of 50 can be set against profits of the same year and can be carried back against profits of the earlier year to the extent that the profits are derived from the relevant activity. The loss of 50 will therefore be partly utilised in the current year - 30 and the previous year - 10. The remaining amount - 10 - will be carried forward against profits of the same trade - the relevant activity.