CTM04870 - Corporation tax: CT loss reform: anti-avoidance

F(2)A17/S19, CTA10/PART14, PART14A and PART14B

Companies have increased flexibility in the way they can use losses sustained from 1 April 2017 (CTM04840).

In addition, the overall amount of relief available for carried-forward losses sustained in any period against profits arising from 1 April 2017 is limited by the loss restriction (CTM05000).

These changes bring new opportunities for avoidance.

In order to protect the tax system, new legislation has been developed and existing legislation has been extended.

TAAR

The reform of carried-forward losses includes a targeted anti-avoidance rule (TAAR) designed to counteract tax advantages that might arise from certain avoidance arrangements (F(2)A17/S19) (CTM07900).

Acquisitions

New rules have been introduced to counter loss buying, and existing rules have been modified (CTM06300).

Changes include:

• On a change of ownership, pre-acquisition carried-forward losses cannot be surrendered into the new group for a period of five years (CTA10/PART14/CHAPTER2C, CTM06300).
• The time limit has been extended for considering whether there has been a major change in a trade or business (CTM06370). Broadly, HMRC can now consider events up to five years from a change in company ownership. (CTA10/S676AA, S673, S677, S690, S692, S704 and S705.)

Loss refresh

CTA10/PART14B (CTM07500) contains provisions that prevent groups from entering into arrangements that turn carried-forward losses into in-year relief.

Prior to 1 April 2017, these rules applied only to trade losses, non-trading loan relationship deficits and management expenses.

From 1 April 2017, the rules have been extended to apply to losses of a UK property business and non-trading losses on intangible fixed assets (CTA10/S730F).