CTM06710 - Corporation Tax: loss buying: modification of pre-existing provisions

CTA10/PART14, PART14A-B

As of 1 April 2017, the existing loss-buying provisions at Parts 14 to 14B have been modified to extend time limits, reflect other changes to the CT loss relief regime and in certain cases to expand restrictions on relief.

Extended time limits

A number of provisions have been modified in order to extend the time limit for considering whether the loss buying conditions have been met. These conditions may involve a major change in a trade or business, or may involve the transfer of an asset.

Broadly, HMRC can now consider events up to five years from a change in company ownership. However, the precise operation of the time limit depends on the losses involved.

The modified time limits only have effect where both the change in ownership (CTM06720) and, where relevant, the change in the trade or business that brings a restriction into effect, occur on or after 1 April 2017.

The provisions affected are as follows:

  • Disallowance of trading losses (CTA10/S673),
  • Restrictions on relief for companies with investment business(CTA10/S677, S690),
  • Restrictions on relief for companies with investment business: asset transferred within group (CTA10/S692),
  • Restrictions on relief for companies with UK property business (CTA10/S704),
  • Restrictions on relief for companies with overseas property business (CTA10/S705).

However, the extension of s673 does not apply in certain cases involving decommissioning losses of oil and gas ring-fence trades (CTA10/S303C). In these circumstances, the time limit for considering whether loss buying conditions have been met remains three years following a change in ownership (CTA10/S674A).

Some provisions enable HMRC to consider a period prior to a change in ownership, for example to determine whether restrictions relating to a major change in a trade should apply (s673). The period of time prior to a change in ownership that HMRC can potentially consider remains unchanged.

Expansion of restrictions

Part 14B contains provisions that prevent groups from entering into arrangements that turn carried-forward losses into in-year losses. 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).

In addition, the coverage of CTA10/PART14/CH4 has been expanded. This chapter restricts the way companies can use losses against certain gains following a change in ownership. Where a company changes ownership on or after 1 April 2017, the gains affected include those reallocated to the company using an election under TCGA92/S171A.

Consequential amendments

A number of provisions within Parts 14 to 14B have been expanded so that restrictions and apportionment rules cover group relief for carried-forward losses (CTM06810) and amounts carried forward under provisions introduced as part of the relaxation of relief (CTM04840) for carried-forward losses, as appropriate.

The affected provisions are:

  • Disallowance of trading losses (CTA10/S674),
  • Apportionment of amounts (CTA10/S685),
  • Restriction of debits to be brought into account (CTA10/S696),
  • Apportionment of amounts (CTA10/S702),
  • Disallowance of deductible amounts (CTA10/S730C),
  • Meaning of relevant carried-forward loss (CTA10/S730F).