CTM06800 - Corporation Tax: loss buying: assets transferred between companies: profits representing the gain
CTA10/S676BE, S676DE
CTA10/PART14/CH2B and CH2D restrict relief only against profits representing a transferred gain or a gain on a transferred asset.
The amount of profit affected is determined as follows:
1. Find the amount of the relevant gain (amount Y). This will be either the gain that has been transferred, or the gain realised on the transferred asset.
2. Find amount Z for the accounting period in which the relevant gain arises;
- If the relevant gain is a chargeable gain, amount Z is the total amount included in respect of chargeable gains for the accounting period.
- If the relevant gain is a non-trading chargeable realisation gain, amount Z is the total amount included in respect of non-trading chargeable realisation gains for the accounting period.
3. If Z is greater than or equal to Y, the amount of profit affected is equal to amount Y. That is, relief is restricted under Chapters 2B and 2D on profits equal to the amount of the relevant gain.
4. If Y is greater than Z, the amount of profit affected is equal to amount Z. That is, relief is restricted under Chapters 2B and 2D on profits equal to the amount of chargeable gains of the period, or the amount of non-trading chargeable realisation gains, as appropriate.
In certain circumstances, the change in company ownership that brings the restrictions into effect could occur after the beginning and before the end of an accounting period of the company. This creates the possibility of a gain arising after the change in ownership but before the end of the accounting period.
In these circumstances, the company will need to apportion amounts between two notional accounting periods, one before and one after the change in ownership (CTA10/S676BB, S676DB). Amount Z will be the total amount included in respect of either chargeable gains or non-trading chargeable realisation gains, as appropriate, for the notional period following the change in ownership.