CTM06845 - Corporation Tax: loss buying: restriction of group relief for carried-forward losses: affected profits

CTA10/S676CG

A company will only need to know its affected profits for the purposes of CTA10/PART14/CH2C if its ability to claim group relief for carried-forward losses has been restricted due to a change in its trade or business (CTA10/S676CF).

The restriction at s676CF prevents the company from claiming relief for profits that arise within the five years from the end of the accounting period of the transferred company in which the change in ownership occurred.

However, these profits are only affected if they are related to the major change in the company’s trade or business that has caused s676CF to apply. To decide this, HMRC look at the activities or other sources of income that have resulted in that change or have partly contributed to bringing the change about.

Only profits that can fairly and reasonably be attributed to these activities or sources of income are affected by the restriction at s676CF.

If the company has an accounting period that begins before and ends after the date of the fifth anniversary, it will need to apportion amounts relating to that period.