CTM06865 - Corporation Tax: loss buying: transfer of trade: subsequent transfers of the trade

CTA10/S676ED

S676ED ensures that the restrictions under CTA10/PART14/CH2E continue to apply in situations where a trade is transferred through several companies.

If:

then, for the purposes of Chapter 2E, there is a deemed transfer from company C, or from the co-transferred company, to company Z. This deemed transfer is treated as taking place on the date of the transfer from company Y to company Z.

In addition, if CTA10/PART22/CH1 applies to the second transfer, from Y to Z, then Chapter 2E operates as if Chapter 1, Part 22 applied to the deemed transfer as well.

This means that the deemed transfer will meet one of the conditions for the restrictions in Chapter 2E, Part 14 to apply. The actual relationship between companies C and Z does not matter.

If the other conditions of Chapter 2E are met, company Z’s ability to relieve or surrender losses of the transferred trade will be restricted in accordance with CTA10/S676EB-EC.

The deemed transfer creates the conditions for the same rules to apply again for any subsequent transfers of the trade.

Composite trades

In certain circumstances, the transferred trade might be combined with another trade before a subsequent transfer. If:

  • There is a change in ownership of a company, company C,
  • Company C transfers a trade, T, to another company, Y,
  • Company Y includes the activities of trade T in the activities of another trade (the composite trade), and
  • Company Y subsequently transfers the composite trade to another company, Z,

then the composite trade is treated in the same way as trade T in the first example, above.

There is still a deemed transfer between companies C and Z on the date of the first transfer, between Y and Z.

If Chapter 1, Part 22 applied to the second transfer, between Y and Z, then Chapter 2E, Part 14 will operate as if it applied to the deemed transfer.