CTM07050 - Transfer of Deductions – loss Shifting: disallowance of deductible amounts for group relief, group relief for carried-forward losses or sideways loss relief

CTA10/S730c

When there has been a qualifying change in ownership (CTM07020) of a Company ‘C’, the loss shifting rules act to prevent relevant claims by C for certain deductible amounts which were highly likely to exist at the date of transfer (CTM07030).

A relevant claim means a claim by C or a company connected with C for:

  • sideways loss relief against total profits under CTA10/S37,group relief under CTA10/Part 5/Chapter 4, or
  • group relief for carried-forward losses under CTA10/Part 5A/Chapter 3.

Where the following conditions are met the deductions are disallowed for the purposes of the relevant claim for an accounting period ending on or after the change in ownership.

  • There is a qualifying change in ownership.
  • On the relevant day (CTM07020), it is highly likely that the amount, or any part of it, would be brought into account by C, or any company connected with C, in any accounting period ending on or after the relevant day (CTM07030).
  • The purpose, or one of the main purposes, of the “change arrangements” is to bring the amount (whether or not together with other deductible amounts) into account as a deduction in any accounting period ending on or after the relevant day (CTM07040).

However, the rules in S730C do not affect any deductions which could have been claimed or brought into account in the absence of the qualifying change. For example, for relief of carried forward trading losses against subsequent trading profits of the same trade under CTA10/S45.

Where the claim is for group relief for carried-forward losses, those losses cannot be made up of amounts that were restricted deductible amounts in a previous accounting period. For the purposes of calculating this amount, assume that the most beneficial use has been made of the carried-forward losses.

Change Arrangements

“Change Arrangements” means any arrangements made to bring about, or otherwise connected with, the qualifying change (CTM07020).