(1) This section applies if there is a change in the ownership of a company (“the company”) on or after 1 April 2017 and—
(a) conditions 1 and 2 are met, or
(b) condition 3 is met.
(2) Condition 1 is that after the change in ownership the company acquires an asset from another company in circumstances such that—
(a) section 171 of TCGA 1992 (no gain/no loss transfer within group), or
(b) section 775 of CTA 2009 (tax-neutral transfer within group),
applies to the acquisition.
(3) Condition 2 is that—
(a) in a case within subsection (2)(a), a chargeable gain accrues to the company on a disposal of the asset within the period of 5 years beginning with the change in ownership, or
(b) in a case within subsection (2)(b), there is a non-trading chargeable realisation gain on the realisation of the asset within that period.
(4) Condition 3 is that a chargeable gain on a disposal of an asset within the period of 5 years beginning immediately after the change in ownership (or an amount of such a gain) is treated as accruing to the company by virtue of an election under section 171A of TCGA 1992 (notional transfers within a group).
(Accordingly, references in this Chapter to the accrual of a relevant gain are to be read in the light of section 171B(2) and (3) of TCGA 1992.)
(5) For the purposes of subsection (3), an asset (P) acquired by the company as mentioned in subsection (2) is treated as the same as an asset (Q) owned at a later time by the company if the value of Q is derived in whole or in part from P.
(6) In particular, P is treated as the same as Q for those purposes if—
(a) Q is a freehold,
(b) P was a leasehold, and
(c) the lessee has acquired the reversion.
(7) In this Chapter—
“the change in ownership” means the change in ownership mentioned in subsection (1),
“the company” has the same meaning as in this section,
“non-trading chargeable realisation gain” means a chargeable realisation gain (within the meaning of Part 8 of CTA 2009 (intangible fixed assets)) which is a non-trading credit for the purposes of that Part (see section 746 of that Act),
“realisation” has the meaning given by section 734 of CTA 2009, and
“the relevant gain” means the gain (or amount of a gain) within subsection (3)(a) or (b) or (4).
676BB Notional split of accounting period in which change in ownership occurs
(1) This section applies for the purposes of this Chapter.
(2) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.
(3) Section 702 (apportionment of amounts) applies for the purposes of this Chapter as it applies for the purposes of Chapter 4.
(4) The amounts for the actual accounting period in column 1 of the table in section 702(2) are apportioned to the two notional accounting periods in accordance with section 702.
(5) In this Chapter, and in sections 702 and 703 as they apply by virtue of subsection (3), “the actual accounting period” and “notional accounting periods” have the same meaning as in this section.
(1) This section has effect for the purposes of restricting relief under sections 45A, 45F and 303C of this Act and section 124B of FA 2012 for a loss made ... in a trade before the change in ownership.
(2) But this section applies only if, in accordance with the relevant provisions and section 702, an amount is included in respect of chargeable gains or, as the case may be, non-trading chargeable realisation gains in the total profits of the accounting period in which the relevant gain accrues or arises.
(3) Relief under section 45A or 303C of this Act or section 124B of FA 2012 is available only in relation to each of the notional accounting periods considered separately.
(4) A loss made by the company in an accounting period beginning before the change in ownership—
(a) may not be deducted as a result of section 45A or 303C of this Act or section 124B of FA 2012 from so much of the total profits of an accounting period ending after the change in ownership as represents the relevant gain;
(b) may not be deducted by virtue of paragraph (a) of the definition of “relevant profits” in section 45F(7) from so much of the total profits of an accounting period ending after the change in ownership as represents the relevant gain.
(5) A loss made by another company (“the predecessor company”) in an accounting period beginning before the change in ownership may not be deducted as a result of section 45A, 45F or 303C (as applied by Chapter 1 of Part 22 (transfers of trades)) from so much of the total profits of an accounting period of the company ending after the change in ownership as represents the relevant gain.
In this Chapter “the relevant provisions” means—
(a) section 8(1) of, and Schedule 7A to, TCGA 1992 (amounts included in respect of chargeable gains in total profits), or
(b) Chapter 6 of Part 8 of CTA 2009 (intangible fixed assets: how credits and debits are given effect).
676BE Meaning of “amount of profits which represents a relevant gain”
(1) In this Chapter, the amount of any profits which represents a relevant gain is found by comparing—
(a) the amount (“Y”) of the relevant gain, with
(b) the amount (“Z”) which is included in respect of chargeable gains or, as the case may be, non-trading chargeable realisation gains for the accounting period concerned.
(2) If Y does not exceed Z, the amount of the profits which represents the relevant gain equals Y.
(3) If Y exceeds Z, the amount of those profits equals Z.
(1) This Chapter applies if on or after 1 April 2017 there is a change in the ownership of a company (“the transferred company”).
(2) In this Chapter—
“the change in ownership” means the change in ownership mentioned in subsection (1);
“the transferred company” has the meaning given by subsection (1).
676CB Restriction on surrender of carried-forward losses
(1) Subsection (3) applies if a company (“the claimant company”) would, (apart from this section), be eligible under Part 5A to make a relevant claim for group relief for carried-forward losses.
(2) For the purposes of this section a claim for group relief for carried-forward losses is a “relevant claim” if it is—
(a) for an accounting period ending after the change in ownership, and
(b) in respect of an amount surrendered by the transferred company or a co-transferred company which is a relevant pre-acquisition loss.
(3) The general rule is that the relief is not available.
(4) The general rule is subject to the exceptions in sections 676CD and 676CE.
(5) For the purposes of this section—
(a) the accounting period of the company mentioned in subsection (2)(b) in which the change in ownership occurs is treated as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period, and
(b) the profits or losses of the accounting period are apportioned to the two periods.
(6) Any apportionment under subsection (5)(b) is to be made on a time basis according to the respective lengths of the two periods.
(7) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
676CC Cases where consortium condition 1 or 2 was previously met
(1) Subsection (4) applies in relation to a claim for group relief for carried-forward losses by the transferred company if conditions A and B are met.
(2) Condition A is that the claim is—
(a) for an accounting period ending after the change in ownership, and
(b) in respect of a relevant pre-acquisition loss.
(3) Condition B is that consortium condition 1 was met in relation to—
(a) the transferred company (as the company owned by a consortium as mentioned in section 188CF(1)(b)), and
(b) the surrendering company (as the company mentioned in section 188CF(1)(c)),
immediately before the change in ownership (“time T”).
(4) The relief given under section 188CK in respect of the transferred company's total profits of the claim period may not exceed the relief that would be available on the assumption that the claim is based on consortium condition 1 and the ownership proportion for the purposes of that condition is equal to the lowest of the following proportions—
(a) the proportion of the ordinary share capital of the transferred company that was beneficially owned by the surrendering company at time T,
(b) the proportion of any profits available for distribution to equity holders of the transferred company to which the surrendering company was beneficially entitled at that time,
(c) the proportion of any assets of the transferred company available for distribution to such equity holders on a winding up to which the surrendering company would be beneficially entitled (as determined at that time), and
(d) the proportion of the voting power in the transferred company that was directly possessed by the surrendering company at that time.
(5) Subsection (8) applies in relation to a claim for group relief for carried-forward losses by the transferred company if conditions A and B are met.
(6) Condition A is that the claim is—
(a) for an accounting period ending after the change in ownership, and
(b) in respect of a a relevant pre-acquisition loss.
(7) Condition B is that consortium condition 2 was met in relation to—
(a) the transferred company (as the company owned by a consortium as mentioned in section 188CG(1)(b)), and
(b) the surrendering company (as the company mentioned in section 188CG(1)(c)),
immediately before the change in ownership (“time T”).
(8) The relief given under section 188CK in respect of the transferred company's total profits of the claim period may not exceed the relief that would be available on the assumption that the claim is based on consortium condition 2 and the ownership proportion for the purposes of that condition is equal to the lowest of the following proportions—
(a) the proportion of the ordinary share capital of the transferred company that was beneficially owned by the link company at time T,
(b) the proportion of any profits available for distribution to equity holders of the transferred company to which the link company was beneficially entitled at that time,
(c) the proportion of any assets of the transferred company available for distribution to such equity holders on a winding up to which the link company would be beneficially entitled (as determined at that time), and
(d) the proportion of the voting power in the transferred company that was directly possessed by the link company at that time.
(9) For the purposes of this section—
(a) the accounting period of the surrendering company mentioned in subsection (3)(b) or (7)(b) (as the case may be) in which the change in ownership occurs is treated as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period, and
(b) the profits or losses of the accounting period are apportioned to the two periods.
(10) Any apportionment under subsection (9)(b) is to be made on a time basis according to the respective lengths of the two periods.
(11) In this section—
“the link company” means the company which is the link company (see section 188CG(1)(d)) for the purposes of the meeting of consortium condition 2 as mentioned in subsection (7),
“the claim period” and “the surrendering company” has the same meaning as in Part 5A (see section 188FD(1)).
(12) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsections (4)(b) and (c) and (8)(b) and (c).
676CD Cases where consortium condition 3 or 4 was previously met
(1) If the requirement in subsection (3) is met, section 676CB(3) does not prevent a company from making under section 188CC a claim for group relief for carried-forward losses falling within subsection (2).
(2) A claim falls within this subsection if it is—
(a) for an accounting period (“the claim period”) ending after the change in ownership, and
(b) in relation to an amount surrendered by the transferred company which is a relevant pre-acquisition loss and is attributable to an accounting period of that company specified in the claim (“the specified loss-making period”).
(3) The requirement is that consortium condition 3 or consortium condition 4 is met throughout a period which—
(a) begins before or during the specified loss-making period, and
(b) ends with or after the time when the change in ownership occurs.
(4) For the purposes of a claim by virtue of this section, section 188CC(3) has effect as if requirement 3 were omitted.
(1) Nothing in section 676CB(3) or 676CC affects the giving of group relief for carried-forward losses by the making of a deduction under section 188CK(1) from total profits of the claimant company which arise after the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs.
(2) Nothing in section 676CB(3) or 676CC affects the availability of relief under Part 5A if immediately before the change in ownership the group condition was met in relation to the transferred company and the claimant company.
But see also section 676CF.
(3) If an accounting period of the claimant company begins before, and ends after, the anniversary mentioned in subsection (1), then for the purposes of that subsection—
(a) the accounting period is treated as two separate accounting periods, the first ending with that date and the second consisting of the remainder of the period, and
(b) the profits or losses of the accounting period are apportioned to the two periods.
(4) Any apportionment under subsection (3)(b) is to be made on a time basis according to the respective lengths of the two periods.
(5) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
(6) In this section “the claimant company” has the same meaning as in Part 5A (see section 188FD(1)).
(1) This section applies if—
(a) Chapter 2 applies in relation to the change in ownership by virtue of condition A in section 673 being met,
(b) Chapter 2A applies in relation to the change in ownership, or
(c) Chapter 3 applies in relation to the change in ownership by virtue of condition B in section 677 being met.
(2) This section also applies if—
(a) the condition in subsection (1)(a) would be met if in subsection (4A) of section 719 (meaning of “change in the ownership of a company”) the reference to Chapter 2C included a reference to Chapter 2, or
(b) the condition in subsection (1)(c) would be met if in subsection (4A) of section 719 the reference to Chapter 2C included a reference to Chapter 3.
(3) Where the company in relation to which the major change mentioned in section 673(4), 676AA(3) or 677(3) has occurred would (apart from this section) be eligible under Part 5A to claim in respect of a relevant pre-acquisition loss group relief for carried-forward losses for an accounting period ending after the change in ownership, no deduction in respect of that loss may be made from affected profits under section 188CK.
See section 676CG for the meaning of “affected profits”.
(4) For the purposes of this section—
(a) the accounting period in which the change in ownership occurs is treated as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period, and
(b) the profits or losses of the accounting period are apportioned to the two periods.
(5) Any apportionment under subsection (4)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.
(6) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
(1) This section has effect for the purposes of section 676CF.
(2) Profits of an accounting period ending after the change in ownership are “affected profits” if and so far as—
(a) they arise before the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs, and
(b) they can fairly and reasonably be attributed to activities, or other sources of income, as a result of which, or partly as a result of which, the major change mentioned in section 673(4), 676AA(3) or 677(3) (as the case may be) has occurred.
(3) If an accounting period of the company in relation to which the major change mentioned in section 673(4), 676AA(3) or 677(3) has occurred begins before, and ends after, the anniversary mentioned in subsection (2), then for the purposes of that subsection—
(a) the accounting period is treated as two separate accounting periods, the first ending with that date and the second consisting of the remainder of the period, and
(b) the profits or losses of the accounting period are apportioned to the two periods.
(4) Any apportionment under subsection (3)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.
(5) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
(1) In this Chapter “relevant pre-acquisition loss” means—
(a) a non-trading deficit from loan relationships for an accounting period beginning before the change in ownership carried forward to the surrender period under section 463G(6) of CTA 2009,
(b) a loss on intangible fixed assets so far as it is made up of amounts carried forward to the surrender period under section 753(3) of CTA 2009 from one or more accounting periods beginning before the change in ownership,
(c) expenses carried forward to the surrender period under section 1223 of CTA 2009 (carry forward of expenses of management of investment business) which were first deductible in an accounting period beginning before the change in ownership,
(d) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 45A(3) (post- 1 April 2017 trade loss),
(e) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 62(5)(b) or 63(3)(a) (loss made in UK property business),
(f) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 303B(2) or 303D(3) (post-1 April non-decommissioning losses of ring fence trade),
(g) a BLAGAB trade loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 124A(2) or 124C(3) of FA 2012.
(2) In this section “the surrender period” is to be interpreted in accordance with section 188BB(7).
(1) In this Chapter “co-transferred company” means any company which is related to the transferred company both immediately before and immediately after the change in ownership.
(2) For the purposes of this Chapter any two companies (“T”) and (“C”) are “related” to one another at any time when—
(a) the group condition is met in relation to T and C, or
(b) any of consortium conditions 1 to 4 is met in relation to T and C,
(whether on the assumption that T is the claimant company and C is the surrendering company or vice versa).
(3) In this Chapter—
“consortium condition 1” is to be interpreted in accordance with section 188CF,
“consortium condition 2” is to be interpreted in accordance with section 188CG,
“consortium condition 3” is to be interpreted in accordance with section 188CH,
“consortium condition 4” is to be interpreted in accordance with section 188CI,
“the group condition” is to be interpreted in accordance with section 188CE.
(1) This section applies if—
(a) there is a change in the ownership of a company (“the company”) on or after 1 April 2017, and
(b) the following are met—
conditions 1 and 2, or
condition 3.
(2) Condition 1 is that after the change in ownership the company acquires an asset from another company in circumstances such that—
(a) section 171 of TCGA 1992 (no gain/no loss transfer within a group), or
(b) section 775 of CTA 2009 (tax-neutral transfer within a group),
applies to the acquisition.
(3) Condition 2 is that—
(a) in a case within subsection (2)(a), a chargeable gain accrues to the company on a disposal of the asset within the period of 5 years beginning with the change in ownership, or
(b) in a case within subsection (2)(b), there is a non-trading chargeable realisation gain on the realisation of the asset within that period.
(4) Condition 3 is that a chargeable gain on a disposal of an asset within the period of 5 years beginning immediately after the change in ownership (or an amount of such a gain) is treated as accruing to the company by virtue of an election under section 171A of TCGA 1992 (notional transfers within a group).
(Accordingly, references in this Chapter to the accrual of a relevant gain are to be read in the light of section 171B(2) and (3) of TCGA 1992.)
(5) For the purposes of subsection (3), an asset (P) acquired by the company as mentioned in subsection (2) is treated as the same as an asset (Q) owned at a later time by the company if the value of Q is derived in whole or in part from P.
(6) In particular, P is treated as the same as Q for those purposes if—
(a) Q is a freehold,
(b) P was a leasehold, and
(c) the lessee has acquired the reversion.
(7) In this Chapter
“the change in ownership” means the change in ownership mentioned in subsection (1),
“the company” has the same meaning as in this section,
“non-trading chargeable realisation gain” means a chargeable realisation gain (within the meaning of Part 8 of CTA 2009 (intangible fixed assets)) which is a non-trading credit for the purposes of that Part (see section 746 of that Act),
“realisation” has the meaning given by section 734 of CTA 2009, and
“the relevant gain” means the gain (or amount of a gain) within subsection (3)(a) or (b) or (4).
676DB Notional split of accounting period in which change in ownership occurs
(1) This section applies for the purposes of this Chapter.
(2) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.
(3) Section 702 (apportionment of amounts) applies for the purposes of this Chapter as it applies for the purposes of Chapter 4.
(4) The amounts for the actual accounting period in column 1 of the table in section 702(2) are apportioned to the two notional accounting periods in accordance with section 702.
(5) In this Chapter, and in sections 702 and 703 as they apply by virtue of subsection (3), “the actual accounting period” and “notional accounting periods” have the same meaning as in this section.
676DC Disallowance of group relief for carried-forward losses
(1) This section has effect for the purposes of restricting relief under Chapter 3 of Part 5A (group relief for carried-forward losses).
(2) But this section applies only if, in accordance with the relevant provisions and section 702, an amount is included in respect of chargeable gains or, as the case may be, non-trading chargeable realisation gains in the total profits of the accounting period in which the relevant gain accrues or arises.
(3) In calculating the company's taxable total profits of the accounting period in which the relevant gain accrues or arises, a relevant pre-acquisition loss may not be deducted, as a result of section 188CK (group relief for carried-forward losses: deductions from total profits) from so much of the total profits of the accounting period as represents the relevant gain.
(4) “Relevant pre-acquisition loss” means—
(a) a non-trading deficit from loan relationships for an accounting period beginning before the change in ownership carried forward to the surrender period under section 463G(6) of CTA 2009,
(b) a loss on intangible fixed assets so far as it is made up of amounts carried forward to the surrender period under section 753(3) of CTA 2009 from one or more accounting periods beginning before the change in ownership,
(c) expenses carried forward to the surrender period under section 1223 of CTA 2009 (carrying forward expenses of management and other amounts) which were first deductible in an accounting period beginning before the change in ownership,
(d) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 45A(3) (post- 1 April 2017 trade loss);
(e) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 62(5)(b) or 63(3)(a) (loss made in UK property business),
(f) a loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 303B(2) or 303D(3) (post-1 April non-decommissioning losses of ring fence trade),
(g) a BLAGAB trade loss made in an accounting period beginning before the change in ownership and carried forward to the surrender period under section 124A(2) or 124C(3) of FA 2012.
(5) In this section “the surrender period” is to be interpreted in accordance with section 188BB(7).
In this Chapter “the relevant provisions” means—
(a) section 8(1) of, and Schedule 7A to, TCGA 1992 (amounts included in respect of chargeable gains in total profits), or
(b) Chapter 6 of Part 8 of CTA 2009 (intangible fixed assets: how credits and debits are given effect).
676DE Meaning of “amount of profits which represents a relevant gain”
(1) In this Chapter, the amount of any profits which represents a relevant gain is found by comparing—
(a) the amount (“Y”) of the relevant gain, with
(b) the amount (“Z”) which is included in respect of chargeable gains or, as the case may be, non-trading chargeable realisation gains for the accounting period concerned.
(2) If Y does not exceed Z, the amount of the profits which represents the relevant gain equals Y.
(3) If Y exceeds Z, the amount of those profits equals Z.
(1) This Chapter applies if on or after 1 April 2017 there is a change in the ownership of a company (“the transferred company”).
(2) In this Chapter—
“the change in ownership” means the change in ownership mentioned in subsection (1);
“the transferred company” has the meaning given by subsection (1).
676EB Restriction on use of trade losses carried-forward on transfer of trade
(1) Subsection (2) applies if—
(a) the transferred company transfers a trade to another company (“the successor company”) within the period of 8 years beginning 3 years before the change in ownership,
(b) the transfer is a transfer to which Chapter 1 of Part 22 applies, and
(c) the transferred company and the successor company are not related to one another both immediately before the change in ownership and at the time of the transfer.
(2) A loss made by the transferred company in the transferred trade in an accounting period beginning before the change in ownership may not be deducted under section 45A or 303C from the relevant profits of an accounting period of the successor company ending after the change in ownership.
(3) Profits of an accounting period of the successor company ending after the change in ownership are “relevant profits” if and so far as—
(a) they arise before the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs, and
(b) they cannot fairly and reasonably be attributed to the carrying on by the successor company of the transferred trade.
(4) If an accounting period of the transferred company begins before, and ends after the change in ownership, then for the purposes of subsection (2)—
(a) the accounting period is treated as two separate accounting period, the first ending with the change and the second consisting on the remainder of the period, and
(b) a loss made in the trade in the accounting period is apportioned to the two periods.
(5) If an accounting period of the successor company begins before, and ends after, the anniversary mentioned in subsection (3), then for the purposes of that subsection—
(a) the accounting period is treated as two separate accounting periods, the first ending with that date and the second consisting of the remainder of the period, and
(b) the profits of the accounting period are apportioned to the two periods.
(6) Any apportionment under subsection (4)(b) or (5)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.
(7) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
676EC Restriction on surrender of trade losses carried forward on transfer of trade
(1) This section applies if—
(a) the transferred company or a co-transferred company transfers a trade to another company (“the successor company”) within the period of 8 years beginning 3 years before the change in ownership,
(b) the transfer is a transfer to which Chapter 1 of Part 22 applies, and
(c) another company (“the claimant company”) would, apart from this section, be eligible under Part 5A to make a relevant claim for group relief for carried-forward losses.
(2) For the purposes of this section a claim for group relief for carried forward-losses is a relevant claim if it is—
(a) for an accounting period ending after the change in ownership, and
(b) in respect of an amount surrendered by the successor company which is an amount of a loss—
(i) made in the trade by the transferred company or the co-transferred company in an accounting period beginning before the change in ownership, and
(ii) carried forward to the surrender period of the successor company under section 45A(3), 303B(2) or 303D(3).
(3) The general rule is that the relief is not available.
(4) Subsection (3) does not affect the giving of group relief for carried-forward losses by the making of a deduction under section 188CK(1) from the total profits of the claimant company which arise after the 5th anniversary of the end of the accounting period of the transferred company in which the change in ownership occurs.
(5) Subsection (3) does not affect the availability of relief under Part 5A if immediately before the change in ownership the group condition was met in relation to the claimant company and the transferred company.
(6) If an accounting period of the transferred company or co-transferred company begins before, and ends after the change in ownership, then for the purposes of subsection (2)(b)—
(a) the accounting period is treated as two separate accounting period, the first ending with the change and the second consisting on the remainder of the period, and
(b) a loss made in the trade in the accounting period is apportioned to the two periods.
(7) If an accounting period of the claimant company begins before, and ends after, the anniversary mentioned in subsection (4), then for the purposes of that subsection—
(a) the accounting period is treated as two separate accounting period, the first ending with that date and the second consisting of the remainder of the period, and
(b) the profits of the accounting period are apportioned to the two periods.
(8) Any apportionment under subsection (6)(b) or (7)(b) is to be made on a time basis according to the respective lengths of the two deemed accounting periods.
(9) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
(1) Subsections (2) and (3) apply if a trade transferred by the transferred company or a co-transferred company is transferred on a subsequent occasion to another company.
(2) The transferred company or (as the case may be) the co-transferred company is to be treated for the purposes of this Chapter—
(a) as having transferred the trade to that other company, and
(b) as having done so at the time it was actually transferred to that other company.
(3) The deemed transfer is to be treated for the purposes of this Chapter as a transfer to which Chapter 1 of Part 22 applies if the actual transfer to the other company was a transfer to which that Chapter applies.
(4) Subsections (5) and (6) apply if—
(a) a trade (“the original trade”) is transferred by the transferred company or a co-transferred company,
(b) the activities of the original trade are included in the activities of another trade (“the composite trade”), and
(c) the composite trade is transferred to another company.
(5) The transferred company or (as the case may be) the co-transferred company is to be treated for the purposes of this Chapter—
(a) as having transferred the original trade to that other company, and
(b) as having done so at the time the composite trade was actually transferred to that other company.
(6) The deemed transfer is to be treated for the purposes of this Chapter as a transfer to which Chapter 1 of Part 22 applies if the transfer of the composite trade to the other company was a transfer to which that Chapter applies.
(1) Section 940B (meaning of “transfer of trade” and related expressions) applies for the purposes of this Chapter as it applies for the purposes of Chapter 1 of Part 22.
(2) In this Chapter “co-transferred company” means any company which is related to the transferred company both immediately before and immediately after the change in ownership.
(3) For the purposes of this Chapter any two companies (“T”) and (“C”) are “related” to one another at any time when—
(a) the group condition is met in relation to T and C, or
(b) any of consortium conditions 1 to 4 is met in relation to T and C,
(whether on the assumption that T is the claimant company and C is the surrendering company or vice versa).
(4) In this Chapter—
“consortium condition 1” is to be interpreted in accordance with section 188CF,
“consortium condition 2” is to be interpreted in accordance with section 188CG,
“consortium condition 3” is to be interpreted in accordance with section 188CH,
“consortium condition 4” is to be interpreted in accordance with section 188CI,
“the group condition” is to be interpreted in accordance with section 188CE.”
(1) This Chapter applies if—
(a) there is a change in the ownership of a company with investment business (“the company”), and
(b) condition A, B or C is met.
(2) Condition A is that after the change in ownership there is a significant increase in the amount of the company's capital (see sections 688 to 691).
(3) Condition B is that within the period of 8 years beginning 3 years before the change in ownership there is a major change in the nature or conduct of the business carried on by the company.
(4) Condition C is that the change in ownership occurs at any time after the scale of the activities in the business carried on by the company has become small or negligible and before any significant revival of the business.
(5) In subsection (3) “major change in the nature or conduct of a business” includes a major change in the nature of the investments held by the company, even if the change is the result of a gradual process which began before the period of 8 years mentioned in that subsection.
(6) In this Chapter—
“the change in ownership” means the change in ownership mentioned in subsection (1), and
“the company” has the same meaning as in this section.
678 Notional split of accounting period in which change in ownership occurs
(1) This section applies for the purposes of this Chapter.
(2) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.
(3) The amounts for the actual accounting period in column 1 of the table in section 685(2) are apportioned to the two notional accounting periods in accordance with section 685.
(4) In this Chapter “the actual accounting period” and “notional accounting periods” have the same meaning as in this section.
679 Restriction on debits to be brought into account
(1) This section has effect for the purpose of restricting the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the company's loan relationships.
(2) The debits to be brought into account for the purposes of Part 5 of CTA 2009 for—
(a) the accounting period beginning immediately after the change in ownership, or
(b) any subsequent accounting period,
do not include relevant non-trading debits so far as amount A exceeds amount B.
(3) Amount A is the sum of—
(a) the amount of those relevant non-trading debits, and
(b) the amount of any relevant non-trading debits which have been brought into account for the purposes of that Part for any previous accounting period ending after the change in ownership.
(4) Amount B is the amount of the taxable total profits of the accounting period ending with the change in ownership.
(5) For the meaning of “relevant non-trading debit”, see section 730.
680 Restriction on the carry forward of non-trading deficit from loan relationships
(1) This section has effect for the purpose of restricting the carry forward of a non-trading deficit from the company's loan relationships under Part 5 of CTA 2009 (loan relationships).
(2) Subsection (3) applies if the non-trading deficit in column 1 of row 4 of the table in section 685(2) is apportioned in accordance with section 685(2) to the first notional accounting period.
(3) None of that non-trading deficit may be carried forward to—
(a) the accounting period beginning immediately after the change in ownership, or
(b) any subsequent accounting period.
681 Restriction on relief for non-trading loss on intangible fixed assets
(1) This section has effect for the purpose of restricting relief under section 753 of CTA 2009 (treatment of non-trading losses) in respect of a non-trading loss on intangible fixed assets.
(2) Relief under section 753 of CTA 2009 against the total profits of the same accounting period is available only in relation to each of the notional accounting periods considered separately.
(3) A non-trading loss on intangible fixed assets for an accounting period beginning before the change in ownership may not be—
(a) carried forward under section 753(3) of that Act to an accounting period ending after the change in ownership, or
(b) treated under that section as if it were a non-trading loss on intangible fixed assets for that period.
682 Restriction on the deduction of expenses of management
(1) This section has effect for the purpose of restricting deductions for expenses of management.
(2) Any amounts which—
(a) are, or are treated as, expenses of management referable to the actual accounting period, and
(b) are apportioned to either of the two notional accounting periods in accordance with section 685,
are treated for the purposes of Chapter 2 of Part 16 of CTA 2009 (companies with investment business) as expenses of management referable to that notional accounting period.
(3) Any allowances which are apportioned to either of the notional accounting periods in accordance with section 685 are treated for the purposes of sections 253 and 270HE of CAA 2001 and section 1233 of CTA 2009 (companies with investment business: excess capital allowances) as falling to be made in that notional accounting period.
(4) In calculating the taxable total profits of an accounting period of the company ending after the change in ownership, no deduction may be made under section 1219 of CTA 2009 (expenses of management of a company's investment business) by reference to—
(a) expenses of management deductible for an accounting period beginning before the change, or
(b) allowances falling to be made for such an accounting period.
(1) This section has effect for the purpose of restricting relief under sections 62 and 63 for a loss made by the company in a UK property business before the change in ownership.
(2) Relief under section 62(3) is available only in relation to each of the notional accounting periods considered separately.
(3) A loss made in an accounting period beginning before the change in ownership may not be—
(a) carried forward under section 62(5)(a) or 63(3)(a) to an accounting period ending after the change in ownership, or
(b) treated in relation to that accounting period as mentioned in section 62(5)(b) or 63(3)(b).
684 Disallowance of overseas property business losses
(1) This section has effect for the purpose of restricting relief under section 66 for a loss made by the company in an overseas property business before the change in ownership.
(2) A loss in the business made in an accounting period beginning before the change in ownership may not be used under section 66(3) to reduce the profits of the business of an accounting period ending after the change in ownership.
(1) This section applies for the purposes of this Chapter, but subsection (2) is subject to subsection (3).
(2) Any amount for the actual accounting period in column 1 of the following table is to be apportioned to the two notional accounting periods in accordance with the corresponding method of apportionment in column 2 of the table.
Row | 1. Amount to be apportioned | 2. Method of apportionment
1 | The amount for the actual accounting period of any adjusted non-trading profits from the company's loan relationships (see section 686(2)). | Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
2 | The amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships (see section 686(3)). | Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
3 | The amount of any non-trading debit that falls to be brought into account for the actual accounting period for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company. | (1) If condition A in section 686(4) is met, apportion the amount in column 1 by reference to the time of accrual of the amount to which the debit relates. (2) If condition B in section 686(5) is met, apportion the amount in column 1 to the first notional accounting period.
4 | The amount of any non-trading deficit carried forward to the actual accounting period under section 457(1) , 463G(6) or 463H(4) of CTA 2009. | Apportion the whole of the amount in column 1 to the first notional accounting period.
5 | The amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for the actual accounting period under section 751 of CTA 2009 (non-trading gains and losses), but excluding any amount within column 1 of row 6. | Apportion to each notional accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice.
6 | The amount of any non-trading loss on intangible fixed assets carried forward to the actual accounting period under section 753(3) of CTA 2009 and treated under that section as if it were a non-trading loss on intangible fixed assets for that period. | Apportion the whole of the amount in column 1 to the first notional accounting period.
7 | The amount of any expenses of management referable to the actual accounting period within the meaning of Chapter 2 of Part 16 of CTA 2009 (companies with investment business) (but see section 686(6)). | Apportion to each notional accounting period the amounts that would fall to be brought into account in that period as an amount in column 1 if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice.
8 | The amount of any excess carried forward under section 1223 of CTA 2009 (expenses of management carried forward) to the actual accounting period. | Apportion the whole of the amount in column 1 to the first notional accounting period.
9 | The amount of any allowances falling to be made for the actual accounting period as a result of section 253 of CAA 2001 which would (but for this Chapter) be added to the expenses of management for the period because of section 1233 of CTA 2009 (excess capital allowances). | Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
10 | Any other amounts by reference to which the profits or losses of the actual accounting period would (but for this Chapter) be calculated. | Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
(3) If any method of apportionment in column 2 of the table in subsection (2) would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.
(4) For the meaning of certain expressions used in this section, see section 686.
(1) This section applies for the purposes of the table in section 685(2).
(2) For the purposes of column 1 of row 1 of the table, the amount for the actual accounting period of any adjusted non-trading profits from the company's loan relationships is the amount which would be the amount of the profits from those relationships chargeable under section 299 of CTA 2009 (charge to tax on non-trading profits) if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded.
(3) For the purposes of column 1 of row 2 of the table, the amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships is the amount which would be the amount of the non-trading deficit from those relationships if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded.
(4) Condition A is that —
(a) the amount in column 1 of row 3 of the table is determined on an amortised cost basis of accounting, and
(b) none of the following provisions applies—
(i) section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases),
(ii) section 407 of that Act (postponement until redemption of debits for connected companies' deeply discounted securities), or
(iii) section 409 of that Act (postponement until redemption of debits for close companies' deeply discounted securities).
(5) Condition B is that —
(a) the amount in column 1 of row 3 of the table is determined on an amortised cost basis of accounting, and
(b) any of the provisions mentioned in subsection (4)(b) applies.
(6) The expenses of management mentioned in column 1 of row 7 of the table do not include any expenses for which a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) would be disallowed because of subsection (3)(b) of that section.
687 Adjustment to balancing charges if relief is restricted
(1) This section applies if condition A or B is met.
(2) Condition A is that the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in the case of the company in respect of its loan relationships are restricted because of section 679.
(3) Condition B is that deductions from the company's total profits are restricted because of section 680 or 682.
(4) In applying the provisions of CAA 2001 about balancing charges to the company by reference to any event after the change in ownership, there is to be disregarded any allowance falling to be made in taxing the company's trade for any accounting period beginning before the change in ownership.
This subsection applies despite section 577(3) of CAA 2001.
(5) But subsection (4) does not apply if the allowance has been given effect to by means of relief against any profits of that accounting period or any subsequent accounting period beginning before the change in ownership.
(6) For the purposes of subsection (5), it is to be assumed that any loss attributable to any such allowance as is mentioned in subsection (4) is relieved before any loss which is not attributable to such an allowance.
688 Meaning of “significant increase in the amount of a company's capital”
(1) This section and sections 689 to 691 have effect for determining whether, for the purposes of section 677(2), there is a significant increase in the amount of a company's capital after a change in the ownership of the company.
(2) There is a significant increase in the amount of a company's capital if amount B—
(a) exceeds amount A by at least £1 million, , and
(b) is at least 125% of amount A.
(3) For the meaning of—
(a) “amount A” and “amount B”, see sections 689 and 690 respectively, and
(b) “amount of capital”, see section 691.
(1) In section 688, amount A is the lower of—
(a) the amount of the company's capital immediately before the change in ownership, and
(b) the highest 60 day minimum amount for the pre-change year.
(2) The highest 60 day minimum amount for the pre-change year is found as follows.
Step 1 Find the daily amounts of the company's capital over the pre-change year.
Step 2 Take the highest of the daily amounts.
Step 3 Find out whether there was in the pre-change year a period of at least 60 days in which there was no daily amount lower than the amount taken.
Step 4 If there was, the amount taken is the highest 60 day minimum amount for the pre-change year. If there was not, take the next highest of the daily amounts and repeat step 3; and so on, until the highest 60 day minimum amount for the pre-change year is found.
(3) In this section “the pre-change year” means the period of one year ending immediately before the change in ownership.
(1) In section 688, amount B is the highest 60 day minimum amount for the post-change period.
(2) The highest 60 day minimum amount for the post-change period is found as follows.
Step 1 Find the daily amounts of the company's capital over the post-change period.
Step 2 Take the highest of the daily amounts.
Step 3 Find out whether there was in the post-change period a period of at least 60 days in which there was no daily amount lower than the amount taken.
Step 4 If there was, the amount taken is the highest 60 day minimum amount for the post-change period. If there was not, take the next highest of the daily amounts and repeat step 3; and so on, until the highest 60 day minimum amount for the post-change period is found.
(3) In this section “the post-change period” means the period of 5 years beginning with the change in ownership.
(1) This section applies for the purposes of sections 688 to 690.
(2) The amount of the capital of a company is the sum of—
(a) the amount of the paid up share capital of the company,
(b) the amount outstanding of any debts incurred by the company which are within section 453(2), and
(c) the amount outstanding of any redeemable loan capital issued by the company.
(3) For the purposes of subsection (2)—
(a) the amount of the paid up share capital includes any amount in the share premium account of the company, and
(b) the amount outstanding of any debts includes the amount of any interest due on the debts.
(4) Amounts of capital are to be expressed in sterling.
(5) In this section “share premium account” has the same meaning as in section 610 of the Companies Act 2006.
(1) This Chapter applies if—
(a) there is a change in the ownership of a company with investment business (“the company”), and
(b) the following are met—
condition 1, and
conditions 2 and 3 or condition 4.
(2) Condition 1 is that none of conditions A to C in section 677 is met.
(3) Condition 2 is that after the change in ownership the company acquires an asset from another company in circumstances such that—
(a) section 171(1) of TCGA 1992 (no gain/no loss on transfer within group), or
(b) section 775 of CTA 2009 (tax-neutral transfer within group),
applies to the acquisition.
(4) Condition 3 is that—
(a) in a case within subsection (3)(a), a chargeable gain accrues to the company on a disposal of the asset within the period of 5 years beginning with the change in ownership, or
(b) in a case within subsection (3)(b), there is a non-trading chargeable realisation gain on the realisation of the asset within that period.
(4A) Condition 4 is that a chargeable gain on a disposal of an asset within the period of 5 years beginning immediately after the change in ownership (or an amount of such a gain) is treated as accruing to the company by virtue of an election under section 171A of TCGA 1992 (election to reallocate gain or loss to another member of the group).
(Accordingly, references in this Chapter to the accrual of a relevant gain are to be read in the light of section 171B(2) and (3) of TCGA 1992.)
(5) For the purposes of subsection (4), an asset (P) acquired by the company as mentioned in subsection (3) is treated as the same as an asset (Q) owned at a later time by the company if the value of Q is derived in whole or in part from P.
(6) In particular, P is treated as the same as Q for those purposes if—
(a) Q is a freehold,
(b) P was a leasehold, and
(c) the lessee has acquired the reversion.
(7) In this Chapter—
“the change in ownership” means the change in ownership mentioned in subsection (1),
“the company” has the same meaning as in this section,
“non-trading chargeable realisation gain” means a chargeable realisation gain (within the meaning of Part 8 of CTA 2009 (intangible fixed assets)) which is a non-trading credit for the purposes of that Part (see section 746 of that Act),
“realisation” has the meaning given by section 734 of CTA 2009, and
“the relevant gain” means the gain (or amount of a gain) within subsection (4)(a) or (b) or (4A) .