BIM75635 - Farming losses: notional cessations and recommencements

ICTA88/S397 does not deny relief where the trade was set up and commenced within the five years prior to the year of claim. This includes a notional cessation and recommencement under ICTA88/S113 where there has been a change in the persons carrying on the trade, but subject to the following modifications:

• The application of Section 113 does not affect the operation of Section 397 in relation to any person who is engaged in carrying on the trade before and after the change.
• Husband and wife, or civil partners, are to be treated as if they were the same person. Any transfer of the trade between them will, therefore, not affect the operation of Section 397. A widow, widower, or surviving civil partner, is not, however, to be treated for these purposes as a wife, husband or civil partner, so that when a trade passes to a widow, widower, or surviving civil partner on death, a new run of losses must accrue before Section 397 becomes effective to deny loss relief.
• If a husband and wife, or civil partners, or either of them, control a farming or market gardening company and succeed to the company's trade, or if they, or either of them, carry on a trade which is taken over by the company, (they and the company are regarded as the same person and the trade is treated as a continuous trade without regard to any discontinuance). However, where the continuation basis is applied under ICTA88/S113 (2), ICTA88/S397 (8) does not apply since there has not been a discontinuance under the provisions of Taxes Acts. (In this connection, ‘control' has the meaning given by ICTA88/S416. See CTM60200 onwards.)