A sale of a lessor company by a loss-making group to a
profit-making group is likely to invite scrutiny because the
expense is not balanced by a tax effective income amount. For a
loss to remain available without restriction in the hands of the
profit-making buyer the company will need to show that other
factors were more significant in deciding to enter into the
transaction than obtaining the benefit of the expense amount.
Commercially, such a sale is unlikely to be attractive
precisely because the parties will have different perspectives on
the value of the company; the profit-making group would be unlikely
to pay a sum that would compensate the loss-making group for the
loss of a tax free income stream. Nevertheless there will be
circumstances that indicate that obtaining the expense amount is
not the primary motive for the sale. The particular position of the
company, the groups involved and the wider circumstances and events
surrounding the sale will need to be considered. In cases of
difficulty you should contact CT & VAT (Technical) for
advice.
