CTM06200 - Corporation Tax: company reconstructions: arrangements for transfer of leasing contracts

ICTA88/S395 applies where:

• a company leases plant and machinery under a leasing contract, and
• the company has losses created by first year allowances on that plant and machinery and
• there are arrangements during the accounting period for which the first year allowances are due for a successor company to take over (during or after the accounting period) the part of the first company’s trade that represents or includes any or all of its obligations under the leasing contract.

Where these conditions are met the profits and losses on the leasing contract are calculated as if it was a separate trade. This means that the company cannot set its losses on the leasing contract against its other income and the losses can only go forward against profits from the leasing contract.

A company is a successor company of the first company if:

• it is a successor company within ICTA88/S343 (see CTM06005 onwards), or
• it is connected with the first company as defined in ICTA88/S839.

Arrangements for the purposes of Section 395 are arrangements of any kind, written or otherwise.

FA73/S32 provides a statutory information power in relation to arrangements. There is guidance on Section 32 at CTM80200.