CTM06305 - Corporation Tax: loss-buying: introduction

CTA2010/S673

CTA2010/S673 counters ‘loss-buying’, where a person buys a trading company wholly or partly for its unused trading losses rather than solely for the inherent value of its trade or assets. The new owner usually introduces new activity into the company, but in such a way that it would be difficult to persuade Commissioners that one trade had ceased and a new one commenced. Thus, but for S673, the company would keep its’ entitlement to relief for losses brought forward. CTA2010/S673 applies where either: 

• within any period of 3 years there is both:

• • a change in the ownership of a company (CTM06340 and CTM06350), and
  • a major change in the nature or conduct of a trade carried on by the company (CTM06370 and CTM06380),

• • or
    

• there is a change in ownership of a company at a time when the scale of its trading activities has become small or negligible (CTM06390).

Where the conditions of CTA2010/S673 are satisfied all the company's unused CTA2010/S45 trading losses as at the date of the change of ownership are cancelled (CTM06420).

The CTA2010/S719 rules in conjunction with rules very similar to those at Section 673also restrict the utilisation of amounts other than trading losses - see CTM06340 for details.