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HMRC internal manual

Business Leasing Manual

Sale of lessor companies and similar arrangements: anti-avoidance: application of section 432

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 fully 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 CTISA (CT&BIT) for advice.