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HMRC internal manual

Business Leasing Manual

Sale of lessor companies and similar arrangements: anti-avoidance: restrictions on use of losses

Section 385 CTA 2010

Section 385 ensures that the income amount arises in the selling group and the expense amount benefits the buying group. It does this through restrictions on access to losses carried back across the change of ownership.

Where the relevant day falls before 21 March 2012 any amount of loss that is derived from the expense is not available to carry back to an earlier accounting period. The amount derived from the expense is identified by treating the expense amount as the final amount deducted.

Where the relevant day falls on or after 21 March 2012 different restrictions apply. Instead of identifying and restricting the use of a loss derived from the expense the legislation identifies profits derived from the income amount and prevents any amount of loss arising in the new accounting period that follows the change of ownership from being set against any profits derived from the income amount. The amount derived from the income is identified by treating the income amount as the final item added.