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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Corporation Tax: trading losses - relief against total profits: restriction of relief for uncommercial trading - meaning of ‘larger undertaking’

CTA10/S44(2)

The disallowance of relief for uncommercial trading losses (CTM04600) does not apply where:

  • the trade forms part of a larger undertaking, and
  • it is carried on with a view to profits in the undertaking as a whole.

There is no definition of ‘undertaking’, but it should be taken to mean ‘trading undertaking’. There are no decided cases on whether a larger undertaking:

  • can embrace the trades of several companies in a group, or
  • is confined to the activities of a single company.

In a straightforward case it may be accepted that a loss is available for set-off by way of group relief, provided the ordinary group relief rules are satisfied. Group relief is dealt with at CTM80100+. An example of a straightforward case is where a manufacturing company in a group sells its products cheaply to a fellow group member wholesaling company. In a case like this the manufacturing company’s loss may be accepted as available for set-off by way of group relief against the correspondingly inflated profit of the wholesaler.

Officers should send a report and the file to CTIS (Technical) where abuse is suspected - see ‘Technical Help’ on the left bar. An example of a case where there might be abuse is the artificial inflation of a more flexible (sideways) relief at the expense of a less flexible (carry forward) relief.