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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: company reconstructions: without change in ownership - general

CTA09/S41 (starting and ceasing a trade) & CTA10/S940A (without change of ownership)

Where a company transfers a trade to someone else, including another company, CTA09/S41 treats the trade as if it had ceased in the hands of the transferring company. This means the consequences of cessation apply in computing income from that trade chargeable to CT. The commencement or cessation of a trade is dealt with at CTM02100.

However, when a trade, or part-trade, is transferred between companies in common ownership, CTA10/S940A:

  • preserves relief for CTA10/S45 carry forward losses, and
  • allows capital allowances to go forward as if the trade had not been transferred.

CTA10/S940A only applies to transfers between companies. It does not apply to the transfer of a trade or part-trade to an individual or partnership of individuals.

For CTA10/S940A to apply:

  • there must be a transfer of a trade or part-trade as set out at CTM06060 or CTM06070, and
  • the companies concerned must be in common ownership as explained at CTM06010+.

The full consequences of the application of CTA10/S940A are at CTM06110.


Particular points

A company does not have to claim CTA10/S940A treatment because it is mandatory.

CTA10/S940A has often been exploited in attempts to transfer losses to unconnected companies. There is a discussion of the method used and possible counteraction at CTM06210.

Where losses are transferable under CTA10/S940A they may still be restricted or cancelled altogether by the relevant liabilities restriction. This is described at CTM06250+.

CTA10/S940A applies only to trading profits. It does not apply to property income.

The legislation is contained in CTA10/PART22/CHAPTER1 and the key opening section is CTA10/940A. This was CTA10/S938 in the original CTA, but was renumbered along with CTA10/S939 (which became S940B) and CTA10/S940 (which became S940C) by FA11/SCH5/PARA3. Prior to Tax Law Rewrite the main provision was ICTA88/S343.