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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: company reconstructions: common ownership


CTA10/S940A applies where there is a transfer of a trade (or part-trade) and the companies concerned are in common ownership.

CTA10/S941 defines a test of common ownership between the predecessor and successor companies in terms of ownership of the transferred trade. CTA10/S942 (1) extends this to the ownership of the ordinary share capital (defined at CTA10/S1119) of the companies concerned. The requisite degree of common ownership is 75 per cent. Tests of ownership and CTA10/S942 are dealt with at CTM06020.

If the conditions at CTA10/S940C (a) and (b) are met then CTA10/S944 applies, modifying the normal cessation and commencement rules (CTM06110).

75 per cent test

CTA10/S941 provides that there is common ownership of a trade if the same person or persons owned at least 75 per cent of the trade both:

  • at some time within one year before the transfer of the trade, and
  • on or at any time within two years after that transfer.

CTA10/S941 does not lay down any minimum period throughout which the predecessor and successor companies must be in common ownership. There is guidance on this at CTM06210.

For the guidance on the interpretation of ‘persons’ for the purposes of CTA10/S940A, see CTM06020

Company must be within charge to CT

CTA10/S943 contains the condition that throughout the period defined in CTA10/S941 (1) the trade must have been carried on by a company or companies within the charge to CT.

This definition brings within the scope of CTA10/S940A companies that are:

  • non-resident, and
  • chargeable to CT in respect of a trade carried on in the UK through a branch or agency.

There is guidance on non-resident companies generally at CTM34200+.

Part trades

The common ownership test is defined in terms of a trade. The same rules apply when only partof a trade is transferred - see in particular CTM06060, CTM06120 and CTM06130.