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HMRC internal manual

Company Taxation Manual

Corporation Tax: company reconstructions: without change in ownership - effects

CTA10/S944 and S948

When the conditions of CTA10/S940B are satisfied there are modifications to the normal cessation and commencement treatment of:

  • capital allowances,
  • trading losses carried forward,
  • trading losses carried back,

Each of these is dealt with in turn below.

For all other purposes the normal cessation and commencement rules (see CTM02100) apply.


Capital allowances: CTA10/S948

CTA10/S948 deals with capital allowances. In the computations of both the predecessor and successor companies, the consideration given for the assets transferred with the trade or part-trade is ignored. The disposal value when the successor sells these assets is calculated as if the successor had always carried on the trade or part-trade inherited from the predecessor.

Guidance on the calculation of capital allowances for accounting periods in which the transfer takes place is at CA15400.

CTA10/S948 does not apply where the successor is a dual resident investing company. There is guidance on a dual resident investment company at CTM34620.


Trading losses carried forward: CTA10/S944

Any unused trading losses of the predecessor are allowed against the successor’s future income from the same trade or part-trade under CTA10/S45. The amount available is the loss that remains after:

  • any CTA10/S37 sideways or group relief claims in respect of the predecessor’s loss,


  • the application of the relevant liabilities restriction (CTM06250).

Guidance on how losses are identified and allowed where the successor has an existing trade and/or the part-trade rules apply is at CTM06120 and CTM06130.

Where a company transfers its trade to a partnership of companies of which it is a member it can:

  • carry forward its losses under CTA10/S45, and
  • set them against its share of the partnership profits.

The same applies where a company partner begins to carry on the trade alone.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)


Trading losses carried back: CTA10/S944(2)

CTA10/S944(2) disapplies the rule at CTA10/S39 which normally allows a carry back of up to three years on cessation. The usual 12 month carry back limit at CTA10/S37 therefore applies.