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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Corporation Tax: company reconstructions: arrangements for transfer of leasing contracts

CTA10/S53 applies where:

  • a company leases plant and machinery under a leasing contract, and
  • the company has losses created by first year allowances on that plant and machinery and
  • there are arrangements during the accounting period for which the first year allowances are due for a successor company to take over (during or after the accounting period) the part of the first company’s trade that represents or includes any or all of its obligations under the leasing contract.

Where these conditions are met the profits and losses on the leasing contract are calculated as if it was a separate trade. This means that the company cannot set its losses on the leasing contract against its other income and the losses can only go forward against profits from the leasing contract.

A company is a successor company of the first company if:

  • it is a successor company within CTA10/S940B (see CTM06005+), or
  • it is connected with the first company as defined in CTA10/S1122.

Arrangements for the purposes of CTA10/S53 are arrangements of any kind, written or otherwise.

FA08/SCH36 (previously a specific power in FA73/S32) contains an information power which can be exercised in relation to arrangements. See CTM80200.