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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: loss-buying: identifying cases

The two essential elements of a loss-buying exercise are:

  • the purchase of a company with unused CTA10/S45 carry forward losses,


  • a dying trade brought back to life and/or important changes are made to the trading activity.

Certainly trades have to be flexible to keep up with market conditions and improve efficiency - see paragraphs 7 and 8 of SP10/91. A new owner might be expected to assess the trade and bring in new ideas and people. But if these changes go beyond organic development of the trade then CTA10/S673 may apply (CTM06370).

Although CTA10/S673 is anti-avoidance legislation, there is no motive or purpose test. But all relevant factors should be considered in deciding whether to apply the legislation.

Officers may consult CTIAA (Technical) in cases of doubt or difficulty - see ‘Technical Help’ on the left bar.

As a major change in the nature or conduct of a trade can be established by reference to a period of up to three years after the date of change of ownership it is helpful to review the accounts covering the whole of the relevant period. CTA10/S727 provides a time limit for assessment of 6 years from the circumstance or event (within the 3 year window) which triggers the operation of CTA10/S673. But this is subject to the following.

CTPF periods

Possible discovery limitations by virtue of earlier agreements to set off pre-change of ownership losses against post change trading income. For this same reason, it may be appropriate to postpone agreement of any pre change loss set off position for any open CTPF period where it is suspected at the time that it may be necessaryto review the CTA10/S673 position in later periods.

CTSA periods

Bear in mind enquiry window time limits, and possible ‘discovery’ limitations.