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HMRC internal manual

Company Taxation Manual

Corporation Tax: loss-buying: groups of companies


Indirect ownership

The CTA10/S719 definition of change in ownership only relates to the direct ownership of a company. It does not look further to see if there has been a change in ultimate ownership, so CTA10/S723 contains additional rules for groups of companies.

These rules are designed to ensure that the change in ownership condition is satisfied for:

  • subsidiaries,


  • sub-subsidiaries, etc

whenever there is a change in ownership of a parent company under CTA10/S719.

The rules work by treating a person or persons who acquire:

  • shares of the parent,


  • the powers or rights to which CTA10/S721 applies,

as if they had also acquired all that company’s shareholding rights and powers for CTA10/S719 purposes.

If a subsidiary has a subsidiary of its own, the same process is applied to its shareholding rights and powers in that sub-subsidiary. If this sub-subsidiary has its own subsidiaries the same process is applied again, and so on.


  • A is the 100 per cent parent of B and C.
  • B owns 70 per cent of the shares in D and A owns the other 30 per cent.
  • D has substantial trading losses brought forward which are wanted by the X group who will however not be able to use them unless a major change is made to D’s trade.
  • X buys A’s 100 per cent shareholding in B and A’s 30 per cent shareholding in D.

There is no direct change of ownership in D. Yet there is a change in ownership of D for the purpose of CTA10/S719 because CTA10/S723 deems X to acquire B’s 70 per cent holding in D.



75 per cent subsidiaries

The rules also limit the scope of CTA10/S719 where there is no change in the ultimate ownership of a company within a group.

Under CTA10/S724, changes in the direct ownership of a company are disregarded if the company concerned was a 75 per cent subsidiary of the same ‘parent’ company immediately before and after a change in (direct) ownership under CTA10/S719 - ’75 per cent subsidiary’ is defined at CTA10/S1154.

CTA10/S724 does not apply where a company is inserted between an existing company and its shareholders.

CTA10/S724 only covers share changes in companies that continue to be 75 per cent subsidiaries in real economic terms. So for the purposes of CTA10/S719 a 75 per cent subsidiary is only treated as such if the ‘parent’ company would be beneficially entitled to:

  • at least 75 per cent of the profits available for distribution to equity holders of the subsidiary company,


  • at least 75 per cent of assets of the subsidiary company available for distribution on a winding-up.