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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Corporation Tax: company purchase schemes: scope

CTA10/S706 to S711 (formerly ICTA88/S767A)

CTA10/S706 to S711 (formerly ICTA88/S767A) apply where there has been a change in the ownership of a company (applying the rules in CTA10/S719, formerly ICTA88/S769), and CT assessed for accounting periods beginning before the change remains unpaid for six months (CTA10/S710(1), formerly ICTA88/S767A (1)(a), 1(b) and (9)) and any of the following three conditions is satisfied.

  1. The activities of a trade or business of the company cease or their scale becomes small or negligible during the three years before the change in the ownership and there is no significant revival before that change (CTA10/S711(2), formerly ICTA88/S767A (4)).
  2. The activities of a trade or business of the company cease or their scale becomes small or negligible after the change of ownership but under arrangements made before that change (CTA10/S711(3), formerly ICTA88/S767A (5)).
  3. The following criteria are satisfied
  • there is a major change in the nature or conduct of a trade or business of the company during the period of six years beginning three years before the change in ownership,
  • there is a transfer or transfers of assets directly or indirectly from the company to a person who previously controlled it, or that person’s connected person,
  • the major change in the trade is attributable to that transfer or transfers, and
  • these transfers occurred during the three years before the change of ownership or after that change but under arrangements made before it.

If the legislation applies HMRC is able to collect the unpaid tax from either:

  • any person who controlled the company at some time during either the three years before the change of ownership of the company, or if shorter the period since a previous change of ownership, or
  • any company which that person controlled at any time during the three years before the change of ownership (CTA10/S706 and S709 (formerly ICTA88/S767A (2) and (3)).

The unpaid tax is recovered by means of a CT assessment on that person in the name of the defaulting company.