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HMRC internal manual

Company Taxation Manual

Corporation Tax: change of ownership: companies with investment business: restriction for accounting periods ending on or after 1 April 1996 (S677)

Following the introduction of the loan relationships legislation, restrictions remain on interest accruing before the change in ownership by limiting the debits to be brought into account in computing the company’s profits for periods following a change in ownership.

The debits to which this restriction applies are:

  • any non-trading debit which CTA2009/S372 requires to be treated as not accruing until paid and which would otherwise have fallen to be brought into account for an accounting period ending before or with the change in ownership,
  • any other non-trading debit that relates to an amount that accrued before the change in ownership.

These debits are not to be brought into account where they, together with the amount of any such debits brought into account for a previous accounting period ending after the change in ownership, exceed the profits for the accounting period ending with the change in ownership. In other words the amount of such debits to be brought into non-trading debits from the company’s loan relationships is limited to an amount equal to the profits for the accounting period ending with the change.

For changes of ownership on or after 10 February 2005, the non trading loan relationship deficit is not carried forward to any notional or actual accounting period after the change in ownership.