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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Shadow ACT: unrelieved surplus: ACT buying

Regulation 16, like ICTA88/S245, counters unrelieved surplus ACT buying. It stops a company or group acquiring a company with unrelieved surplus ACT and routing new business into that company, significantly changing its business in order to exploit its unrelieved surplus ACT.

A set-off of unrelieved surplus ACT is precluded for accounting periods after a change of ownership where:

  • within any period of three years there is both a change in the ownership of a company and either earlier or later in that period or at the same time, a major change in the nature or conduct of a trade or business carried on by the company, or
  • at any time after the scale of the activities in a trade or business carried on by a company has become small or negligible and before any considerable revival of the trade or business, there is a change in the ownership of the company.

The description of what a major change (see CTM20320) includes is taken straight from ICTA88/S245 (4) as are the definitions of a trading company and an investment company.