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CTA10/S676AG

In addition to the restriction of lossses, where a company meets the conditions of CTA10/PART14/CHAPTER2A, its ability to bring relevant non-trading debits into account under the loan relationship rules at CTA09/PART5 is also restricted.

Broadly, these are debits that relate the periods before the change in ownership but have not been brought into account at the time the change occurs.  The amounts are defined at CTA10/S730.

The restriction on debits applies indefinitely, beyond the five years for which the restriction on losses applies and without reference to the affected profits.

However, the restriction does not necessarily prevent the company from bringing all of its relevant non-trading debits into account.  The company can get relief for these debits up to the amount of its profits for the accounting period (AP) ending with the change in ownership.  This may in practice be a notional accounting period if the change in ownership occures afterthe beginning and before the end of a true AP of the company.

If the company has already brought some relevant non-trading debits into account in periods following the change in ownership the amount of relief it can obtain in subsequent accounting periods is adjusted accordingly.

For example:

• A company changes ownership on 30 June 2020.  It meets the conditions of CHAPTER2A.
• The company has an AP ending 31 December, so it has a six month notional accounting period from 1 January to 30 June 2020. The company's profits in the notional accounting period ending 30 June 2020 are £50,000.  The company will be able to bring into account relevant non-trading debits in subsequent APs up to a limit of £50,000.
• In an AP ended 31 December 2021 the company brings into account £30,000 relevant non-trading debits.  This may be, for example, because it makes a payment of interest it was not previously able to deduct from its profits to the operation of CTA10/S373 (late interest treated as not accruing until paid in some cases).
• The new limit on the amount of relevant non-trading debits the company can bring into account is £50,000 - £30,000 = £20,000.
• In the next accounting period the company makes another payment of late interest for which deductions have previously been disallowed under CTA10/S373.  The payment is £40,000 and, but for the restriction, the company would be able to bring this into account.
• However, due to the provisions of CHAPTER2A, the company is only able to bring £20,000 of these debits into account.
• The company will not be able to bring any further relevant non-trading debits into account in any future accounting periods as it has already obtained relief for these debits up to the full amount of the limit set by CTA10/S676AG.