CTM06800 - Corporation Tax: loss buying: assets transferred between companies: profits representing the gain

CTA10/S676BE and S676DE

CTA10/PART14/CHAPTER2B and CHAPTER2D restrict relief only against profits representing a transferred gain or a gain on a transferred asset.

The amount of profit affected is determined as follows:

1. Determine the amount of the relevant gain (amount Y) - this will be either the gain that has been transferred, or the gain realised on the transferred asset.

2. Determine amount Z for the accounting period in which the relevant gain arises:

  • if the relevant gain is a chargeable gain, amount Z is the total amount included in respect of chargeable gains for the accounting period;
    听
  • if the relevant gain is a non-trading chargeable realisation gain, amount Z is the total amount included in respect of non-trading chargeable realisation gains for the accounting period.

3. If amount Z is greater than or equal to amount Y, the amount of profit affected is equal to amount Y: that is, relief is restricted under CTA10/CHAPTER2B and CHAPTER2D to profits equal to the amount of the relevant gain.

4. If amount Y is greater than amount Z, the amount of profit affected is equal to amount Z: that is, relief is restricted under CTA10/CHAPTER2B and CHAPTER2D to profits equal to the amount of chargeable gains of the period, or the amount of non-trading chargeable realisation gains, as the case may be.

In certain circumstances, the change in company pwnership that brings the restrictions into effect could occur after the beginning and before the end of an accounting period of the company.听 This creates the possibility of a gain arising after the change in ownership but before the end of the accounting period.

In such circumstances, the company will need to apportion amounts between two notional accounting periods, one before and one from the change in ownership (CTA10/S676BB and S676DB).听 Amount Z will be the total amount included in respect of either chargeable gains or non-trading chargeable realisation gains, as the case may be, for the notional accounting period following the change in ownership.