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CTA10/PART14/CHAPTER2C

CTA10/CHAPTER2C restricts group relief for carried forward losses following a change in company ownership.  The change in ownership must take place on or after 1 April 2017.

The restriction applies both to the company whose ownership has changed (the transferred company) and to any co-transferred companies.  It applies only to losses incurred before the change in ownership (CTA10/S676CH).

The general rule is that these losses cannot be surrendered for group relief for carried-forward losses against any profits that arise within five years of the end of the accounting period of the transferred company in which the change in ownership occurs (CTA10/S676CB and S676CE).

However, other companies within the group are not prevented from surrendering losses incurred in any period to transferred or co-transferred companies.

Companies may need to apportion amounts in order to determine the losses restricted by CTA10/CHAPTER2C and the profits affected.  They should do so following the method set out in legislation for each of the following two periods:

• the accounting period (AP) in which the change in ownership occurs, and
• the AP in which the fifth anniversary of the change in ownership occurs.

Note that, unlike CTA10/PART14/CHAPTER2A, which restricts the use of losses where there has been a major change in a company's business, CHAPTER2C applies even if the transferred company's business is unchanged.

Companies in the same group before the change in ownership
CTA10/S676CE

In most circumstances, the restriction does not apply to companies that met the group relief group condition (CTA10/S188CE and S188FB, CTA10/PART5/CHAPTER5), immediately before the change in ownership occurred.

These companies were already able to surrender or claim losses to or from one another before the change.  CTA10/CHAPTER2C does not prevent companies from obtaining group relief for carried-forward losses in a way that was available to them before the change in ownership.

For example:

• On 1 December 2020, company A and company B are in the same group for the purposes of group relief for carried-forward losses.  Each is able to surrender losses to the other for this relief;
• On 2 December 2020, both companies are acquired by company Z;
• For the five years to 2 December 2025, neither company A nor company B will be able to surrender losses incurred before the change in ownership, on 2 December 2020, to company Z;
• However, company A and company B are still able to surrender losses incurred before the change between each other.

This is subject to further restrictions in CTA10/CHAPTER2A, which apply if there is a major change in the trade or business of a transferred or co-transferred company (in this case, either or both of company A and company B).

Nothing in CTA10/CHAPTER2C prevents company A and company B from surrendering losses incurred after the change to company Z.  Nor does CHAPTER2C prevent company Z from surrendering losses incurred in any period to either of company A and company B.

Consortia

CTA10/S676CC to S676/CD

Companies that were able to surrender losses to one another for group relief for carried-forward losses because they met one of the consortium conditions (CTA10/S676CC to S676CD) immediately before the change in ownership, and did not meet the group condition, are subject to specific rules.

These control the amount of relief a transferred company, previously owned by a consortium, can claim and surrender as group relief for carried-forward losses following the change in ownership (CTM06825).