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CTA10/S730D

CTA10/S730D acts to prevent the deduction TAAR from being circumvented by placing profits of an acquiring group into a newly acquired company which has deductible amounts available.  For example, if a company with capitalised expenditure is purchased by a larger group and then profits are moved into the company by the new owner, S730D acts to prevent the capitalised expenditure being claimed against the profits as they arise.

Where the following four conditions are met, deductible amounts may not be deducted in calculating profits or losses of the acquired company (company C) or any company connected with company C in any accounting period (AP) ending on or after the relevant day:

• Condition A - there is a 'qualifying change' in ownership, CTM07020;
• Condition B - arrangements ('the profit transfer arrangements') are made, which result in either an increase in the total profits of company C, or of a company connected with company C or a reduction of any loss or other amount for which relief from Corporation Tax can be given to company C or a company connected with company C, in any AP ending on or after the relevant day;
• Condition C - on the relevant day, CTM07020, it is 'highly likely' that the amount, or any part of it, would be brought into account by company C, or any company connected with company C, in any AP ending on or after the relevant day, CTM07030.
• Condition D - the purpose, or one of the main purposes, of the profit transfer arrangements is to bring the amount (whether or not together with other deductible amounts) into account as a deduction in any AP ending on or after the relevant day, CTM07040.