Corporation Tax Act 2009 section 355

Cessation of connection

Section 355 ensures that impairment losses or release debits previously blocked under the connected companies rules remain permanently blocked, even after the companies cease to be connected.

• Where an impairment loss or release debit on a creditor relationship has been excluded from the accounts under section 354 because the parties were connected, that exclusion is permanent.
• If the creditor and debtor companies later cease to be connected, the previously excluded debit still cannot be brought into account.
• This prohibition applies for the first accounting period in which the companies are no longer connected, and for every subsequent accounting period thereafter.
• The rule prevents companies from obtaining a tax benefit by engineering a break in their connected status after an impairment loss or debt release has occurred.