Corporation Tax Act 2010 section 675

Disallowance of trading losses: calculation of balancing charges

Section 675 prevents double taxation when trading losses are disallowed following a change in company ownership, by adjusting how balancing charges on capital allowances are calculated.

• Where trading loss relief is restricted under section 674(2) after a change of ownership, capital allowances given before the ownership change are ignored when calculating balancing charges on later asset disposals
• This prevents the company being penalised twice — once through the disallowance of unused capital allowances within the extinguished losses, and again through an inflated balancing charge when the relevant assets are sold
• The adjustment does not apply to any capital allowance that was actually used against profits of the accounting period in which it arose, or of a subsequent period beginning before the change of ownership
• Where both capital allowances and other losses were available for relief in the same period, capital allowances are treated as having been used first, before other losses