Corporation Tax Act 2010 section 676EB

Restriction on use of trade losses carried-forward on transfer of trade

Section 676EB restricts the ability of a successor company to use carried-forward trade losses originally incurred by a transferred company, where there has been both a change in ownership and a transfer of that trade.

• Where a trade is transferred to a successor company within an 8-year window (starting 3 years before the change in ownership) and the two companies are not related both immediately before the ownership change and at the time of transfer, the restriction applies.
• Losses made by the transferred company before the ownership change cannot be set against the successor company's "relevant profits" — that is, profits arising within 5 years of the end of the accounting period in which the ownership change occurred, to the extent those profits cannot fairly and reasonably be attributed to the successor company's carrying on of the transferred trade.
• If an accounting period of either company straddles the ownership change date or the 5-year anniversary, it is split into two deemed periods, and losses or profits are apportioned between those periods on a time basis.
• If a time-based apportionment would produce an unjust or unreasonable result, a different method that is just and reasonable must be used instead.