Corporation Tax Act 2010 section 676EC

Restriction on surrender of trade losses carried forward on transfer of trade

Section 676EC restricts the ability of a successor company to surrender carried-forward trade losses as group relief where those losses originated in a trade that was transferred to it following a change in ownership of the original company.

• Where a trade is transferred to a successor company within an eight-year window (starting three years before a change in ownership), any carried-forward trade losses from before the ownership change generally cannot be surrendered as group relief to a claimant company
• Two exceptions apply: the restriction does not apply to relief against the claimant company's profits arising more than five years after the end of the accounting period in which the ownership change occurred, and it does not apply where the claimant company and the transferred company already satisfied the group condition immediately before the change in ownership
• Where an accounting period straddles either the date of the ownership change or the fifth anniversary date, it is split into two deemed periods, and losses or profits are apportioned between them on a time basis
• If a time-based apportionment would produce an unjust or unreasonable result, an alternative method that is just and reasonable may be used instead