Corporation Tax Act 2010 section 697

Restriction on the carry forward of non-trading deficit from loan relationships

Section 697 restricts the ability of an investment company to carry forward non-trading deficits from its loan relationships after a change in ownership, where an asset has been transferred within a group and a chargeable gain arises.

• This section limits the carry forward of non-trading deficits arising from a company's loan relationships following a change in company ownership.
• The restriction only applies where a chargeable gain or non-trading chargeable realisation gain is included in the company's total profits for the accounting period in which the gain accrues, in accordance with the apportionment rules in section 702.
• If the non-trading deficit is apportioned to the first notional accounting period (the period before the ownership change) under the section 702 apportionment mechanism, none of that deficit may be carried forward beyond the change in ownership.
• Debits and deficits serve different functions within the loan relationships regime, and this Chapter therefore imposes separate restrictions on each.