Corporation Tax Act 2010 section 704

Company carrying on UK property business

Section 704 restricts the ability of a company carrying on a UK property business to use losses from before a change in ownership to reduce profits arising after that change.

• The restriction applies where a company carrying on a UK property business (that is not an investment company) undergoes a change in ownership, and either there is a major change in the nature or conduct of the business within a five-year window, or the business had already become small or negligible before any significant revival
• The accounting period in which the ownership change occurs is split into two notional periods — one ending at the date of the change and one covering the remainder — with profits or losses apportioned between them on a time basis (or another just and reasonable basis if time apportionment would produce an unjust result)
• Losses arising before the change in ownership cannot be carried forward under section 62 to set against profits of any accounting period ending after the change, effectively ring-fencing pre-change losses from post-change profits
• A major change in the nature or conduct of the business includes changes in the type of property dealt in, services or facilities provided, or shifts in customers, outlets or markets — and the restriction applies even where the change results from a gradual process that began outside the five-year window