Corporation Tax Act 2010 section 705

Company carrying on overseas property business

Section 705 restricts the use of overseas property business losses when a company undergoes a change of ownership combined with a major change in business activity or a period of dormancy.

• Where a non-investment company carrying on an overseas property business changes ownership, loss relief may be restricted if there is also a major change in the nature or conduct of the business within a five-year window, or if the business has become small or negligible before ownership changes
• The accounting period in which the ownership change occurs is split into two notional periods — one ending on the date of the change and the other covering the remainder — with profits or losses apportioned between them on a time basis (or another just and reasonable basis if time apportionment would be unjust)
• Overseas property business losses arising in an accounting period that begins before the change of ownership cannot be carried forward under section 66(3) to reduce profits of an accounting period ending after the change
• A "major change in the nature or conduct" of the business includes changes in the type of property dealt in, services provided, or shifts in customers, outlets or markets — even where the change results from a gradual process that began outside the five-year window