Corporation Tax Act 2010 section 730G

Disallowance of deductions for relevant carried-forward losses

Section 730G prevents a company from using carried-forward losses to reduce profits that have been generated through tax-motivated arrangements, where all five specified conditions are satisfied.

• Where a company has taxable profits arising from specific arrangements and would normally be entitled to set carried-forward losses against those profits, this section can deny that deduction if the arrangements are primarily tax-driven.
• The arrangements must result in a deductible amount being claimed by the company or a connected company, and a main purpose must be to secure a corporation tax advantage or a CFC charge advantage through the combination of that deduction and the use of carried-forward losses.
• The tax value of the arrangements (including any tax advantage and related economic benefits) must reasonably have been expected to exceed the non-tax value (all other economic benefits) at the time the arrangements were entered into — ensuring the rule targets arrangements undertaken predominantly for their tax benefit.
• The rule does not apply where the targeted anti-avoidance rule for banking companies under section 269CK already covers the same arrangements, and where all five conditions are met the company is completely prevented from deducting carried-forward losses against the relevant profits.