What is the tax condition under section 943 of the Corporation Tax Act 2010?

The tax condition requires that throughout the relevant period the transferred trade has been carried on only by companies within the charge to UK corporation tax or UK income tax. This ensures the trade was subject to UK taxation at all material times before transfer of trade relief under Chapter 1 of Part 22 can apply.

What is the relevant period for the tax condition in section 943 CTA 2010?

The relevant period begins at the earliest point when the companies came under common ownership and ends when the trade is actually transferred. It mirrors the same window used to test the ownership condition, running forwards from the establishment of common ownership to the date of the transfer of the trade.

How does the tax condition apply when a trade has been absorbed into another trade?

Where the activities of the transferred trade have been merged into or carried on as part of another trade, the tax condition is tested by reference to that other absorbing trade rather than the original transferred trade. This prevents circumvention of the condition by folding trade activities into a larger operation.

What happens if a company was outside the UK tax charge during the relevant period?

If any company carrying on the transferred trade was non-UK resident and outside the charge to UK corporation tax or income tax for any part of the relevant period, the tax condition would not be satisfied. Consequently, the transfer of trade relief under Chapter 1 of Part 22 of the Corporation Tax Act 2010 would not be available.

Corporation Tax Act 2010 section 943

The tax condition

Section 943 sets out the tax condition, which is the second of two conditions that must be met for the transfer of trade provisions in Chapter 1 of Part 22 to apply.

The transferred trade must have been carried on only by companies within the charge to UK corporation tax or income tax throughout the relevant period.
The relevant period runs from the point when common ownership first existed (the start of the ownership comparison window) to the point when the trade was actually transferred.
This ensures the trade has been subject to UK taxation at all material times during the period used to establish common ownership.
Where the transferred trade's activities have been absorbed into another trade, the tax condition is applied by reference to that other trade instead.

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