Corporation Tax Act 2010

Chapter 5 Company without investment business: disallowance of property losses

704 Company carrying on UK property business

(1) This section applies if—

(a) there is a change in the ownership of a company carrying on a UK property business,

(b) the company is not a company with investment business, and

(c) condition A or B is met.

(2) Condition A is that within any period of 3 years in which the change in ownership occurs there is a major change in the nature or conduct of a trade or UK property business carried on by the company.

(3) Condition B is that the change in ownership occurs at any time after the scale of the activities in a trade or UK property business carried on by the company has become small or negligible and before any significant revival of the trade or business.

(4) The following provisions have effect for the purpose of restricting relief under section 62 for a loss made by the company in a UK property business before the change in ownership.

(5) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated for that purpose as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.

(6) The profits or losses of the actual accounting period are apportioned to the two notional accounting periods on a time basis according to the respective lengths of the two periods.

(7) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.

(8) Relief under section 62(3) is available only in relation to each of the notional accounting periods considered separately.

(9) A loss made in an accounting period beginning before the change in ownership may not be—

(a) carried forward under section 62(5)(a) to an accounting period ending after the change in ownership, or

(b) treated in relation to such an accounting period as mentioned in section 62(5)(b).

(10) In this section “major change in the nature or conduct of a trade or UK property business” includes—

(a) a major change in the type of property dealt in, or services or facilities provided in, the trade or business, or

(b) a major change in customers, outlets or markets of the trade or business.

This section applies even if the change is the result of a gradual process which began before the period of 3 years mentioned in subsection (2).

705 Company carrying on overseas property business

(1) This section applies if—

(a) there is a change in the ownership of a company carrying on an overseas property business,

(b) the company is not a company with investment business, and

(c) condition A or B is met.

(2) Condition A is that within any period of 3 years in which the change in ownership occurs there is a major change in the nature or conduct of a trade or overseas property business carried on by the company.

(3) Condition B is that the change in ownership occurs at any time after the scale of the activities in a trade or overseas property business carried on by the company has become small or negligible and before any significant revival of the trade or business.

(4) The following provisions have effect for the purpose of restricting relief under section 66 for a loss made by the company in an overseas property business before the change in ownership.

(5) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated for that purpose as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.

(6) The profits or losses of the actual accounting period are apportioned to the two notional accounting periods on a time basis according to the respective lengths of the two periods.

(7) But if that method of apportionment would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.

(8) A loss in the business made in an accounting period beginning before the change in ownership may not be used under section 66(3) to reduce the profits of the business of an accounting period ending after the change in ownership.

(9) In this section “major change in the nature or conduct of a trade or overseas property business” includes—

(a) a major change in the type of property dealt in, or services or facilities provided in, the trade or business, or

(b) a major change in customers, outlets or markets of the trade or business.

This section applies even if the change is the result of a gradual process which began before the period of 3 years mentioned in subsection (2).