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Corporation Tax Act 2010


2780.The Chapter rewrites sections 343, 343A and 344 of ICTA (company reconstructions without a change of ownership).

2781.It is possible (and common) for the trade, assets and liabilities of one company (“the predecessor”) to be transferred to another (“the successor”). As a rule, on such a transfer the predecessor’s trade ceases. This has two consequences in particular.

2782.First, if the predecessor has incurred qualifying expenditure on plant and machinery, a balancing charge is imposed or a balancing allowance is given under Part2 of CAA (plant and machinery allowances). Also, the successor is entitled to plant and machinery allowances on the amount paid to the predecessor for the plant and machinery. Similar rules apply to the other types of capital allowance.

2783.Second, if the predecessor has incurred losses in its trade they cannot be carried forward under section 393 of ICTA. To the extent that they cannot be relieved under section 393A of ICTA or by group relief, they are wasted.

2784.But the predecessor and the successor are not necessarily independent. If they are under common ownership, the owners of the companies may have commercial reasons for transferring the trade and net assets from one to another. Where this is the case, section 343 of ICTA makes it possible for:

  • capital allowances to be given to the successor as if the trade was still being carried on by the predecessor; and

  • the predecessor’s unrelieved trade losses to be carried forward to the successor.

2785.Sections 343 and 344 of ICTA were based on section 61 of FA 1965, which was itself modelled on section 17 of FA 1954 and Schedule 3 to that Act.

2786.Section 343A of ICTA was inserted by paragraph 1 of Schedule 6 to FA 2007.

2787.The sections rewriting sections 343, 343A and 344 of ICTA are laid out in the following order.

  • Sections 938 and 939 are introductory.

  • Sections 940 to 943 specify the transfers to which the Chapter applies.

  • Sections 944 to 950 specify the effect of the Chapter in relation to transfers to which it applies.

  • Sections 951 to 953 are supplementary.

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