Corporation Tax Act 2010

Chapter 2 Transfers of trade to obtain balancing allowances

954 Transfer of activities on complete cessation of trade

(1) This section applies (subject to section 957(1)) if—

(a) a company (“the predecessor”) ceases to carry on a trade,

(b) another company (“the successor”) begins to carry on the activities of that trade as its trade or as part of its trade,

(c) the successor is not a dual resident investing company,

(d) in the accounting period in which the predecessor ceases to carry on the trade the predecessor would (apart from this section) be entitled under Part 2 of CAA 2001 (plant and machinery allowances) to a balancing allowance in respect of the trade, and

(e) the predecessor’s ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to entitle the predecessor to that balancing allowance.

(2) CAA 2001 has effect subject to subsections (3) to (5).

(3) Any allowances or charges are to be made to or on the successor if such allowances or charges would have been made to or on the predecessor had the predecessor continued to carry on the trade.

(4) A transfer of assets from the predecessor to the successor does not of itself give rise to any allowances or charges if—

(a) the transfer of the assets is made on the transfer of the trade, and

(b) the assets are in use for the purposes of that trade.

(5) For the purpose of determining the amount of the allowances or charges mentioned in subsection (3) to be made to the successor—

(a) the successor is to be treated as if it has been carrying on the trade since the predecessor began to do so, and

(b) anything done to or by the predecessor is to be treated as having been done to or by the successor.

(6) If the successor carries on the activities of the trade as part of its trade, that part is to be treated for the purposes of subsections (3) to (5) as a separate trade carried on by the successor.

(7) In subsection (1)(c) “dual resident investing company” has the same meaning as in section 949 (with references in that section to the “transfer accounting period” construed as references to the accounting period of the successor in which it begins to carry on the activities of the trade as mentioned in subsection (1)(b) above).

955 Transfer of activities on part cessation of trade

(1) This section applies (subject to section 957(1)) if—

(a) a company (“the predecessor”) ceases to carry on part of a trade,

(b) another company (“the successor”) begins to carry on the activities of that part of the trade as its trade or as part of its trade,

(c) the successor is not a dual resident investing company, and

(d) the predecessor’s ceasing to carry on the part of the trade mentioned in paragraph (a) is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to entitle the predecessor, on cessation of that part of the trade, to a balancing allowance in respect of the trade under Part 2 of CAA 2001.

(2) CAA 2001 has effect subject to subsections (3) to (6).

(3) The part of the trade which the predecessor ceased to carry on is to be treated as a separate trade (“the deemed separate trade”).

(4) Any allowances or charges are to be made to or on the successor if such allowances or charges would have been made to or on the predecessor had the predecessor continued to carry on the deemed separate trade.

(5) A transfer of assets from the predecessor to the successor does not of itself give rise to any allowances or charges if—

(a) the transfer of the assets is made on the transfer of the deemed separate trade, and

(b) the assets are in use for the purposes of that trade.

(6) For the purpose of determining the amount of the allowances or charges mentioned in subsection (4) to be made to the successor—

(a) the successor is to be treated as if it has been carrying on the deemed separate trade since the predecessor began to do so, and

(b) anything done to or by the predecessor is to be treated as having been done to or by the successor.

(7) If the successor carries on the activities of the part of the trade mentioned in subsection (1)(a) as part of its trade, that part of the successor’s trade is to be treated for the purposes of subsections (4) to (6) as a separate trade carried on by the successor.

(8) In subsection (1)(c) “dual resident investing company” has the same meaning as in section 949 (with references in that section to the “transfer accounting period” construed as references to the accounting period of the successor in which it begins to carry on the activities of the part of the trade as mentioned in subsection (1)(b) above).

956 Apportionment if part of trade treated as separate trade

(1) If part of a trade is to be treated as a separate trade in accordance with section 954(6) or 955(7), just and reasonable apportionments are to be made of receipts, expenses, assets and liabilities.

(2) Subsection (3) applies if—

(a) at the time of an apportionment under subsection (1) it appears that the apportionment is material to the liability to tax (for whatever period) of two or more companies, and

(b) a question arises as to how the apportionment is to be made for the purposes of the liability of those companies.

(3) The question is to be determined in the same way as an appeal, and all the companies concerned are entitled to be a party to the proceedings.

957 Chapter 2: supplementary

(1) This Chapter does not apply in cases where Chapter 1 applies.

(2) In this Chapter, except in so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) references to carrying on a trade include holding an office.