Part 4

Loss relief
Chapter 2

Trade losses

Carry-forward trade loss relief

Trade transferred to a company
86
1
This section applies if—
a
a trade is carried on by an individual otherwise than as a partner in a firm or by individuals in partnership,
b
the trade is transferred to a company,
c
the consideration for the transfer is wholly or mainly the allotment of shares to the individual or individuals, and
d
in the case of any individual to whom, or to whose nominee or nominees, shares are so allotted, the individual’s total income for a relevant tax year includes income derived by the individual from the company.
2
For the purposes of carry-forward trade loss relief, the income so derived is treated as—
a
profits of the trade of the relevant tax year carried on by the individual, or
b
if the trade was carried on by the individual in partnership, profits of the individual’s notional trade of the relevant tax year.
3
The tax year in which the transfer is made is a relevant one if—
a
the individual is the beneficial owner of the shares allotted as mentioned above, and
b
the company carries on the trade,
throughout the period beginning with the date of the transfer and ending with the next 5 April.
4
Otherwise a tax year is a relevant one if—
a
the individual is the beneficial owner of the shares allotted as mentioned above, and
b
the company carries on the trade,
throughout the tax year.
5
The income derived from the company may be by way of dividends on the shares or otherwise.
6
This section applies to businesses which are not trades as it applies to trades.