Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 1 — Introduction
338

Decisions and appeals
670
Notification of HMRC decision
An officer of Revenue and Customs must notify the club of any decision—
(a)
to register it as a registered club,
(b)
to refuse to register it as a registered club, or
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(c)
to cancel its registration.
671
Appeals
(1)
A club may appeal against a decision of any officer of Revenue and Customs
in relation to its application, or registration, as a registered club.
(2)
Notice of the appeal must be given in writing to an officer of Revenue and
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Customs within 30 days of the date of the notification under section 670.
(3)
The notice must specify the grounds of the appeal.
(4)
If the appeal is against a refusal to register the club, or a decision to register it
with effect from a particular date, the tribunal may (if not dismissing the
appeal)—
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(a)
direct that the club is to be registered with effect from a specified date,
or
(b)
send the matter back to any officer of Revenue and Customs for
reconsideration.
(5)
If the appeal is against a decision to cancel the registration of the club, or to do
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so with effect from a particular date, the tribunal may (if not dismissing the
appeal)—
(a)
revoke the cancellation,
(b)
direct that the cancellation is to have effect from a specified date, or
(c)
send the matter back to any officer of Revenue and Customs for
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reconsideration.
(6)
The provisions of TMA 1970 relating to appeals under the Taxes Acts (within
the meaning of TMA 1970) apply to an appeal under this section as they apply
to those appeals.
Part 14
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Change in company ownership
Chapter 1
Introduction
672
Overview of Part
(1)
Chapter 2 restricts relief for trading losses in some cases where there is a
35
change in the ownership of a company.
(2)
Chapters 3 and 4 restrict relief in some cases where there is a change in the
ownership of a company with investment business.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 2 — Disallowance of trading losses
339

(3)
Chapter 5 restricts relief for property losses in some cases where there is a
change in the ownership of a company without investment business.
(4)
Chapter 6 enables unpaid corporation tax to be recovered from a linked person
in some cases where there is a change in the ownership of a company.
(5)
Chapter 8 contains supplementary provision.
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(6)
See also Chapter 7 of Part 22 (recovery of unpaid corporation tax due from non-
UK resident company).
(7)
For the meaning of—
(a)
“change in the ownership of a company”, see Chapter 7,
(b)
“company with investment business”, see section 729, and
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(c)
“linked” person, see section 706.
Chapter 2
Disallowance of trading losses
673
Introduction to Chapter
(1)
This Chapter applies if—
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(a)
there is a change in the ownership of a company (“the company”), and
(b)
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
carried on by the company.
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(3)
Condition B is that the change in ownership occurs at any time after the scale
of the activities in a trade carried on by the company has become small or
negligible and before any significant revival of the trade.
(4)
In this section “major change in the nature or conduct of a trade” includes—
(a)
a major change in the type of property dealt in, or services or facilities
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provided in, the trade, or
(b)
a major change in customers, outlets or markets of the trade.

This Chapter applies even if the change is the result of a gradual process which
began before the period of 3 years mentioned in subsection (2).
(5)
In this Chapter—
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“the change in ownership” means the change in ownership mentioned in
subsection (1),
“the company” has the same meaning as in this section, and
“trade” includes an office.
674
Disallowance of trading losses
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(1)
In calculating the company’s taxable total profits of an accounting period
beginning before the change in ownership, no relief may be given under
section 37 or 42 (relief for trade losses) for a loss made by the company in an
accounting period ending after the change in ownership.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 2 — Disallowance of trading losses
340

(2)
No relief may be given under section 45 for a loss made by the company in an
accounting period beginning before the change in ownership by carrying
forward the loss to reduce the profits of a trade of an accounting period ending
after the change in ownership.
(3)
For the purposes of this section and section 675—
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(a)
the accounting period in which the change in ownership occurs is
treated as two separate accounting periods, the first ending with the
change and the second consisting of the remainder of the period, and
(b)
the profits or losses of the accounting period are apportioned to the two
periods.
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(4)
The apportionment under subsection (3)(b) is to be made on a time basis
according to the respective lengths of the two periods.
(5)
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.
(6)
In subsection (2), “profits of a trade” includes interest or dividends treated as
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profits of a trade under section 46.
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Disallowance of trading losses: calculation of balancing charges
(1)
The following provisions apply if relief in respect of the company’s losses is
restricted because of section 674(2).
(2)
In applying the provisions of CAA 2001 about balancing charges to the
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company by reference to any event after the change in ownership, there is to be
disregarded any allowance falling to be made in taxing the company’s trade
for any accounting period beginning before the change in ownership.

This subsection applies despite section 577(3) of CAA 2001.
(3)
But subsection (2) does not apply if the allowance has been given effect to by
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means of relief against any profits of that accounting period or any subsequent
accounting period beginning before the change in ownership.
(4)
For the purposes of subsection (3), it is to be assumed that any loss attributable
to any such allowance as is mentioned in subsection (2) is relieved before any
loss which is not attributable to such an allowance.
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676
Disallowance of trading losses where company reconstruction without
change in ownership
In relation to any relief available under section 944(3) (modified application of
Chapter 2 of Part 4) to a successor company, section 674(2) applies as if—
(a)
any loss sustained by a predecessor company had been sustained by a
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successor company, and
(b)
as if the references to a trade included the trade as carried on by a
predecessor company.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
341

Chapter 3
Company with investment business: restrictions on relief: general provision
Introduction
677
Introduction to Chapter
(1)
This Chapter applies if—
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(a)
there is a change in the ownership of a company with investment
business (“the company”), and
(b)
condition A, B or C is met.
(2)
Condition A is that after the change in ownership there is a significant increase
in the amount of the company’s capital (see sections 688 to 691).
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(3)
Condition B is that within the period of 6 years beginning 3 years before the
change in ownership there is a major change in the nature or conduct of the
business carried on by the company.
(4)
Condition C is that the change in ownership occurs at any time after the scale
of the activities in the business carried on by the company has become small or
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negligible and before any significant revival of the business.
(5)
In subsection (3) “major change in the nature or conduct of a business” includes
a major change in the nature of the investments held by the company, even if
the change is the result of a gradual process which began before the period of
6 years mentioned in that subsection.
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(6)
In this Chapter—
“the change in ownership” means the change in ownership mentioned in
subsection (1), and
“the company” has the same meaning as in this section.
Notional split of accounting period in which change in ownership occurs
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678
Notional split of accounting period in which change in ownership occurs
(1)
This section applies for the purposes of this Chapter.
(2)
The accounting period in which the change in ownership occurs (“the actual
accounting period”) is treated as two separate accounting periods (“notional
accounting periods”), the first ending with the change and the second
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consisting of the remainder of the period.
(3)
The amounts for the actual accounting period in column 1 of the table in section
685(2) are apportioned to the two notional accounting periods in accordance
with section 685.
(4)
In this Chapter “the actual accounting period” and “notional accounting
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periods” have the same meaning as in this section.