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Corporation Tax Bill


Corporation Tax Bill
Part 4 — Loss relief
Chapter 4 — Property losses

36

 

61      

Unrelieved losses brought forward

(1)   

This section applies if—

(a)   

a company (“the member company”) carries on a trade as a member of

an LLP at a time during an accounting period (“the current period”),

and

5

(b)   

as a result of section 59, relief under section 37 or Part 5 (group relief)

has not been given for an amount of loss made in the trade by the

member company as a member of the LLP in a previous accounting

period.

(2)   

For the purpose of determining the relief under section 37 or Part 5 to be given

10

to any company, the amount of loss is treated as having been made by the

member company in the current period so far as it is not excluded by

subsection (3) or (4).

(3)   

An amount of loss is excluded so far as—

(a)   

under this section the amount has been treated as made by the member

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company in a previous accounting period, and

(b)   

as a result of that, relief under section 37 or Part 5 has been given for the

amount or would have been given had a claim been made.

(4)   

An amount of loss is also excluded so far as relief under the Corporation Tax

Acts has been given for the amount other than as a result of this section.

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Chapter 4

Property losses

UK property businesses

62      

Relief for losses made in UK property business

(1)   

This section applies if, in an accounting period, a company carrying on a UK

25

property business makes a loss in the business.

(2)   

Relief for the loss is given to the company under this section.

(3)   

The relief is given by deducting the loss from the company’s total profits of the

accounting period.

(4)   

Subsection (5) applies if—

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(a)   

not all the loss can be deducted as mentioned in subsection (3), and

(b)   

the company continues to carry on the UK property business in the next

accounting period.

(5)   

So far as the loss cannot be deducted, it—

(a)   

is carried forward to the next accounting period, and

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(b)   

is treated for the purposes of this section as a loss made by the company

in the UK property business in that period.

(6)   

Relief under this section is subject to restriction or modification in accordance

with provisions of the Corporation Tax Acts.

 
 

Corporation Tax Bill
Part 4 — Loss relief
Chapter 4 — Property losses

37

 

63      

Company with investment business ceasing to carry on UK property business

(1)   

This section applies if, in an accounting period, a company with investment

business (as defined in section 1218 of CTA 2009)—

(a)   

ceases to carry on a UK property business or to be within the charge to

corporation tax in respect of such a business, but

5

(b)   

continues to be a company with investment business.

(2)   

Subsection (3) applies if, as a result of the company ceasing to carry on the UK

property business or to be within the charge to corporation tax in respect of it,

an amount of loss made in carrying on that business cannot be carried forward

to the next accounting period for the purposes of section 62.

10

(3)   

The amount of loss—

(a)   

is, nevertheless, carried forward to the next accounting period, and

(b)   

is treated for the purposes of Chapter 2 of Part 16 of CTA 2009 as an

expense of management deductible for that period or a succeeding

period in accordance with that Chapter.

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64      

UK property business to be commercial or carried on for statutory functions

(1)   

Sections 62 and 63 apply to a UK property business only so far as it is carried

on—

(a)   

on a commercial basis, or

(b)   

in the exercise of functions conferred by or under an Act (including an

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Act of the Scottish Parliament).

(2)   

A business (or part) is not carried on on a commercial basis unless it is carried

on with a view to making a profit or so as to afford a reasonable expectation of

making a profit.

(3)   

If during an accounting period there is a change in the way in which a business

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(or part) is carried on, it is treated as having been carried on throughout that

period in the way in which it is being carried on by the end of that period.

65      

UK furnished holiday lettings business treated as trade

(1)   

This section applies if a company carries on a UK furnished holiday lettings

business.

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(2)   

“UK furnished holiday lettings business” means a UK property business so far

as it consists of the commercial letting of furnished holiday accommodation

(within the meaning of Chapter 6 of Part 4 of CTA 2009).

(3)   

For the purposes of this Part the company is treated as carrying on a single

trade—

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(a)   

which consists of every commercial letting of furnished holiday

accommodation comprised in the company’s UK furnished holiday

lettings business, and

(b)   

in relation to which the profits are chargeable to corporation tax under

Chapter 2 of Part 3 of CTA 2009.

40

(4)   

Accordingly, sections 62 to 64 apply in relation to the company’s UK property

business as if the lettings mentioned in subsection (3)(a) were not included in it.

 
 

Corporation Tax Bill
Part 4 — Loss relief
Chapter 5 — Losses on disposal of shares

38

 

(5)   

If there is a letting of accommodation only part of which is furnished holiday

accommodation, just and reasonable apportionments are to be made for the

purpose of determining what is comprised in the trade treated as carried on.

Overseas property businesses

66      

Relief for losses made in overseas property business

5

(1)   

This section applies if, in an accounting period, a company carrying on an

overseas property business makes a loss in the business.

(2)   

Relief for the loss is given to the company under this section.

(3)   

For this purpose—

(a)   

the loss is carried forward to subsequent accounting periods, and

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(b)   

the profits of the business of any such period are reduced by the loss so

far as it cannot be used under this paragraph to reduce the profits of the

business of an earlier period.

(4)   

Relief under this section is subject to restriction or modification in accordance

with provisions of the Corporation Tax Acts.

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67      

Overseas property business to be commercial or carried on for statutory

functions

(1)   

Section 66 applies to an overseas property business only so far as it is carried

on—

(a)   

on a commercial basis, or

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(b)   

in the exercise of functions conferred by or under an Act (including an

Act of the Scottish Parliament) or by or under the law of a territory

outside the United Kingdom.

(2)   

A business (or part) is not carried on on a commercial basis unless it is carried

on with a view to making a profit or so as to afford a reasonable expectation of

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making a profit.

(3)   

If during an accounting period there is a change in the way in which a business

(or part) is carried on, it is treated as having been carried on throughout that

period in the way in which it is being carried on by the end of that period.

Chapter 5

30

Losses on disposal of shares

Share loss relief against income

68      

Share loss relief

(1)   

A company which has subscribed for shares in a qualifying trading company

is eligible for relief under this Chapter (“share loss relief”) if—

35

(a)   

it incurs an allowable loss (for the purposes of corporation tax on

chargeable gains) on the disposal of the shares in any accounting

period, and

(b)   

it meets the eligibility conditions (see section 69).

 
 

Corporation Tax Bill
Part 4 — Loss relief
Chapter 5 — Losses on disposal of shares

39

 

(2)   

Subsection (1) applies only if the disposal of the shares is—

(a)   

by way of a bargain made at arm’s length,

(b)   

by way of a distribution in the course of dissolving or winding up the

qualifying trading company,

(c)   

a disposal within section 24(1) of TCGA 1992 (entire loss, destruction,

5

dissipation or extinction of asset), or

(d)   

a deemed disposal under section 24(2) of that Act (claim that value of

the asset has become negligible).

(3)   

Subsection (1) does not apply to any allowable loss incurred on the disposal

if—

10

(a)   

the shares are the subject of an exchange or arrangement of the kind

mentioned in section 135 or 136 of TCGA 1992 (company

reconstructions etc), and

(b)   

because of section 137 of that Act, the exchange or arrangement

involves a disposal of the shares.

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(4)   

For the meaning of “qualifying trading company”, see section 78.

69      

Eligibility conditions

(1)   

These are the eligibility conditions mentioned in section 68(1)(b) that a

company which has subscribed for shares in a qualifying trading company

must meet to be eligible for share loss relief on the disposal of the shares.

20

(2)   

Condition A is that the subscribing company (“the investor”) is an investment

company on the date of the disposal of the shares (“the disposal date”).

(3)   

Condition B is that the investor has been an investment company—

(a)   

for a continuous period of 6 years ending on the disposal date, or

(b)   

for a shorter continuous period ending on the disposal date and has not

25

before the beginning of that period been a trading company or an

excluded company (see section 90(1)).

(4)   

Condition C is that the investor was not associated with, or a member of the

same group as, the qualifying trading company at any time during the

period—

30

(a)   

beginning with the date when the investor subscribed for the shares,

and

(b)   

ending with the disposal date.

(5)   

For the purposes of condition C, two companies are associated with each other

if—

35

(a)   

one controls the other, or

(b)   

both are under the control of the same person or persons.

(6)   

Sections 450 and 451 (which contain provision as to when a person is to be

taken to have control of a company) apply for the purposes of subsection (5).

70      

Entitlement to claim

40

(1)   

This section applies where a company is eligible for share loss relief.

(2)   

The company may make a claim for the loss to be deducted in calculating for

corporation tax purposes the company’s income—

 
 

Corporation Tax Bill
Part 4 — Loss relief
Chapter 5 — Losses on disposal of shares

40

 

(a)   

for the accounting period in which the loss is incurred, and

(b)   

if the claim so requires, for previous accounting periods so far as they

fall (wholly or partly) within the period of 12 months ending

immediately before the beginning of the accounting period in which

the loss is incurred.

5

(3)   

The company may make a claim under subsection (2)(b) for any accounting

period only if the company was an investment company throughout that

period.

(4)   

A claim for share loss relief must be made before the end of the period of two

years after the end of the accounting period in which the loss is incurred.

10

71      

How relief works

(1)   

This subsection explains how deductions in respect of share loss relief claimed

by a company under section 70 are to be made.

Step 1

   

Deduct the loss in calculating the company’s income for the accounting period

15

in which the loss is incurred.

Step 2

   

If not all of the loss can be deducted at Step 1, deduct the remaining loss in

calculating the company’s income for any accounting period falling (wholly or

partly) within the 12 month period that ends immediately before the beginning

20

of the accounting period in which the loss is incurred.

(2)   

The amount of a deduction to be made at Step 2 for any accounting period is

the amount of the loss so far as it cannot be deducted under subsection (1) for

a subsequent accounting period.

(3)   

Subsection (1) is subject to sections 72, 74(5) and 75 (which set limits on the

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amount of share loss relief that may be obtained in particular cases).

(4)   

A deduction at Step 2 from the income of an accounting period may be made

only after all other deductions have been made from the income for that period

in respect of share loss relief given for an earlier loss.

(5)   

Deductions made on the basis of relief claimed under Part 7 of Schedule 15 to

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FA 2000 (relief for losses on disposal of shares to which investment relief is

attributable) must, in accordance with paragraph 70 of that Schedule, be made

before making deductions for share loss relief.

(6)   

A claim for share loss relief does not affect any claim for a deduction under

TCGA 1992 for so much of the allowable loss as is not deducted under

35

subsection (1).

72      

Limit on deduction if accounting period falls partly within 12 month period

(1)   

This section applies if an accounting period falls partly within the period of 12

months ending immediately before the beginning of the accounting period in

which the loss is incurred.

40

(2)   

The amount of the deduction under Step 2 in section 71(1) for the accounting

period is not to exceed an amount equal to the overlapping proportion of the

company’s income of that period.

 
 

Corporation Tax Bill
Part 4 — Loss relief
Chapter 5 — Losses on disposal of shares

41

 

(3)   

The overlapping proportion is the same as the proportion that the part of the

accounting period falling within the 12 month period mentioned in subsection

(1) bears to the whole of the accounting period.

Shares: subscription and disposal

73      

Subscription for shares

5

(1)   

This section has effect for the purposes of this Chapter.

(2)   

A company subscribes for shares in another company if they are issued to the

company by the other company in consideration of money or money’s worth.

(3)   

If—

(a)   

a company has subscribed for, or is treated under this subsection as

10

having subscribed for, any shares, and

(b)   

any corresponding bonus shares are subsequently issued to the

company,

   

the company is treated as having subscribed for the bonus shares.

(4)   

If—

15

(a)   

a company subscribed for any shares (“the original shares”) on a

particular date, and

(b)   

any corresponding bonus shares are treated as having been subscribed

for by the company under subsection (3),

   

the company is treated as having subscribed for the bonus shares on that date.

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74      

Disposals of new shares

(1)   

This section applies if—

(a)   

a company disposes of shares (“the new shares”), and

(b)   

the new shares are, by virtue of section 127 of TCGA 1992

(reorganisation etc treated as not involving disposal), identified with

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other shares (“the old shares”) previously held by the company.

(2)   

The company is not eligible for share loss relief on the disposal of the new

shares unless condition A or B is met.

   

This is subject to section 87(3).

(3)   

Condition A is that the company would have been eligible for share loss relief

30

on a disposal of the old shares—

(a)   

if the company had incurred an allowable loss in disposing of them by

way of a bargain made at arm’s length on the occasion of the disposal

that would have occurred but for section 127 of TCGA 1992, and

(b)   

where applicable, if this Chapter had then been in force.

35

(4)   

Condition B is that the company gave for the new shares consideration in

money or money’s worth other than consideration of the kind mentioned in

paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

(5)   

If the company relies on condition B, the amount of share loss relief on the

disposal of the new shares must not exceed the amount or value of the new

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consideration taken into account as a deduction in calculating the amount of

the loss incurred on the disposal.

 
 

 
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