CTM07010 - Transfer of deductions 鈥� Introduction

CTA10/Part 14A

The transfer of deduction rules were introduced by FA13 for 鈥渜ualifying changes鈥� of ownership on or after 20 March 2013 (CTM07020). The rules were introduced to bring the treatment of unrealised expenses in line with the long-standing CTA10/Part 14 change of ownership rules for crystallised losses.

In broad terms the rules prevent deductions where a company changes ownership with expenses that have not yet been recognised for tax, but are 鈥榟ighly likely鈥� (CTM07030) to be deducted at a later point after the change.

The rules are split into two areas:

  • The loss shifting rules in S730C operate where the deductible amounts would crystallise and be used against a company鈥檚 total profits (under CTA10/S37) or be surrendered as group relief (under CTA10/Part 5) (CTM07050) or surrendered as group relief for carried-forward losses (under CTA10/Part5A).
  • The profit shifting rules in S730D operate where arrangements put profits into a company after a qualifying change and that company has deductible amounts (CTM07060)

Both of these are subject to a motive test (CTM07040).

The rules were introduced alongside an enhancement to the anti-Capital Allowance buying rules in CAA01/Part 2/Chapter 16A (CA27810 onwards).