Part 1Introduction

1Overview of Act

(1)Part 2 is about calculation of the corporation tax chargeable on a company's profits, in particular—

(a)the rates at which corporation tax on profits is charged (see Chapter 2),

(b)ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3), and

(c)the currency in which profits are to be calculated and expressed (see Chapter 4).

(2)Parts 3A to 7 make provision for the following reliefs—

(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)relief for companies with small profits (other than ring-fence profits) (see Part 3A),

(b)relief for trade losses (see Chapters 2 and 3 of Part 4),

(c)relief for losses from property businesses (see Chapter 4 of Part 4),

(d)relief for losses on a disposal of shares (see Chapter 5 of Part 4),

(e)relief for losses from miscellaneous transactions (see Chapter 6 of Part 4),

(f)group relief (see Part 5),

(fa)group relief for carried-forward losses (see Part 5A),

(g)relief for qualifying charitable donations (see Part 6), ...

(ga)relief for expenditure on grassroots sport (see Part 6A), and

(h)community investment tax relief (see Part 7).

(2A)Part 7ZA contains provision restricting the amount of certain deductions which may be made in calculating the profits of a company on which corporation tax is chargeable.

(3)Parts 7A to 13 make provision about special types of business and companyetc, in particular—

(za)banking companies (see Part 7A),

(a)oil activities (see Part 8),

(aa)oil contractor activities (see Part 8ZA),

(ab)profits arising from the exploitation of patents etc (see Part 8A),

(ac)trading profits taxable at Northern Ireland rate (see Part 8B),

(ad)restitution interest (see Part 8C),

(b)leasing plant or machinery (see Part 9),

(c)close companies (see Part 10),

(d)charitable companies etc (see Part 11),

(e)Real Estate Investment Trusts (see Part 12),

(f)corporate beneficiaries under trusts (see Chapter 1 of Part 13),

(g)open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13),

(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i)securitisation companies (see Chapter 4 of Part 13),

(j)companies in liquidation or administration (see Chapter 5 of Part 13),

(k)banks etc in compulsory liquidation (see Chapter 6 of Part 13),

(l)co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13), and

(m)community amateur sports clubs (see Chapter 9 of Part 13).

(4)Parts 14 to 21C contain provisions relating to tax avoidance, in particular with respect to—

(a)change in company ownership (see Part 14),

(aa)transfer of deductions (see Part 14A),

(ab)carried-forward losses (see Part 14B),

(b)transactions in securities (see Part 15),

(c)factoring of income (see Part 16),

(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(da)manufactured dividends (see Part 17A),

(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)the sale and lease-back of assets (see Part 19),

(g)leasing plant or machinery (see Part 20), ...

(h)other arrangements involving asset leasing (see Part 21) ...

(i)risk transfer schemes (see Part 21A).

(j)group mismatch schemes (see Part 21B)., and

(ja)tax mismatch schemes (see Part 21BA),

(k)tainted donations made to charities (see Part 21C).

(5)Part 22 contains miscellaneous provisions, including provision with respect to—

(a)transfers of trade without a change of ownership (see Chapter 1),

(b)transfers of trade to obtain balancing allowances (see Chapter 2),

(c)transfer of relief within partnerships (see Chapter 3),

(d)the surrender of tax refunds within groups of companies (see Chapter 4),

(e)the set off of income tax deductions against corporation tax (see Chapter 5),

(f)the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6),

(g)the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7), and

(h)exemptions (see Chapter 8).

(6)Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7)Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8)Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9)For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

Part 2Calculation of liability in respect of profits

Chapter 1Introduction

2Overview of Part

(1)This Part contains provisions that relate to the calculation of the corporation tax chargeable on a company's profits of an accounting period.

(2)Chapter 2 is about the rates at which corporation tax on profits is charged.

(3)Chapter 3 is about ascertaining the amount of a company's profits of an accounting period to which the rates of corporation tax applicable to the company are applied.

(4)Chapter 4 makes provision about the currency in which a company must calculate and express its profits for corporation tax purposes.

(5)For provision about the calculation of the corporation tax payable for an accounting period see paragraph 8 of Schedule 18 to FA 1998.

Chapter 2Rates at which corporation tax on profits charged

3Corporation tax rates

(1)Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.

(2)Subsection (1) is subject to—

(a)section 18A (which provides for tax to be charged at the standard small profits rate instead of the main rate in certain cases), and

(b)any other provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.

Chapter 3Calculation of amount to which rates applied

4Amount of profits to which corporation tax rates applied

(1)In the calculation under paragraph 8(1) of Schedule 18 to FA 1998 of the amount of corporation tax payable for an accounting period of a company, the first step is to apply the rate or rates of corporation tax applicable to the profits of the company of the period on which tax is chargeable.

(2)

The profits of a company of an accounting period on which corporation tax is chargeable (in this Act referred to as the company's taxable total profits of the period) are found as follows—

• Step 1

  Find the company's total profits of the period (see subsection (3)).

• Step 2

  Deduct from the result of Step 1 any amounts which can be relieved against the company's total profits of the period.

(3)To find a company's total profits of an accounting period take the following steps.

• Step 1

  Find the amount in respect of which the company is chargeable for the period under the charge to corporation tax on income after any reduction required to give effect to relief from tax.

• Step 2

  Add to the result of Step 1 any amount to be included in respect of chargeable gains in the company's total profits of the accounting period (see section 8 of TCGA 1992) after any reduction required to give effect to relief from tax.

(4)Subsections (2) and (3) are subject to the provisions of the Corporation Tax Acts.

Chapter 4Currency

The currency to be used in tax calculations

5Basic rule: sterling to be used

(1)For corporation tax purposes the income and chargeable gains of a company for an accounting period must be calculated and expressed in sterling.

(2)See the following sections for provision about the application of subsection (1) in certain cases where profits or losses fall to be calculated in accordance with generally accepted accounting practice—

• section 6 (UK resident company operating in sterling and preparing accounts in another currency),

• section 7 (UK resident company operating in currency other than sterling and preparing accounts in another currency),

• section 8 (UK resident company preparing accounts in currency other than sterling),

• section 9 (non-UK resident company preparing accounts in currency other than sterling).

(3)See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.

6UK resident company operating in sterling and preparing accounts in another currency

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice, a UK resident company(other than a UK resident investment company) —

(a)prepares its accounts in a currency other than sterling, and

(b)in those accounts identifies sterling as its functional currency.

(1A) This section also applies if, for a period of account, a UK resident investment company—

(a)in accordance with generally accepted accounting practice, prepares its accounts in a currency other than sterling, and

(b)either—

(i)has sterling as its designated currency for that period of account (see sections 9A and 9B), or

(ii)if it does not have a designated currency for that period, in those accounts identifies sterling as its functional currency in accordance with generally accepted accounting practice.

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as if the company prepared its accounts in sterling.

7UK resident company operating in currency other than sterling and preparing accounts in another currency

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a)a UK resident company(other than a UK resident investment company) prepares its accounts in one currency,

(b)in those accounts it identifies another currency as its functional currency, and

(c)that other currency is not sterling.

(1A) This section also applies if, for a period of account, a UK resident investment company—

(a)in accordance with generally accepted accounting practice, prepares its accounts in one currency,

(b)either—

(i)has another currency as its designated currency for that period (see sections 9A and 9B), or

(ii)if it does not have a designated currency for that period, in those accounts identifies another currency as its functional currency in accordance with generally accepted accounting practice, and

(c)that other currency is not sterling.

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the relevant currency as if the company prepared its accounts in that currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the relevant currency of the company.

(4) In subsections (2) and (3) “ the relevant currency ” means the currency other than sterling referred to in subsection (1)(c) or (1A)(c).

8UK resident company preparing accounts in currency other than sterling

(1)This section applies if, for a period of account—

(a)a UK resident company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b)neither section 6 nor section 7 applies.

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the accounts currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

9Non-UK resident company preparing return of accounts in currency other than sterling

(1)This section applies if a non-UK resident company within the charge to corporation tax prepares its return of accounts for a period of account in a currency other than sterling (the “accounts currency”).

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the accounts currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

(4)The reference in subsection (1) to the company's “return of accounts” is to a return of such accounts ... as may be required under paragraph 3 of Schedule 18 to FA 1998 (companytax returns).

9A Designated currency of a UK resident investment company

(1) The designated currency of a UK resident investment company is the currency which the company elects as its designated currency.

(2)An election under this section by a company (“X”) takes effect only if, at the time when it is to take effect (see section 9B(1))—

(a)X is a UK resident investment company, and

(b)Condition A or Condition B is met.

(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Condition A is that a significant proportion of X's assets and liabilities are denominated in the currency.

(5)Condition B is that—

(a)the currency is the functional currency of another company, and

(b)it is reasonable to assume that the two companies will meet the consolidation condition.

(6)X and another company (“Y”) meet the consolidation condition at any time if—

(a)for a period which includes that time, the financial results of X are comprised in financial statements of Y's group prepared in accordance with acceptable accounting practice, or

(b)if no financial statements of the group are prepared in accordance with acceptable accounting practice for a period which includes that time, the financial results of X would be comprised in financial statements of Y's group for a period which includes that time if such statements were prepared in accordance with international accounting standards.

(7)In subsection (6)—

• “ financial statements of the group ” means consolidated financial statements of Y and its subsidiaries(and for this purpose “subsidiaries” has the meaning given by international accounting standards),

• “Y's group” means a worldwide group of which Y is the ultimate parent within the meaning of Part 10 of TIOPA 2010,

• “ acceptable accounting practice ” means—

  (a)

  international accounting standards,

  (b)

  UK generally accepted accounting practice, or

  (c)

  accounting practice which is generally accepted in the country in which Y is resident.

(8)A currency is the designated currency of X for a period of account if the election in respect of that currency has effect throughout that period (see section 9B).

(9)In relation to any period of account for which a currency is X's designated currency as a result of an election under this section, profits or losses of X that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated as if—

(a)the designated currency were the functional currency of the company, and

(b)no part of X's business could, in accordance with generally accepted accounting practice, be regarded as having another currency as its functional currency.

9BPeriod for which an election under section 9A has effect

(1)An election under section 9A takes effect at the beginning of the day specified in the election as the day on which it takes effect (which must be later than the day on which the election is made).

(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)An election under section 9A may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.

(4)Subject to that, an election has effect until immediately before—

(a)the day on which another election by X takes effect, or

(b)the day on which a revocation event occurs,

(whichever first occurs).

(5)A revocation event occurs in a period of account (other than a period to which subsection (6) applies) if, at any time during that period—

(a)it is not the case that a significant proportion of X's assets and liabilities are denominated in the currency to which the election relates, and

(b)it is not the case that the currency is the functional currency of another company which, with X, met the consolidation condition (within the meaning of section 9A(6)) at any time during the preceding period of account.

(6)A revocation event occurs in the period of account in which X's first accounting period begins if—

(a)Condition A and not Condition B is satisfied at the beginning of that accounting period, and

(b)the condition in subsection (5)(a) is met at any time during the period of account but after the first accounting period begins.

(6A)A revocation event also occurs in a period of account (whether or not a period to which subsection (6) applies) if, at any time during that period, X ceases to be a UK resident investment company.

(7)Subsections (8) and (9) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—

(a)an election under section 9A takes effect, or

(b)a revocation event occurs.

(8)It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—

(a)the first beginning with the straddling period of account and ending immediately before that day, and

(b)the second beginning with that day and ending with the straddling period of account,

and X's profits and losses are to be computed accordingly for the purposes of corporation tax.

(9)For those purposes, it is to be assumed—

(a)that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and

(b)that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X's functional currency, the accounts for each of the two periods do likewise.

(10)In this section references to “X” are to be construed in accordance with section 9A.

9CChargeable gains and losses of companies

(1)This section applies if—

(a)a company disposes of an asset which is a ship, an aircraft, shares or an interest in shares, and

(b)at any time beginning with the company's acquisition of the asset (or, if earlier, the time allowable expenditure was first incurred in respect of the asset) and ending with the disposal, the company's relevant currency is not sterling.

(2)A company's relevant currency at any time is its functional currency at that time, subject to subsection (3).

(3)If, at any time—

(a)a company is a UK resident investment company, and

(b)the company has a designated currency (see sections 9A and 9B) which is different from its functional currency,

the company's relevant currency at that time is that designated currency.

(4)If the relevant currency of the company at the time of the disposal is not sterling, the chargeable gain or loss accruing to the company on the disposal must be calculated as follows—

• Step 1 Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal.

• Step 2 Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

(5)In any case, subsections (6) to (10) apply for the purposes of calculating the chargeable gain or loss.

(6)Where any allowable expenditure is incurred in a currency which is not the company's relevant currency at the time it is incurred, that expenditure is to be translated into that relevant currency by reference to the spot rate of exchange for the day on which it is incurred.

(7)Where, at any time after any allowable expenditure is incurred but before the asset is disposed of, there is a change in the company's relevant currency, that expenditure is to be translated (or, if it has previously been translated under this section, further translated) into the relevant currency of the company immediately following the change, by reference to the spot rate of exchange for the day of the change.

(8)Any amount of consideration for the disposal which is given in a currency other than the company's relevant currency is to be translated into that relevant currency by reference to the spot rate of exchange on the day of disposal.

(9)For the purposes of subsections (6) and (7)—

(a)any translation of expenditure under subsection (6) is to be done before any translation of the expenditure under subsection (7), and

(b)if subsection (7) applies as a result of more than one change in the company's relevant currency, it is to be applied in relation to each change in the order the changes were made (with the earliest first).

(10)Where, by virtue of any enactment, the company was at any time treated for the purposes of corporation tax on chargeable gains as acquiring the asset—

(a)for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the person disposing of the asset, or

(b)for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

(11)For the purposes of this section, a reference to a ship or aircraft includes a reference to the benefit of a contract—

(a)to which section 67 of CAA 2001 applies, and

(b)which relates to plant or machinery which is a ship or aircraft.

(12)In this section—

• “allowable expenditure” means expenditure which, immediately before the disposal, was attributable to the asset under section 38(1)(a) to (c) of TCGA 1992;

• “interest in shares” has the same meaning as in Schedule 7AC to TCGA 1992 (see paragraph 29 of that Schedule);

• “shares” includes stock.

Translating amounts into other currencies

10The equivalent in another currency of a sterling amount

(1)Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

(2)The translation must be made by reference to—

(a)the average exchange rate for the accounting period, or

(b)the rate mentioned in subsection (3).

(3)That rate is—

(a)if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b)if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

11Sterling equivalents: basic rule

(1)Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

(2)The translation must be made by reference to—

(a)the average exchange rate for the accounting period, or

(b)the rate mentioned in subsection (3).

(3)That rate is—

(a)if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b)if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(4)Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

12Sterling equivalents: carried-back amounts

(1)This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2)The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below).

(3)In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-back amount is to be carried back,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises, and

• “the relevant accounting period” means the latest accounting period of the company that both—

  (a)

  ends before the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the earlier tax calculation currency.

13Sterling equivalents: carried-forward amounts

(1)This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2)The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below).

(3)In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-forward amount is to be carried forward, and

• “the relevant accounting period” means the earliest accounting period of the company that both—

  (a)

  begins after the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the later tax calculation currency.

Adjustment of sterling losses

14Carried-back amounts

(1)This section applies if conditions A, B and C are met.

(2)Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a)prepares its accounts for a period of account in sterling, or

(b)prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3)Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-back amount.

(4)Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried back (“the earlier tax calculation currency”) is a currency other than sterling.

(5)The loss must be adjusted by—

(a)first being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and

(b)then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(6)In this section “the relevant accounting period” means the latest accounting period of the company that both—

(a)ends before the accounting period in which the loss arises, and

(b)is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

15Carried-forward amounts

(1)This section applies if conditions A, B and C are met.

(2)Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a)prepares its accounts for a period of account in sterling, or

(b)prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3)Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-forward amount.

(4)Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried forward (“the later tax calculation currency”) is a currency other than sterling.

(5)The loss must be adjusted by—

(a)first being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and

(b)then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(6)In this section “the relevant accounting period” means the earliest accounting period of the company that both—

(a)begins after the accounting period in which the loss arises, and

(b)is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

Interpretation

16Sections 13(2) and 15(5): profit against which carried-forward amount to be set off

(1)This section is about the interpretation of the references in sections 13(2) and 15(5) to the profit against which a carried-forward amount is to be set off, in a case where the carried-forward amount—

(a)is one that is treated as arising in an accounting period later than that in which it in fact arises, and

(b)is accordingly deductible in calculating a profit for that later period.

(2)In such a case, the references are to be read as references to the profit in calculating which the amount is deductible, disregarding the deduction.

17Interpretation of Chapter

(1)References in this Chapter to the accounts of a UK resident company are to—

(a)the annual accounts of the company required by Part 15 of the Companies Act 2006, or

(b)if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the territory under whose laws the company is incorporated, or

(c)if the company is not required to keep accounts as mentioned in paragraph (a) or (b), those accounts of the company that most closely correspond to accounts which it would have been required to prepare if the provisions of Part 15 of the Companies Act 2006 applied to it.

(2)In this Chapter “carried-back amount” means—

(a)an amount carried back under section 37 (relief for trade losses against total profits),

(aa)an amount carried back under section 45F (relief for terminal trade losses),

(b)an amount carried back under section 389(2) of CTA 2009 (deficits of insurance companies), or

(c)an amount carried back by virtue of a claim under section 459(1)(b) or 463B(1)(b) of CTA 2009 (non-trading deficits from loan relationships).

(3)In this Chapter “carried-forward amount” means—

(a)an amount carried forward under section 45 (carry forward of pre-1 April 2017trade loss against subsequent trade profits),

(aa)an amount carried forward under section 45A (carry forward of post 1-April 2017 trade loss against total profits),

(ab)an amount carried forward under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits),

(b)an amount carried forward under section 62(5) (UK property business losses),

(c)an amount carried forward under section 63(3) (company with investment business ceasing to carry on a UK property business),

(d)an amount carried forward under 66(3) (overseas property business losses),

(e)an amount carried forward under section 91(6) (losses from miscellaneous transactions),

(f)an amount carried forward under section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies) ,

(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h)an amount carried forward under section 391(2) of CTA 2009 (deficits of insurance companies),

(i)an amount carried forward under section 457(3) , 463G(6) or 463H(4) of CTA 2009 (non-trading deficits from loan relationships),

(j)an amount carried forward under section 753(3) of CTA 2009 (non-trading loss on intangible fixed assets),

(k)an amount carried forward under section 925(3) of CTA 2009 (patent income: relief for expenses), or

(l)an amount carried forward under section 1223 of CTA 2009 (expenses of management and other amounts).

(3A)In this Chapter “investment company” means a company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived from those investments.

(4)

References in this Chapter to the functional currency of a company or of part of a company's business are references to the currency of the primary economic environment in which the company or part operates.

(5)

References in this Chapter to the tax calculation currency of a company in an accounting period are to the currency in which profits or losses of the company arising in that period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes are required to be calculated by virtue of section 5(1), section 6(2), Step 1 of section 7(2), Step 1 of section 8(2) or Step 1 of section 9(2).

Part 3Companies with small profits

The small profits rate

18Profits charged at the small profits rate

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Marginal relief

19Marginal relief

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20Company with only ring fence profits

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21Company with ring fence profits and other profits

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22The ring fence amount

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23The remaining amount

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The lower limit and the upper limit

24The lower limit and the upper limit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25Associated companies

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26Section 25(3): treatment of certain non-trading companies

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27Attribution to persons of rights and powers of their associates

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28Associated companies: fixed-rate preference shares

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29Association through a loan creditor

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30Association through a trustee

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary

31Power to obtain information

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32Meaning of “augmented profits”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33Interpretation of section 32(2) and (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34Close investment-holding companies

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 3ACompanies with small profits

The standard small profits rate for non-ring fence profits

18AProfits charged at the standard small profits rate

(1)Corporation tax is charged at the standard small profits rate on a company's taxable total profits of an accounting period which are not ring fence profits if—

(a)the company is UK resident in the accounting period,

(b)it is not a close investment-holding company in the period, and

(c)its augmented profits of the accounting period do not exceed the lower limit.

(2)In this Act “the standard small profits rate” means a rate that—

(a)is lower than the main rate, and

(b)is set by Parliament for the financial year as the standard small profits rate.

(3)In this Part “ring fence profits” has the same meaning as in Part 8 (see section 276).

(4)In the case of a company with ring fence profits, see section 279A(3) (small ring fence profits rate chargeable on ring fence profits).

Marginal relief

18BMarginal relief for companies without ring fence profits

(1)This section applies if—

(a)a company is UK resident in an accounting period,

(b)it is not a close investment-holding company in the period,

(c)its augmented profits of the accounting period exceed the lower limit but do not exceed the upper limit, and

(d)its augmented profits of the accounting period do not include any ring fence profits.

(2)The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to—

(3)In this Act “the standard marginal relief fraction” means the fraction set by Parliament for the financial year as the standard marginal relief fraction for the purposes of this Part.

18CMarginal relief for companies with ring fence profits

In the case of a company with ring fence profits—

(a)see section 279B (if the company's augmented profits of an accounting period consist exclusively of ring fence profits), and

(b)see section 279C (if the company's augmented profits of an accounting period consist of both ring fence profits and other profits).

The lower limit and the upper limit

18DThe lower limit and the upper limit

(1)This section gives the meaning in this Part of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“C”).

(2)If C has no associated company in the accounting period—

(a)the lower limit is £50,000, and

(b)the upper limit is £250,000.

(3)If C has one or more associated companies in the accounting period—

(a)the lower limit is—

(b)the upper limit is—

(4)For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

18EAssociated companies

(1)For the purposes of section 18D, a company is another company's associated company in an accounting period if it is an associated company (see subsection (4)) for any part of the accounting period.

(2)The rule in subsection (1) applies to each of two or more associated companies even if they are associated companies for different parts of the accounting period.

(3)But an associated company is ignored for the purposes of section 18D if—

(a)it has not carried on a trade or business at any time in the accounting period, or

(b)it was an associated company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period.

(4)For the purposes of this Part, a company is an associated company of another at any time when—

(a)one of the two has control of the other, or

(b)both are under the control of the same person or persons.

(5)In subsection (4) “control” has the same meaning as in Part 10 (see sections 450 and 451).

(6)In this section—

(a)subsection (3) is subject to section 18F, and

(b)subsections (4) and (5) are subject to sections 18G to 18J.

18FSection 18E(3): treatment of certain non-trading companies

(1)Subsection (2) applies if a company carries on a business of making investments in an accounting period and throughout the period the company—

(a)carries on no trade,

(b)has one or more 51% subsidiaries, and

(c)is a passive company.

(2)The company is treated for the purposes of section 18E(3) as not carrying on a business at any time in the accounting period.

(3)A company is a passive company throughout an accounting period only if the following requirements are met—

(a)it has no assets in that period, other than shares in companies which are its 51% subsidiaries,

(b)no income arises to it in that period other than dividends,

(c)if income arises to it in that period in the form of dividends—

(i)the redistribution condition is met (see subsection (4)), and

(ii)the dividends are exempt distributions of a qualifying kind received by it (see subsection (5)),

(d)no chargeable gains accrue to it in that period,

(e)no expenses of management of the business mentioned in subsection (1) are referable to that period, and

(f)no qualifying charitable donations are deductible from the company's total profits of that period.

(4)The redistribution condition is that—

(a)the company pays dividends to one or more of its shareholders in the accounting period, and

(b)the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period.

(5)For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a)it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b)it is exempt for the purposes of Part 9A of CTA 2009 (companydistributions).

(6)If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (3)(c) is met in respect of the income—

(a)neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (3)(a), and

(b)no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (3)(a) in that period or any earlier accounting period.

18GAttribution to persons of rights and powers of their partners

(1)This section applies if—

(a)it is necessary to determine in accordance with section 18E(4) and (5) whether a company is an associated company of another company, and

(b)the relationship between the two companies is not one of substantial commercial interdependence.

(2)In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates.

(3)The Treasury may by regulations prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section.

18HAssociated companies: fixed-rate preference shares

(1)In determining for the purposes of section 18E(4) whether a company is under the control of another, fixed-rate preference shares held by a company are ignored if the company holding them—

(a)is not a close company,

(b)takes no part in the management or conduct of the company which issued the shares, or in the management or conduct of its business, and

(c)subscribed for the shares in the ordinary course of a business which includes the provision of finance.

(2)In this section “fixed-rate preference shares” means shares which—

(a)were issued wholly for new consideration,

(b)do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(c)do not carry any right to dividends other than dividends which—

(i)are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(ii)together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued.

(3)In subsection (2)(a) “new consideration” has the meaning given by section 1115.

18IAssociation through a loan creditor

(1)A company (“A”) is not under the control of another company (“B”) for the purposes of section 18E(4) if—

(a)B is a loan creditor of A,

(b)there is no other connection between A and B, and

(c)either—

(i)B is not a close company, or

(ii)B's relationship to A as a loan creditor arose in the ordinary course of a business which B carries on.

(2)Subsection (3) applies if—

(a)two companies (“A” and “B”) are controlled by the same person who is a loan creditor of each of them,

(b)there is no other connection between A and B, and

(c)either—

(i)the loan creditor is a company which is not a close company, or

(ii)the loan creditor's relationship to each of A and B as a loan creditor arose in the ordinary course of a business which the loan creditor carries on.

(3)In determining for the purposes of this Part whether A and B are associated with each other, rights which the loan creditor has as a loan creditor of A, or as a loan creditor of B, are ignored.

(4)In subsection (2)(a) “control” has the same meaning as in section 18E(4).

(5)In this section—

(a)“connection” includes a connection in the past as well as a connection in the present, and

(b)references to a connection between two companies include any dealings between them.

(6)In this section references to a loan creditor of a company are to be read in accordance with section 453.

18JAssociation through a trustee

(1)Subsection (2) applies if—

(a)two companies (“A” and “B”) are controlled by the same person by virtue of rights or powers (or both) held in trust by that person, and

(b)there is no other connection between A and B.

(2)In determining for the purposes of this Part whether A and B are associated with each other, the rights and powers mentioned in subsection (1)(a) are ignored.

(3)In subsection (1)—

(a)“control” has the same meaning as in section 18E(4),

(b)“connection” includes a connection in the past as well as a connection in the present, and

(c)the reference to a connection between A and B includes any dealings between them.

Supplementary

18KPower to obtain information

(1)This section applies if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company.

(2)The officer may, for the purposes of this Part, by notice require the issuing company to provide the officer with—

(a)particulars of any bearer securities issued by the company,

(b)the names and addresses of the persons to whom the securities were issued, and

(c)details of the amounts issued to each person.

(3)The officer may, for the purposes of this Part, by notice require—

(a)any person to whom bearer securities were issued by the company, or

(b)any person to or through whom bearer securities issued by the company were subsequently sold or transferred,

to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities.

(4)In this section—

• “loan creditor” has the meaning given by section 453, and

• “securities” includes—

  (a)

  shares, stocks, bonds, debentures and debenture stock, and

  (b)

  any promissory note or other instrument evidencing indebtedness to a loan creditor of the company.

18LMeaning of “augmented profits”

(1)For the purposes of this Part a company's “augmented profits” of an accounting period are—

(a)the company's taxable total profits of that period, plus

(b)any exempt distributions of a qualifying kind received by the company (“R”) that are not excluded.

(2)For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a)it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b)it is exempt for the purposes of Part 9A of CTA 2009 (companydistributions).

(3)For the purposes of this section a distribution which R receives from a company (“C”) is excluded if—

(a)C is a 51% subsidiary of R or of a company of which R is a 51% subsidiary, or

(b)C is a trading company or relevantholding company that is a quasi-subsidiary of R.

(4)Section 18M—

(a)makes further provision for determining whether a company is a 51% subsidiary of another for the purposes of subsection (3), and

(b)defines expressions used in that subsection.

18MInterpretation of section 18L(3)

(1)This section applies for the purposes of section 18L(3).

(2)In addition to meeting the requirements of section 1154(2), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

(a)B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and

(b)B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

(3)In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning share capital if—

(a)it owns the share capital indirectly,

(b)the share capital is owned directly by a company (“D”), and

(c)a profit on the sale of the shares would be a trading receipt for D.

(4)A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades.

(5)A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries.

(6)A company is a “quasi-subsidiary” of R if—

(a)it is owned by a consortium of which R is a member,

(b)it is not a 75% subsidiary of any company, and

(c)no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75% subsidiary of any company.

(7)A company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which—

(a)beneficially owns at least 5% of that capital,

(b)would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and

(c)would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

(8)The companies meeting those conditions are called the members of the consortium.

(9)Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of this section as it applies for the purposes of section 151(4)(a) and (b).

18NClose investment-holding companies

(1)For the purposes of this Part, a close company (“the candidate company”) is a close investment-holding company in an accounting period unless throughout the period it exists wholly or mainly for one or more of the permitted purposes set out in subsection (2).

There is an exception to this rule in subsection (5).

(2)The candidate company exists for a permitted purpose so far as it exists—

(a)for the purpose of carrying on a trade or trades on a commercial basis,

(b)for the purpose of making investments in land, or estates or interests in land, in cases where the land is, or is intended to be, let commercially (see subsection (3)),

(c)for the purpose of holding shares in and securities of, or making loans to, one or more companies each of which—

(i)is a qualifying company, or

(ii)falls within subsection (4),

(d)for the purpose of co-ordinating the administration of two or more qualifying companies,

(e)for the purpose of the making of investments as mentioned in paragraph (b)—

(i)by one or more qualifying companies, or

(ii)by a company which has control of the candidate company, or

(f)for the purpose of a trade or trades carried on on a commercial basis—

(i)by one or more qualifying companies, or

(ii)by a company which has control of the candidate company.

(3)For the purposes of subsection (2)(b), any letting of land is taken to be commercial unless the land is let to—

(a)a person connected with the candidate company (“a connected person”), or

(b)a person who is—

(i)the spouse or civil partner of a connected person,

(ii)a relative of a connected person, or the spouse or civil partner of a relative of a connected person,

(iii)a relative of the spouse or civil partner of a connected person, or

(iv)the spouse or civil partner of a relative of the spouse or civil partner of the connected person.

(4)A company falls within this subsection (see subsection (2)(c)(ii)) if—

(a)it is under the control of the candidate company or of a company which has control of the candidate company, and

(b)it exists wholly or mainly for the purpose of holding shares in or securities of, or of making loans to, one or more qualifying companies.

(5)If a company is wound up and was not a close investment-holding company in the accounting period that ends (by virtue of section 12(2) of CTA 2009) immediately before the winding up starts, the company is not treated for the purposes of this Part as being a close investment-holding company in the subsequent accounting period.

(6)In this section “qualifying company” means a company which—

(a)is under the control of the candidate company or of a company which has control of the candidate company, and

(b)exists wholly or mainly for either or both of the purposes mentioned in subsection (2)(a) or (b).

(7)In this section—

• “control” has the meaning given by section 450, and

• “relative” means brother, sister, ancestor or lineal descendant.

Part 4Loss relief

Chapter 1Introduction

35Overview of Part

(1)This Part provides corporation tax relief for—

(a)losses made in a trade (see Chapter 2 as well as the restrictions on relief in Chapter 3 relating to limited partnerships and limited liability partnerships),

(b)losses made in a UK property business or overseas property business (see Chapter 4),

(c)losses made on a disposal of certain shares (see Chapter 5), and

(d)losses made in certain miscellaneous transactions (see Chapter 6).

(2)This Part also provides for the reduction of available relief if there is a write-off of government investment in a company (see Chapter 7).

(3)For rules about the calculation of losses for the purposes of this Part, see—

(a)section 47 of CTA 2009 (losses of a trade calculated on same basis as profits), and

(b)section 210 of CTA 2009 (which applies section 47 of that Act, so that losses of a UK property business or overseas property business are calculated on the same basis as profits).

(4)See also Part 17 of CTA 2009 for rules about how to calculate the losses of a company that is a partner in a partnership.

Chapter 2Trade losses

Introduction

36Introduction to Chapter

(1)This Chapter provides relief for a loss made by a company in a trade (see sections 37 to 47)

(2)This Chapter also provides for restrictions on relief for the following cases—

(a)farming or market gardening (sections 48 to 51),

(b)dealings in commodity futures (section 52),

(c)leasing contracts and company reconstructions (section 53), and

(d)receipts of interest, dividends and royalties by a non-UK resident company (section 54).

(3)In this Chapter references to a company carrying on a trade are references to the company carrying on the trade so as to be within the charge to corporation tax in relation to the trade.

(4)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.

Relief in loss-making period and carry back relief

37Relief for trade losses against total profits

(1)This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade.

(2)The company may make a claim for relief for the loss under this section (but see subsection (5)).

(3)If the company makes a claim, the relief is given by deducting the loss from the company's total profits of—

(a)the accounting period in which the loss is made (“the loss-making period”), and

(b)if the claim so requires, previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the loss-making period begins.

(4)The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the loss so far as it cannot be deducted under that subsection for a subsequent accounting period.

(5)The company may not make a claim if, in the loss-making period, the company carries on the trade wholly outside the United Kingdom.

(6)A deduction under subsection (3)(b) may be made for an accounting period only if the company—

(a)carried on the trade in the period, and

(b)did not do so wholly outside the United Kingdom.

(7)The company's claim must be made—

(a)within the period of two years after the end of the loss-making period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(8)If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest loss).

(9)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

38Limit 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 mentioned in section 37(3)(b).

(2)The amount of the deduction for the loss for the accounting period is not to exceed an amount equal to the overlapping proportion of the company's total profits of that period.

(3)The overlapping proportion is the same as the proportion that the part of the accounting period falling within the period of 12 months bears to the whole of the accounting period.

39Terminal losses: extension of periods for which relief may be given

(1)This section applies if—

(a)a company ceases to carry on a trade, and

(b)the company has made a terminal loss in the trade.

(2)Sections 37(3)(b) and 38(1) and (3) have effect in relation to the terminal loss as if the references to 12 months were references to 3 years.

(3)The following are terminal losses made in the trade—

(a)the whole of any loss made by the company in the trade in an accounting period that begins during the final 12 months, and

(b)the overlapping proportion of any loss made by the company in the trade in an accounting period that ends, but does not begin, during the final 12 months.

(4)The overlapping proportion is the same as the proportion that the part of the accounting period falling within the final 12 months bears to the whole of the accounting period.

(5)“The final 12 months” means the period of 12 months ending when the company ceases to carry on the trade.

(6)This section is subject to section 41.

40Ring fence trades: extension of periods for which relief may be given

(1)This section applies if—

(a)in an accounting period a company makes a loss in a ring fence trade (as defined in section 162 of CAA 2001),

(b)the accounting period is an accounting periodfor which any allowances under section 164 or by virtue of section 416ZA of CAA 2001 are made to the company in respect of decommissioning expenditure , and

(c)not all the loss is a terminal loss (see section 39(3) above).

(2)Sections 37(3)(b) and 38(1) and (3) have effect in relation to the loss (so far as it is not a terminal loss) as if the references to 12 months were references to 3 years.

(3)But if the loss exceeds the sum of the allowances mentioned in subsection (1)(b), subsection (2) applies in relation to the loss only so far as it does not exceed that amount .

(3A)In this section “decommissioning expenditure” has the meaning given by section 330C.

(4)This section is subject to section 41.

41Sections 39 and 40: transfers of trade to obtain relief

Sections 39 and 40 do not apply by reason of a company ceasing to carry on a trade if—

(a)on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b)the company'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 secure that either or both of those sections apply in relation to a loss by reason of the cessation.

42Ring fence trades: further extension of period for relief

(1)This section applies if—

(a)a company makes a claim under section 37 for relief in respect of a loss made in a ring fence trade,

(b)the claim is made by virtue of section 39 or 40, and

(c)a part of the loss that is eligible for relief under section 37 cannot be so relieved because there are not enough profits from which the loss may be deducted under that section.

(2)Relief for the part of the loss that cannot be relieved under section 37 (“the unrelieved loss”) is given to the company under this section.

(3)The relief is given by deducting the unrelieved loss from the profits of the ring fence trade of an accounting period that—

(a)falls wholly or partly before the three year relief period, and

(b)ends on or after 17 April 2002.

(4)The amount of a deduction to be made under subsection (3) for any accounting period is so much of the unrelieved loss as cannot be deducted under that subsection from profits of the ring fence trade of a subsequent accounting period (but this is subject to subsections (5) and (6)).

(5)In the case of an accounting period that falls partly before the 3 year relief period, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling within the 3 year relief period bears to the whole of the accounting period.

(6)In the case of an accounting period that falls partly before 17 April 2002, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling before that date bears to the whole of the accounting period.

(7)If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest first).

(8)In this section—

• “ring fence trade” has the same meaning as in section 162 of CAA 2001, and

• “3 year relief period” means the period of 3 years that applies to a claim under section 37 by virtue of section 39 or 40.

43Claim period in case of ring fence or mineral extraction trades

(1)This section applies in relation to a claim under section 37 if—

(a)as a result of section 165 of CAA 2001 (general decommissioning expenditure after ceasing ring fence trade) a company's qualifying expenditure for the accounting period in which it ceases to carry on a ring fence trade (as defined in section 162 of that Act) is increased by any amount, or

(b)as a result of section 416 or 416ZA of CAA 2001 (expenditure on site restoration ) any expenditure is treated as qualifying expenditure of a company incurred on the last day of trading.

(2)So far as the claim relates to the increase mentioned in subsection (1)(a), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to the period given by adding two years to the post-cessation period (within the meaning of section 165 of CAA 2001).

(3)So far as the claim relates to the expenditure mentioned in subsection (1)(b), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to a period of 5 years.

44Trade must be commercial or carried on for statutory functions

(1)Relief under section 37 is not available for a loss made in a trade unless for the loss-making period (see section 37(3)(a)) the trade is carried on—

(a)on a commercial basis, and

(b)with a view to the making of a profit in the trade or so as to afford a reasonable expectation of making such a profit.

(2)References in subsection (1)(b) to a profit in the trade include references to a profit in any larger undertaking of which the trade forms part.

(3)If during the loss-making period there is a change in the way in which the trade 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.

(4)The restriction on relief under this section does not apply if the trade is a trade carried on in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

Carry forward of trade loss relief

45Carry forward of pre-1 April 2017 trade loss against subsequent trade profits

(1)This section applies if, in an accounting periodbeginning before 1 April 2017 , a company carrying on a trade makes a loss in the trade.

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

(3)The relief is given for that part of the loss for which no relief is given under section 37 or 42 (“the unrelieved loss”).

(4)For this purpose—

(a)the unrelieved loss is carried forward to subsequent accounting periods (so long as the company continues to carry on the trade), and

(b)the profits of the trade of any such period are reduced by the unrelieved loss so far as that loss is not used under this paragraph to reduce the profits of an earlier period.

(4A)But the company may make a claim that the profits of the trade of an accounting period specified in the claim are not to be reduced by the unrelieved loss, or are not to be reduced by the unrelieved loss by more than an amount specified in the claim.

(4B)A claim under subsection (4A) may specify an accounting period only if it begins on or after 1 April 2017.

(4C)A claim under subsection (4A) is effective if, and only if, it is made—

(a)within the period of two years after the end of the accounting period specified in the claim, or

(b)within such further period as an officer of Revenue and Customs may allow.

(5)In this section and , sections 45B, 45F and 46 references to profits of the trade are references to profits of the trade chargeable to corporation tax.

(6)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

45ACarry forward of post-1 April 2017 trade loss against total profits

(1)This section applies if—

(a)in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b)relief under section 37 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c)the company continues to carry on the trade in the next accounting period (“the later period”), and

(d)the conditions in subsection (3) are met.

(2)But this section does not apply if the trade is a ring fence trade.

(3)The conditions are that—

(a)the trade did not become small or negligible in the loss-making period,

(b)relief under section 37 was not unavailable for the loss by reason of —

(i)section 37(5), 44, 48 or 52, or

(ii)section 1179BF, 1209, 1216DA, 1217DA, 1217MA, 1217SA or 1218ZDA of CTA 2009,

(c)relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the later period,

(d)if the company is a Solvency 2 insurance company the loss is not a shock loss (see subsections (9) and (10)), and

(e)the later period is not an excluded accounting period of a general insurance company.

(4)The unrelieved amount is carried forward to the later period.

(5)The company may make a claim for relief to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6)If the company makes a claim, the relief is given by deducting the unrelieved amount, or the specified part of it, from the company's total profits of the later period.

(7)A claim under this section must be made—

(a)within the period of two years after the end of the later period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9)For the purposes of this section and section 45B, a loss which is partly, but not wholly, a shock loss is to be treated as if—

(a)the amount that is a shock loss, and

(b)the amount that is not,

were separate losses.

(10)In this section—

• “excluded accounting period” has the meaning given by section 269ZG;

• “general insurance company” is to be interpreted in accordance with section 269ZG(6);

• “ring fence trade” has the same meaning as in Part 8 (see section 277);

• “Solvency 2 insurance company” means an insurance company as defined in section 269ZP(2);

• “shock loss” has the meaning given by section 269ZK.

45BCarry forward of post-1 April 2017 trade loss against trade profits

(1)This section applies if—

(a)in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b)relief under section 37 or 42 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c)the company continues to carry on the trade in the next accounting period (“the later period”), and

(d)case 1, 2 or 3 applies.

• Case 1 is that any of the conditions in section 45A(3) are not met.

• Case 2 is that relief for the unrelieved amount was not available under section 45A by reason of section 1210(5), 1216DB(5) or 1217DB(5) of CTA 2009.

• Case 3 is that the trade is a ring fence trade.

(2)The unrelieved amount is carried forward to the later period.

(3)Relief for the unrelieved amount is given to the company in the later period if the company makes a profit in the trade in the later period.

(4)The relief is given by reducing the profits of the trade of the later period by the unrelieved amount.

(5)But the company may make a claim for relief not to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6)A claim under subsection (5) is effective if, and only if, it is made—

(a)within the period of two years after the end of the later period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)If the trade is a ring fence trade, this section has effect only in relation to so much of the loss mentioned in subsection (1)(a) as is not a non-decommissioning loss.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9)In this section—

• “non-decommissioning loss” is to be interpreted in accordance with section 303A;

• “ring fence trade” has the same meaning as in Part 8 (see section 277).

(10)See also section 45A(9) (splitting for the purposes of that section and this section of losses that are partly, but not wholly, shock losses of insurance companies).

45CRe-application of section 45A if loss remains after previous application

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b)any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d)the conditions in subsection (2) are met.

(2)The conditions are that—

(a)the trade did not become small or negligible in the later period,

(b)relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the further period, and

(c)the further period is not an excluded accounting period of a general insurance company.

(3)Subsections (4) to (8) of section 45A apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

(4)In this section “excluded accounting period” and “general insurance company” have the same meaning as in section 45A.

45DApplication of section 45B if loss remains after application of section 45A

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b)any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d)any of the conditions in section 45C(2) is not met.

(2)Subsections (2) to (8) of section 45B apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

45ERe-application of section 45B if loss remains after previous application

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45B(2),

(b)any of that amount is not used under section 45B(4) to reduce profits of the trade for the later period, and

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period.

(2)Subsections (2) to (8) of section 45B apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as was not used as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

45FTerminal losses: relief unrestricted by Part 7ZA and 7A

(1)This section applies if—

(a)a company makes a loss in a trade in an accounting period (the “loss-making period”),

(b)an amount of that loss is carried forward to an accounting period of the company (“the terminal period”) under section 45, 45A or 45B,

(c)relief in the terminal period is not given under section 45, 45A or (as the case may be) 45B for that amount or for any part of it, and

(d)the company ceases to carry on the trade in the terminal period.

(2)The company may make a claim for relief to be given for the unrelieved amount under this section.

(3)If the company makes a claim the relief is given by deducting the unrelieved amount from the relevant profits of the company of—

(a)the terminal period, and

(b)previous accounting periods so far as they fall (wholly or partly) within the period of 3 years ending with the end of the terminal period.

(4)But no deduction is to be made under subsection (3) for any accounting period which is—

(a)the loss-making period,

(b)a period before the loss-making period, or

(c)a period beginning before 1 April 2017.

(5)The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the unrelieved amount so far as it cannot be deducted under that subsection for a subsequent accounting period.

(6)The company's claim must be made—

(a)within the period of two years after the end of the terminal period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)In this section—

• “the unrelieved amount” means so much of the amount mentioned in subsection (1)(b) for which relief is not given in the terminal period under section 45, 45A or (as the case may be) 45B, and

• “relevant profits”, in relation to the terminal period or any previous accounting period, means—

  (a)

  the total profits of the company of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45A,

  (b)

  the profits of the trade of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45 or 45B.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

45GSection 45F: accounting period falling partly within 3 year period

(1)This section applies if—

(a)a company ceases to carry on a trade in an accounting period (“the terminal period”), and

(b)a previous accounting period of the company (“the straddling period”) falls partly within the period of 3 years ending with the end of the terminal period.

(2)The sum of any deductions under section 45F from the profits of the trade of the straddling period is not to exceed an amount equal to the overlapping proportion of those profits (calculated before making those deductions).

(3)The sum of—

(a)any deductions under section 45F from the profits of the trade of the straddling period, and

(b)any deductions under that section from the total profits of the straddling period in respect of losses made in the trade,

must not exceed an amount equal to the overlapping proportion of the total profits of the straddling period (calculated before making those deductions).

(4)The overlapping proportion is the same as the proportion that the part of the straddling period falling within the period of 3 years mentioned in subsection (1)(b) bears to the whole of the straddling period.

45HSection 45F: transfers of trade to obtain relief

Section 45F does not apply by reason of a company ceasing to carry on a trade if—

(a)on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b)the company'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 secure that that section applies by reason of the cessation.

46Use of trade-related interest and dividends if insufficient trade profits

(1)This section applies if in an accounting period a company carrying on a trade makes a loss in the trade and either—

(a)relief for the loss could be given in a later accounting period under section 45(4)(b) or 45B(4) but for the fact that there are no profits of the trade of the later accounting period, or

(b)the amount of relief for the loss that could be given in a later accounting period under section 45(4)(b) or 45B(4) is limited by reason of the amount of profits of the trade of the later accounting period.

(2)For the purposes of section 45 and 45B, Treat any interest or dividends within subsection (3) as profits of the trade of the later period.

(3)Interest or dividends are within this subsection if they—

(a)are from investments, and

(b)would be brought into account as trading receipts in calculating the profits of the trade of the later period but for the fact that they have been subjected to tax under other provisions of the Tax Acts.

47Registered societies

(1)This section applies for the purposes of sections 45 and 45B if the company carrying on the trade is a registered society .

(2)The following amounts may be brought into account in calculating the profits of the trade—

(a)amounts to which the charge to corporation tax on income applies under section 299 of CTA 2009 (charge to tax on non-trading profits from loan relationships), and

(b)amounts arising from possessions out of the United Kingdom to which the charge to corporation tax on income applies under section 933 of CTA 2009 (dividends of non-UK resident company) or under section 974 of that Act (income arising from foreign holdings).

Restrictions on relief: farming or market gardening

48Farming or market gardening

(1)This section applies if a loss is made in a trade of farming or market gardening in an accounting period (“the current period”).

(2)Relief under section 37 is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade—

(a)in the current period, and

(b)in each accounting period falling wholly or partly within the period of 5 years (“the prior 5 years”) ending immediately before the current period begins.

(3)But this section does not prevent relief for the loss from being available if—

(a)the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking,

(b)the farming or market gardening activities meet the reasonable expectation of profit test (see section 49), or

(c)the trade was started, or treated as started, during the prior 5 years (see section 50).

(4)A loss in a trade is calculated without regard to capital allowances by ignoring—

(a)the allowances treated as expenses of the trade under CAA 2001, and

(b)the charges treated as receipts of the trade under CAA 2001.

49Reasonable expectation of profit

(1)This section explains how the farming or market gardening activities (“the activities”) meet the reasonable expectation of profit test for the purposes of section 48(3)(b).

(2)The test is decided by reference to the expectations of a competent farmer or market gardener (a “competent person”) carrying on the activities.

(3)The test is met if—

(a)a competent person carrying on the activities in the year (“the current year”) after the prior 5 years would reasonably expect future profits (see subsection (4)), but

(b)a competent person carrying on the activities at the start of the prior period of loss (see subsection (5)) could not reasonably have expected the activities to become profitable until after the end of the current year.

(4)In determining whether a competent person carrying on the activities in the current year would reasonably expect future profits, regard must be had to—

(a)the nature of the whole of the activities, and

(b)the way in which the whole of the activities were carried on in the current year.

(5)“The prior period of loss” means—

(a)the prior 5 years, or

(b)if subsection (6) applies, the period made up of the successive accounting periods taken together as mentioned in that subsection.

(6)This subsection applies if—

(a)losses in the trade, calculated without regard to capital allowances (see section 48(4)), were made in successive accounting periods before the current year, and

(b)taken together those accounting periods amount to a period of more than 5 years ending at the end of the prior 5 years.

50Cessation of trades

(1)For the purposes of section 48(3)(c) a trade is to be treated as ceased, and a new trade as started, in any of the following cases—

• Case 1

  A company starts or ceases to be within the charge to corporation tax in respect of a trade.

• Case 2

  There is a change in the persons carrying on a trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on.

• Case 3

  There is a change in the persons carrying on a trade and—

  (a)

  immediately before the change, the trade is carried on by persons who include a company, and

  (b)

  after the change, no company that carried on the trade in partnership immediately before the change continues to carry it on in partnership.

• Case 4

  There is a change in the persons carrying on a trade and—

  (a)

  immediately before the change, no company carries on the trade in partnership, and

  (b)

  immediately after the change, the trade is carried on in partnership by persons who include a company.

(2)Subsection (1) is subject to subsections (3) and (4).

(3)A trade is not to be treated as ceased if the change in the persons carrying on the trade is a transfer to which Chapter 1 of Part 22 applies (transfers of trade without a change of ownership).

(4)In determining if there is a change in the persons carrying on a trade, subsection (1) is subject to the following rules—

• Rule 1

  A husband and wife are treated as the same person.

• Rule 2

  Individuals who are civil partners of each other are treated as the same person.

• Rule 3

  A husband or wife is treated as the same person as—

  (a)

  a company of which either of them has control, or

  (b)

  a company of which both have control.

• Rule 4

  An individual's civil partner is treated as the same person as—

  (a)

  a company of which either of the civil partners has control, or

  (b)

  a company of which both have control.

(5)In subsection (4) “control” has the same meaning as in section 450.

51Companies treated as same person as individual

(1)This section applies for the purposes of sections 48(2) and 49(6) if, as a result of section 50(4), a company is treated as the same person as an individual.

(2)A loss in an accounting period may be determined by reference to profits and losses made by the individual in the trade in tax years (within the meaning of the Income Tax Acts).

(3)For this purpose—

(a)profits and losses made by the individual in tax years may be allocated (in whole or in part) to accounting periods in a way that is just and reasonable, and

(b)if a tax year or part of a tax year is not covered by any accounting period—

(i)the period covered by the tax year or part may be treated as if it were an accounting period, and

(ii)in accordance with paragraph (a), profits and losses may be allocated to it.

(4)Section 70(2), (3)(a), (4)(a) and (5) of ITA 2007 applies for the purpose of determining the individual's profits and losses in the trade for tax years.

Restrictions on relief: commodity futures

52Dealings in commodity futures

(1)This section applies if—

(a)a company makes a loss in a trade of dealing in commodity futures,

(b)the company carried on the trade as a partner in a partnership, and

(c)a scheme has been effected or arrangements within subsection (3) have been made (whether by the partnership agreement or otherwise).

(2)Relief under section 37 is not available for the loss.

(3)Arrangements are within this subsection if as a result of them the sole or main benefit that might be expected to arise to the company from the company's interest in the partnership is the obtaining of a reduction in tax liability by means of relief under section 37.

(4)If relief is given in a case to which this section applies, the relief is withdrawn by the making of an assessment to corporation tax under this section.

(5)“Commodity futures” means commodity futures that are for the time being dealt in on a recognised futures exchange (as defined in section 288(6) of TCGA 1992).

Other restrictions on relief

53Leasing contracts and company reconstructions

(1)This section applies if—

(a)under a contract a company (“the leasing company”) incurs capital expenditure on the provision of plant or machinery,

(b)the leasing company lets that plant or machinery to another person under another contract (“the leasing contract”),

(c)a first-year allowance (within the meaning of Part 2 of CAA 2001) in relation to the capital expenditure is made to the leasing company for an accounting period (“the allowance period”),

(d)arrangements within subsection (3) are in place in the allowance period, and

(e)apart from this section, relief under section 37 , 45, 45A or 45B would be available to the leasing company in relation to losses made on the leasing contract.

(2)In the allowance period and any subsequent accounting period, no relief is available to the leasing company as mentioned in subsection (1)(e) except against profits (if any) arising under the leasing contract.

(3)Arrangements are within this subsection if, as a result of them, a successor company will be able to carry on, at some time during or after the allowance period, any part of the leasing company's trade which includes the performance of all or any of the obligations which (apart from the arrangements) would be the leasing company's obligations under the leasing contract.

(4)A company (“company S”) is a successor company if—

(a)Chapter 1 of Part 22 applies in relation to the leasing company and company S as, respectively, the predecessor and the successor within the meaning of that Chapter, or

(b)the leasing company and company S are connected with each other.

(5)“Arrangements” means arrangements of any kind (whether or not in writing).

(6)For the purposes of this section, calculate losses made on the leasing contract and profits arising under that contract as if—

(a)the performance of that contract were a trade carried on by the leasing company separately from any other trade carried on by it, and

(b)the leasing company started carrying on that separate trade at the commencement of the letting under that contract.

(7)In determining if relief is available to the leasing company as mentioned in subsection (1)(e), any losses made on the leasing contract are treated as made in a trade carried on by the leasing company separately from any other trade carried on by it.

54Non-UK resident company: receipts of interest, dividends or royalties

(1)This section applies if—

(a)a non-UK resident company carries on a trade in the United Kingdom, and

(b)tax-exempt receipts of interest, dividends or royalties arise to the company.

(2)The receipts are not to be excluded from the profits of the trade so as to give rise to a loss to be deducted under section 37 , 45, 45A or 45B .

(3)For the purposes of subsection (1) a receipt is “tax-exempt” if it has been treated as tax-exempt under arrangements having effect under section 2 of TIOPA 2010.

Chapter 3Limited partners and members of limited liability partnerships

Introduction

55Introduction to Chapter

(1)This Chapter restricts the amount of relief that may be given for any loss made by a company in a trade carried on by the company—

(a)as a limited partner (see sections 56 to 58), or

(b)as a member of a limited liability partnership (an “LLP”) (see sections 59 to 61).

(2)In this Chapter persons carrying on a trade in partnership are referred to collectively as a “firm”.

Limited partners

56Restriction on reliefs for limited partners

(1)This section applies if—

(a)at any time in an accounting period a company carries on a trade (“the limited partnership trade”) as a limited partner in a firm, and

(b)the company makes a loss in the limited partnership trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 or 45A (relief for trade losses against total profits) other than against profits of the limited partnership trade, ...

(b)under Part 5 (group relief), or

(c)under Part 5A (group relief for carried-forward losses)

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the firm as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 or 45A or Part 5 or 5A for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

(5)The time referred to in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the limited partnership trade during that period, the time when it does so.

(6)If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

57Meaning of “contribution to the firm”

(1)For the purposes of section 56 the company's contribution to the firm is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

(3)In particular, the company's share of any profits of the firm is to be included in the amount which the company has contributed to the firm as capital so far as that share has been added to the firm's capital.

(4)An amount of capital is within this subsection if it is an amount which the company—

(a)has previously drawn out or received back,

(b)is or may be entitled to draw out or receive back at any time when the company is carrying on a trade as a limited partner in the firm, or

(c)is or may be entitled to require another person to reimburse to it.

(5)In subsection (4) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(6)Amount B is the amount of the company's total share of profits within subsection (7) except so far as—

(a)that share has been added to the firm's capital, or

(b)the company has received that share in money or money's worth.

(7)Profits are within this subsection if they are from the limited partnershiptrade.

(8)In determining the amount of the company's total share of profits within subsection (7) ignore the company's share of any losses from the limited partnershiptrade which would (apart from this subsection) reduce that amount.

(9)In subsections (3), (7) and (8) any reference to profits or losses are to profits or losses calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits or losses for tax purposes).

(10)If the firm is carrying on, or has carried on, other trades apart from the limited partnershiptrade, subsections (7) and (8) have effect as if references to the limited partnershiptrade were references to the limited partnershiptrade or any of the other trades.

58Meaning of “limited partner”

(1)In sections 56 and 57 “limited partner” means a company which carries on a trade—

(a)as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907,

(b)as a partner in a firm which in substance acts as a limited partner in relation to the trade (see subsection (2)), or

(c)while the condition mentioned in subsection (3) is met in relation to the company.

(2)A company in substance acts as a limited partner in relation to a trade if the company—

(a)is not entitled to take part in the management of the trade, and

(b)is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person.

(3)The condition referred to in subsection (1)(c) is that—

(a)the company carries on the trade jointly with other persons,

(b)under the law of a territory outside the United Kingdom, the company is not entitled to take part in the management of the trade, and

(c)under that law, the company is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade.

(4)In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).

Members of LLPs

59Restriction on relief for members of LLPs

(1)This section applies if—

(a)a company carries on a trade (“the LLP trade”) as a member of an LLP at any time in an accounting period, and

(b)the company makes a loss in the LLP trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 or 45A (relief for trade losses against total profits) other than against profits of the LLP trade, ...

(b)under Part 5 (group relief), or

(c)under Part 5A (group relief for carried-forward losses)

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the LLP as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 or 45A or Part 5 or 5A for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

(5)The time mentioned in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the LLP trade during that period, at the time when it does so.

(6)If the LLP is carrying on, or has carried on, other trades apart from the LLP trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the LLP trade and then add the results together.

60Meaning of “contribution to the LLP”

(1)For the purposes of section 59 the company's contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

(3)In particular, the company's share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP's capital.

(4)In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

(5)An amount of capital is within this subsection if it is an amount which the company—

(a)has previously drawn out or received back,

(b)draws out or receives back during the period of 5 years beginning with the relevant time,

(c)is or may be entitled to draw out or receive back at any time when it is a member of the LLP, or

(d)is or may be entitled to require another person to reimburse to it.

(6)In subsection (5) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(7)Amount B is the amount of the company's liability on a winding up of the LLP so far as that amount is not included in amount A.

(8)For the purposes of subsection (7) the amount of the company's liability on a winding up of the LLP is the amount which—

(a)the company is liable to contribute to the assets of the LLP in the event of the LLP being wound up, and

(b)the company remains liable to contribute for the period of at least 5 years beginning with the relevant time (or until the LLP is wound up, if that happens before the end of that period).

61Unrelieved losses brought forward

(1)Subsection (2) 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

(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 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).

(2A)Subsection (2B) 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

(b)as a result of section 59, relief under section 45A or Part 5A (group relief for carried forward losses) 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.

(2B)For the purposes of determining the relief under section 45A or Part 5A to be given 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 company in a previous accounting period, and

(b)as a result of that, relief under section 37 or 45A or Part 5 or Part 5A 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.

Chapter 4Property losses

UK property businesses

62Relief for losses made in UK property business

(1)This section applies if, in an accounting period, a company carrying on a UK 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)Subsections (5) to (5C) apply if—

(a)an amount of the loss is not deducted as mentioned in subsection (3) or surrendered by way of group relief under Part 5,

(b)the company continues to carry on the UK property business in the next accounting period.

(5)The amount —

(a)is carried forward to the next accounting period, and

(b)is treated for the purposes of this section as a loss made by the company in the UK property business in that period.

(5A)But relief under subsection (2) for the amount is given to the company in the next accounting period only on the making by the company of a claim.

(5B)A claim may relate to the whole of the amount or to part of it only.

(5C)A claim must be made—

(a)within the period of two years after the end of the next accounting period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(5D)In the application of this section to an amount of a loss previously carried forward under subsection (5), the reference in subsection (4)(a) to group relief under Part 5 is to be read as a reference to group relief for carried-forward losses under Part 5A.

(6)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

63Company 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 1218B 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

(b)continues to be a company with investment business.

(2)Subsections (3) to (7) apply if an amount of loss made in carrying on the UK property business would be carried forward to the next accounting period under section 62(5) but for the company ceasing to carry on the business or to be within the charge to corporation tax in respect of it.

(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 the next accounting period or a succeeding period in accordance with that Chapter.

(4)But a deduction in respect of the amount of loss may be made under section 1219 of CTA 2009 for the next accounting period only on the making by the company of a claim.

(5)A claim may relate to the whole of the amount of the loss or to part of it only.

(6)A claim must be made—

(a)within the period of two years after the end of the next accounting period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)Subsection (1A) of section 1219 of CTA 2009 does not apply in relation to a deduction in respect of the amount of loss made for the next accounting period.

64UK 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 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 (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.

65UK furnished holiday lettings business treated as trade

(1)This section applies if a company carries on a UK furnished holiday lettings business.

(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 (but as modified below) the company is treated as carrying on a single trade—

(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.

(4)... 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.

(4A)Chapter 2 applies as if the following were omitted—

(a)sections 37 to 44,

(b)the words “beginning before 1 April 2017” in section 45(1),

(c)sections 45A to 45H, and

(d)sections 48 to 54.

(4B)Any deduction made under section 45(4)(b) from the profits of the trade treated as carried on under this section is to be ignored for the purposes of section 269ZB (restriction on deductions from trading profits).

(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

66Relief for losses made in overseas property business

(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

(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.

67Overseas 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

(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 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.

67AEEA furnished holiday lettings business treated as trade

(1) This section applies if a company carries on an EEA furnished holiday lettings business.

(2) “ EEA furnished holiday lettings business ” means an overseas 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) in one or more EEA states.

(3)For the purposes of this Part (but as modified below) the company is treated as carrying on a single trade—

(a) which consists of every commercial letting of furnished holiday accommodation comprised in the company's EEA furnished holiday lettings business, and

(b)in relation to which the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009.

(4)Sections 66 and 67 apply in relation to the company's overseas property business as if the lettings mentioned in subsection (3)(a) were not included in it.

(5)Chapter 2 applies as if the following were omitted—

(a)sections 37 to 44,

(b)the words “beginning before 1 April 2017” in section 45(1),

(c)sections 45A to 45H, and

(d)sections 48 to 54.

(5A)Any deduction made under section 45(4)(b) from the profits of the trade treated as carried on under this section is to be ignored for the purposes of section 269ZB (restriction on deductions from trading profits).

(6)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.

Insurance companies

67BExclusion in the case of property businesses of insurance companies

(1)This Chapter does not apply for the purpose of applying the I - E rules in relation to a loss made by an insurance company in any of its separate UK property businesses or overseas property businesses within section 86(4) of FA 2012.

(2)But in the case of a loss which is referable, in accordance with Chapter 4 of Part 2 of that Act, to the company's basic life assurance and general annuity business, see section 87(3) and (4) of that Act.

Chapter 5Losses on disposal of shares

Share loss relief against income

68Share 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—

(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).

(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, 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—

(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.

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

69Eligibility 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.

(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 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—

(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—

(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).

70Entitlement to claim

(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—

(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.

(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.

71How 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 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 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 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 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 subsection (1).

72Limit 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.

(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.

(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

73Subscription for shares

(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 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—

(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.

74Disposals 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 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 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.

(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 consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.

75Limits on relief

(1)Subsection (2) applies if—

(a)a company disposes of any shares for which it has subscribed in a qualifying trading company (“qualifying shares”),

(b)those shares either—

(i)form part of a section 104 holding or a 1982 holding at the time of the disposal, or

(ii)formed part of such a holding at an earlier time, and

(c)the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(2)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares had not formed part of the holding.

(3)Subsection (4) applies if—

(a)a company disposes of any qualifying shares,

(b)the qualifying shares, and other shares that are not capable of being qualifying shares, are for the purposes of TCGA 1992 to be treated as acquired by a single transaction by virtue of section 105(1)(a) of that Act (disposal of shares acquired on same day etc), and

(c)the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(4)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if—

(a)the qualifying shares were to be treated as acquired by a single transaction, and

(b)the other shares were not to be so treated.

(5)Subsection (6) applies if—

(a)a company (“the investor”) disposes of any qualifying shares,

(b)the qualifying shares (taken as a single asset), and other shares in the same company that are not capable of being qualifying shares (taken as a single asset), are for the purposes of TCGA 1992 to be treated as the same asset by virtue of section 127 of that Act (reorganisation etc treated as not involving disposal), and

(c)the investor makes a claim under section 70 in respect of a loss incurred on the disposal.

References in this subsection and subsection (6) to other shares in the same company include debentures of the same company.

(6)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares and the other shares in the same company were not to be treated as the same asset.

(7)In this section—

• “section 104 holding” has the meaning given by section 104(3) of TCGA 1992, and

• “1982 holding” has the meaning given by section 109(1) of that Act.

(8)For the purposes of this section and section 76, shares are not capable of being qualifying shares at any time if—

(a)the company concerned acquired the shares otherwise than by subscription, or

(b)condition C in section 78(4) was not met in relation to the issue of the shares, ...

(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)For the purposes of subsection (5), shares are not capable of being qualifying shares at any time if they are shares of a different class from the shares mentioned in paragraph (a) of that subsection.

76Disposal of shares forming part of mixed holding

(1)This section applies if a company disposes of shares forming part of a mixed holding of shares, that is, a holding of shares in a company which includes—

(a)shares that are not capable of being qualifying shares, and

(b)other shares.

(2)Any question—

(a)whether a disposal by the company of shares forming part of the mixed holding is of qualifying shares, or

(b)as to which of any qualifying shares acquired by the company at different times such a disposal relates to,

is to be determined as provided by the following provisions of this section.

(3)Any such question as is mentioned in subsection (2) is to be determined—

(a)except in a case falling within paragraph (b)—

(i)in accordance with subsection (4), and

(ii)in the case of shares which under that subsection are identified with the whole or any part of a section 104 holding or a 1982 holding, in accordance with subsection (5),

(b)in the case of a mixed holding which includes any shares—

(i)to which investment relief is attributable under Schedule 15 to FA 2000 (corporate venturing scheme), and

(ii)which have been held continuously (within the meaning of paragraph 97 of that Schedule) from the time they were issued until the disposal,

in accordance with subsection (6).

(4)For the purposes of subsection (3)(a)(i), the question is to be determined by identifying the shares disposed of in accordance with sections 105 and 107 of TCGA 1992.

(5)For the purposes of subsection (3)(a)(ii), the question is to be determined by treating the disposal and any previous disposal by the company out of the section 104 or 1982 holding as relating to shares acquired later rather than earlier.

(6)For the purposes of subsection (3)(b), the question is to be determined—

(a)as provided by paragraph 93 of Schedule 15 to FA 2000 (identification of shares on a disposal of part of a holding where investment relief is attributable to any shares in the holding held continuously by the disposing company), but

(b)as if the references in that paragraph to a disposal had the same meaning as in the preceding provisions of this section.

(7)Any such question as is mentioned in subsection (2) which cannot be determined as provided by subsections (3) to (6) is to be determined on a just and reasonable basis.

(8)In this section “holding” means any number of shares of the same class held by one company in the same capacity, growing or diminishing as shares of that class are acquired or disposed of.

For this purpose shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange.

(9)In this section “section 104 holding”, “1982 holding” and “qualifying shares” have the same meaning as in section 75.

77Section 76: supplementary

(1)In a case to which section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal) applies (including a case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of section 76 as acquired when the original shares were acquired.

(2)Any shares held or disposed of by a nominee or bare trustee for a company are treated for the purposes of section 76 as held or disposed of by that company.

(3)In this section “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

Qualifying trading companies: the requirements

78Qualifying trading companies

(1)For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to C .

(2)Condition A is that the company either—

(a)meets each of the following requirements on the date of the disposal—

(i)the trading requirement (see section 79),

(ii)the control and independence requirement (see section 81),

(iii)the qualifying subsidiaries requirement (see section 82), and

(iv)the property managing subsidiaries requirement (see section 83), or

(b)has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.

(3)Condition B is that the company either—

(a)has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or

(b)has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.

(4)Condition C is that the company—

(a)met the gross assets requirement (see section 84) both immediately before and immediately after the issue of the shares in respect of which the share loss relief is claimed, and

(b)met the unquoted status requirement (see section 85) at the relevant time within the meaning of that section.

(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79The trading requirement

(1)The trading requirement is that—

(a)the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or

(b)the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.

(2)If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—

(a)the company is treated as a parent company for the purposes of subsection (1)(b), and

(b)the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.

This subsection does not apply at any time after the abandonment of that intention.

(3)For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(4)For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

(5)For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

(a)the holding of shares in or securities of a qualifying subsidiary of the parent company,

(b)the making of loans to another group company,

(c)the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or

(d)the holding and managing of property used by a group company for the purpose of research and development from which it is intended—

(i)that a qualifying trade to be carried on by a group company will be derived, or

(ii)that a qualifying trade carried on or to be carried on by a group company will benefit.

(6)Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.

(7)In this section—

• “excluded activities” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,

• “group” means a parent company and its qualifying subsidiaries,

• “group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,

• “incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,

• “mainly trading subsidiary” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,

• “non-qualifying activities” means—

  (a)

  excluded activities, and

  (b)

  activities (other than research and development) carried on otherwise than in the course of a trade,

• “parent company” means a company that has one or more qualifying subsidiaries,

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007,

• “qualifying trade” has the meaning given by section 189 of that Act, and

• “research and development” has the meaning given by section 1138 of this Act.

(8)In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 78(3).

(9)In section 195 of ITA 2007 (as applied by subsection (7) for the purpose of the definition of “excluded activities”), references to the issuing company are to be read as references to the company mentioned in subsection (1).

80Ceasing to meet trading requirement because of administration etc

(1)A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.

This has effect subject to subsections (2) and (3).

(2)Subsection (1) applies only if—

(a)the entry into administration or receivership, and

(b)everything done as a result of the company concerned being in administration or receivership,

is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(3)A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 78(2)—

(a)a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is done for the like purpose), or

(b)the company or any of its subsidiaries is dissolved without winding up.

This is subject to subsection (4).

(4)Subsection (3) does not apply if —

(a)the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b)the company continues, during the winding up, to be a trading company.

(5)References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.

81The control and independence requirement

(1)The control element of the requirement is that—

(a)the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and

(b)no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(2)The independence element of the requirement is that—

(a)the company must not—

(i)be a 51% subsidiary of another company, or

(ii)be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and

(b)no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(3)This section is subject to section 87(3).

(4)In this section—

• “arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

• “control”, in subsection (1)(a), is to be read in accordance with sections 450 and 451 (but see section 1124 for the meaning of “control” in subsection (2)(a)(ii)), and

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

82The qualifying subsidiaries requirement

(1)The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

(2)In this section “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

83The property managing subsidiaries requirement

(1)The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

(2)In this section—

• “property managing subsidiary” has the meaning given by section 188(2) of ITA 2007, and

• “qualifying 90% subsidiary” has the meaning given by section 190 of that Act.

84The gross assets requirement

(1)The gross assets requirement in the case of a single company is that the value of the company's gross assets—

(a)must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b)must not exceed £8 million immediately afterwards.

(2)The gross assets requirement in the case of a parent company is that the value of the group assets—

(a)must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b)must not exceed £8 million immediately afterwards.

(3)The value of the group assets means the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.

(4)In this section—

• “group” means a parent company and its qualifying subsidiaries,

• “parent company” means a company that has one or more qualifying subsidiaries,

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007, and

• “single company” means a company that does not have one or more qualifying subsidiaries.

85The unquoted status requirement

(1)The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the share loss relief is claimed are issued—

(a)the company must be an unquoted company,

(b)there must be no arrangements in existence for the company to cease to be an unquoted company, and

(c)there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—

(i)section 87 applies in relation to the exchange, and

(ii)arrangements have been made with a view to the new company ceasing to be an unquoted company.

(2)The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—

(a)listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005(1)(b) of ITA 2007, or

(b)listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,

if the order was made after the relevant time.

(3)In this section—

• “arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

• “debenture” has the meaning given by section 738 of the Companies Act 2006, and

• “unquoted company” has the meaning given by section 184(2) of ITA 2007.

86Power to amend requirements by Treasury order

The Treasury may by order make such amendments of sections 79 to 85 as they consider appropriate.

Qualifying trading companies: supplementary

87Relief after an exchange of shares for shares in another company

(1)This section and section 88 apply in relation to shares if—

(a)a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),

(b)the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(c)the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d)new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and

(e)by virtue of section 127 of TCGA 1992 as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.

In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.

(2)For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

(3)Nothing in—

(a)section 74(2) (disposal of new shares), and

(b)section 81 (the control and independence requirement),

applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) or, in the case of section 81, arrangements with a view to such an exchange.

(4)For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(5)References in section 88 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

88Substitution of new shares for old shares

(1)Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares which had been subscribed for by the company (“the investor”).

(2)This Chapter has effect in relation to any subsequent disposal or other event as if—

(a)the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,

(b)the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and

(c)any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.

(3)Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 79(7) above for the purpose of the definition of “excluded activities”.

89Deemed time of issue for certain shares

(1)This section applies for the purposes of the following provisions—

• ...

• section 84(1)(a) and (2)(a),

• section 85(1), and

• section 88(2)(b).

(2)If—

(a)any shares (“the original shares”) have been issued to a company, or are treated under this subsection as having been issued to the company at a particular time, and

(b)any corresponding bonus shares are subsequently issued to the company,

the bonus shares are treated as having been issued at the time the original shares were issued to the company or are treated as having been so issued.

Interpretation

90Interpretation of Chapter

(1)In this Chapter (subject to subsections (2) to (7))—

• “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),

• “corresponding bonus shares”, in relation to any shares, means bonus shares which—

  (a)

  are issued in respect of those shares, and

  (b)

  are in the same company, are of the same class, and carry the same rights, as those shares,

• “excluded company” means a company which—

  (a)

  has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,

  (b)

  has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,

  (c)

  is a holding company of a group other than a trading group, or

  (d)

  is a building society or a registered society ,

• “group” (except in sections 79 and 84) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,

• “holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,

• “investment company” means a company—

  (a)

  whose business consists wholly or mainly in the making of investments, and

  (b)

  which derives the principal part of its income from the making of investments,

  but does not include the holding company of a trading group,

• “registered society” means—

  (a)

  a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014,

  (b)

  a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, or

  (c)

  an SCE formed in accordance with Council Regulation ( EC ) No 1435/2003 on the Statute for a European Cooperative Society,

• “shares”—

  (a)

  includes stock, but

  (b)

  does not include shares or stock not forming part of a company's ordinary share capital,

• “share loss relief” has the meaning given by section 68(1),

• “trading company” means a company other than an excluded company which is—

  (a)

  a company whose business consists wholly or mainly in the carrying on of a trade or trades, or

  (b)

  the holding company of a trading group, and

• “trading group” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.

(2)For the purposes of the definition of “corresponding bonus shares” in subsection (1), shares are not treated as being of the same class unless they would be so treated if they were—

(a)included in the official UK list, and

(b)admitted to trading on the London Stock Exchange.

(3)Except as provided by subsection (4), paragraph (b) of the definition of shares in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in sections 75(3) to (6), (8) and (9) and 87(1) to (4).

(4)Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 87(1).

(5)The definition of “shares” in subsection (1) does not apply in sections 79(5)(a), 84(3) and 85(1)(c) and (2).

(6)For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.

(7)For the purposes of this Chapter a disposal of shares which results in an allowable loss for the purposes of corporation tax on chargeable gains is treated as made at the time when the disposal is made or treated as made for the purposes of TCGA 1992.

Chapter 6Losses from miscellaneous transactions

91Relief for losses from miscellaneous transactions

(1)This section applies if, in an accounting period (“the loss-making period”), a company makes a loss in a transaction within subsection (2).

(2)A transaction is within this subsection if income arising from it would be miscellaneous income of the company.

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

(4)For this purpose the company's miscellaneous income of the loss-making period is reduced by the loss.

(5)Subsection (6) applies to the loss so far as it cannot be used under subsection (4) to reduce the company's income.

(6)The loss—

(a)is carried forward to subsequent accounting periods, and

(b)the company's miscellaneous income of any such period is reduced by the loss so far as it cannot be used under this paragraph to reduce the income of an earlier period.

(7)A company's miscellaneous income is so much of the company's income which—

(a)arises from transactions, and

(b)is chargeable to corporation tax under or by virtue of any provision to which section 1173 applies, other than regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (offshore income gains).

Chapter 7Write-off of government investment

92Loss relief to be reduced if government investment is written off

(1)This section applies if an amount of government investment in a company (“the written-off amount”) is written off.

(2)The written-off amount is set off against the company's carry-forward losses as at the end of the accounting period ending last before the day of the write-off.

(3)If the written-off amount exceeds those losses, the excess is set off against the company's carry-forward losses as at the end of the next accounting period and so on until the whole of the written-off amount has been set off.

(4)In this Chapter “company” has the meaning given by section 1121 but does not include an unincorporated association.

(5)This section needs to be read with—

• section 93 (which applies if the company is in a group of companies),

• section 94 (which explains what is meant by government investment being written off and how the written-off amount is calculated), and

• section 95 (which explains what is meant by carry-forward losses).

93Groups of companies

(1)This section applies if—

(a)at the end of an accounting period a company in which an amount of government investment is written off is in a group of companies, and

(b)under section 92(2) or (3) an amount could be set off against the company's carry-forward losses as at the end of that period (or could be so set off if there were enough of those losses).

(2)The amount may be set off (wholly or partly) against the carry-forward losses of one or more companies within subsection (3), as may be just and reasonable.

(3)A company (other than the company referred to in subsection (1)(a)) is within this subsection if at the end of the accounting period it is in the group of companies.

(4)A “group of companies” consists of a company that has one or more 51% subsidiaries, together with that or those subsidiaries.

94Cases in which government investment is written off

(1)Government investment in a company is written off if any of the following occurs in relation to the company. This is subject to subsection (2).

• Case 1

  The company's liability to repay any money lent to it out of public funds by a Minister is extinguished. In this case the written-off amount is the amount of the liability extinguished and the write-off occurs when the liability is extinguished.

• Case 2

  Any of the company's shares for which a Minister has subscribed out of public funds are cancelled. In this case the written-off amount is the amount subscribed for the shares and the write-off occurs when the shares are cancelled.

• Case 3

  The company's commencing capital debt (see subsection (3)) is reduced otherwise than by being paid off or its public dividend capital (see subsection (4)) is reduced otherwise than by being repaid (including, in either case, a reduction to nil). In this case the written-off amount is the amount of the reduction and the write-off occurs when the reduction occurs.

(2)The written-off amount is reduced so far as it is replaced by—

(a)money lent, or a payment made, out of public funds, or

(b)shares subscribed for by a Minister for money or money's worth.

(3)“Commencing capital debt” means a debt to a Minister assumed as such under an enactment.

(4)“Public dividend capital” means an amount paid by a Minister—

(a)under an enactment in which that amount is so described, or

(b)under an enactment corresponding to an enactment in which a payment made on similar terms to another body is so described.

(5)In this section—

• “enactment” includes an Act of the Scottish Parliament, and

• “Minister” means a Minister of the Crown, the Scottish Ministers or a Northern Ireland department.

95Meaning of “carry-forward losses”

(1)

A company's carry-forward losses as at the end of an accounting period are as follows.

• Type 1

  Losses of the company to be carried forward under section 45, 45A, 45B, 62 or 66 to the next accounting period. These include losses to be treated as expenses of management of the company under section 63 for the next accounting period.

• Type 2

  Any excess of the company to be carried forward for deduction to the next accounting period under section 1223(3) of CTA 2009.

• Type 3

  Any excess of the company to be carried forward for deduction to the next accounting period under section 260(2) of CAA 2001.

• Type 4

  Any qualifying charitable donations made by the company so far as they exceed the company's profits of the accounting period and are available for surrender for the next accounting period under Part 5 (group relief).

• Type 5

  Allowable losses of the company available under section 8 of TCGA 1992 so far as not allowed for the accounting period or any previous accounting period.

(2)For the purposes of section 92(2) an amount is excluded from a company's carry-forward losses if, before the day of the write-off, a claim is made in relation to the amount under section 37 or Part 5 (group relief)or Part 5A (group relief for carried forward losses) of this Act or section 260(3) of CAA 2001.

(3)But, for the purposes of section 92(3), any such claim made on or after that day is to be disregarded in determining the company's carry-forward losses as at the end of any accounting period.

(4)The set off of an amount against a company's carry-forward losses as at the end of any accounting period is to be done—

• first, against those within Types 1 to 4, and

• second, against those within Type 5.

96Interaction with other tax provisions

(1)A company, in calculating its profits of a trade for corporation tax purposes, is not prevented from deducting a sum by reason only that an amount of government investment in the company is written off.

(2)Subsection (3) applies for the purposes of section 50 of TCGA 1992 and section 532 of CAA 2001 in their application in relation to a company.

(3)Expenditure is not met by a public body (as defined in section 532(2) of CAA 2001) by reason only that an amount of government investment in the company is written off.

(4)Section 464(1) of CTA 2009 does not prevent section 92 of this Act from applying if the writing-off of an amount of government investment in a company involves the extinguishment (in whole or in part) of a liability under a loan relationship.

Part 5Group relief

Chapter 1Introduction

97Introduction to Part

(1)This Part—

(a)allows a company to surrender losses and other amounts, and