UK and International Tax news
Transfer Of Trade And Loss Streaming Rules
Monday 15th August 2016
The Upper Tribunal has recently heard the appeal from the First Tier Tribunal of a case involving the transfer of trade with accumulated losses between two members of a group of companies [HMRC v Leekes Ltd UT/2015/0083]..
At the FTT, the transferee company maintained that it was entitled to obtain relief for those hived in losses by setting them off against the income of the enlarged business. The balance of the unrelieved CT losses were to be carried forward for utilisation against future profits of the transferee company.
HMRC rejected the claim and argued that the transferee company could only set the accumulated losses of the predecessor against future income of the former transferor’s business.
The FTT agreed with the taxpayer and held that the losses did not have to be streamed against the profits of the transferred trade and there was only one combined successor trade after the intra group transfer.
However, on appeal, the UT agreed with HMRC and held that s.343 TA 88 [in particular ss3 and ss8], now s.944 CTA 2010 +, required the transferor’s trade to be distinctly identified as continuing whilst part of a larger trade and future profits of the transferred trade had to be identified by ‘careful record keeping’.
If you would like to discuss the case in more detail, please contact Keith Rushen on 0207 486 2378.
Contact Us