Corporation Tax Act 2010 section 705D

Restriction on carry forward of non-trading deficit from loan relationships

Section 705D prevents a shell company from carrying forward non-trading loan relationship deficits beyond a change of ownership, ensuring that accumulated losses cannot be used to shelter future profits under new ownership.

• This section restricts the carry forward of non-trading deficits arising from the company's loan relationships under Part 5 of CTA 2009.
• It applies where a non-trading deficit is apportioned under section 705F to the first notional accounting period (the period running up to the date of the ownership change).
• Where the restriction applies, none of the apportioned non-trading deficit may be carried forward to the accounting period beginning immediately after the change in ownership, or to any later accounting period.
• The effect is that pre-change non-trading loan relationship losses are permanently trapped and cannot reduce the company's taxable profits after the ownership change.