Corporation Tax Act 2010 section 945

Cases in which predecessor retains more liabilities than assets

Section 945 restricts the tax relief available to a successor company on the transfer of a trade where the predecessor retains liabilities that exceed its remaining assets and the consideration received.

• The section applies where the predecessor's retained liabilities (those not transferred to the successor) exceed the combined value of its retained assets and any consideration received from the successor for the trade transfer.
• The purpose is to prevent tax relief being claimed twice for the same expenditure — once by creditors who write off unpaid debts owed by the predecessor, and again by the successor through carried-forward losses.
• The successor's relief under sections 944 to 944E is reduced by the amount by which the predecessor's retained liabilities exceed its retained assets plus consideration received (the "excess").
• If the excess equals or exceeds the total losses that would otherwise qualify for relief, no relief at all is given to the successor.