The Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999

Calculation of unrelieved surplus ACT on change of ownership of company

16.—(1) This regulation applies where–

(a)within any period of three years there is both a change in the ownership of a company and, either earlier or later in that period, or at the same time, a major change in the nature or conduct of a trade or business carried on by the company; or

(b)at any time after the scale of the activities in a trade or business carried on by a company has become small or negligible, and before any considerable revival of the trade or business, there is a change in the ownership of the company.

(2) Regulation 14 shall apply in relation to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods; and for that purpose the profits of the company charged to corporation tax for the accounting period shall be apportioned between those parts.

(3) No unrelieved surplus ACT of the company shall be set off against the company’s liability to corporation tax on any profits charged to corporation tax for an accounting period ending after the change of ownership; and for this purpose an accounting period in which the change of ownership occurs shall be treated as if the part ending with the change of ownership, and the part after, were two separate accounting periods.

(4) Paragraph (3) applies to unrelieved surplus ACT consisting of ACT which a subsidiary is treated as having paid by virtue of section 240(2) as it applies to unrelieved surplus ACT consisting of ACT paid in respect of any distribution made by the subsidiary.

(5) Sections 768(8) and (9) and 769(1) shall apply for the purposes of this regulation as if in subsection (3) of section 769 the reference to the benefit of the losses were a reference to the benefit of unrelieved surplus ACT.

(6) In paragraph (1) “a major change in the nature or conduct of a trade or business” includes–

(a)a major change in the type of property dealt in, or services or facilities provided, in the trade or business;

(b)a major change in customers, outlets or markets of the trade or business;

(c)a change whereby the company ceases to be a trading company and becomes an investment company or vice versa; or

(d)where the company is an investment company, a major change in the nature of the investments held by the company;

and this paragraph applies even if the change is the result of a gradual process which began outside the period of three years mentioned in paragraph (1).

(7) In this regulation–

“trading company” means a company whose business consists wholly or mainly in the carrying on of a trade or trades;

“investment company” means a company (other than a holding company) whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom;

“holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries and which are trading companies;

“90 per cent. subsidiary” has the meaning given by section 838.