Group Tax Losses

Group Tax Losses

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If a company was to buy 100% of the shares in another company (in the same trade) with corporation tax losses bought forward, would the acquiring profitable company be able to use the losses bought forward against future profits?

Seems to simple.

Thanks

L
LAF

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By billgilcom
11th Nov 2008 11:22

Losses b/f
sorry I missed Gary's question .

What I meant was that there was no reason why the losses b/f should not be carried forward and set off against profits of the trade of the company that had been acquired into the group.

As regards the arrangments these would not come into play as long as there wasn't an arrangement for the loss making trade to disappear out of the group again. It is always possible once a company is within the group to arrange its affairs to mitigate the tax liabilities arising over the group as a whole as long as you are not making a major change in the nature or conduct of the trade. Small changes can get obscured.
regards and hope it helps
Bill

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By Colin23
11th Nov 2008 00:20

Arrangements?
I agree with Gary and would also point out that loss relief could be denied if arrangements exist, see Section 410 ICTA 1988.

Once the loss making company is inside the group you should be able to Group relieve any current period losses provided the accounting periods are co-terminous. The losses brought forward would normally be carried forward and used when the new group company returns to profit. They would not be available for relief around the group.

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By User deleted
05th Nov 2008 15:55

Is that right Bill?
CTM06120 seems to suggest otherwise given that there would need to be a transfer of trade for this to happen.

Any losses made after the transfer are fair game but the brought forwards might be stranded for a while

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By billgilcom
05th Nov 2008 15:25

Unless
for example the company that made the losses (or should I more correctly say the trade made the losses) all of a sudden (without a major change in the conduct of the trade or business) or over a lengthy period becomes profitable it would be able to carry the losses forward and set them off against the subsequent profits of the acquired trade
regards and hope this helps
[email protected]
http://www.wamstaxltd.com

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By User deleted
05th Nov 2008 15:17

No
Losses accrued pre-acquisition will not be eligible for group relief.

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