Corporation tax losses

Corporation tax losses

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A client's limited company has substantial trading losses, supported by personal funds.  Income of the company to date has been small, as it is a fledgling software/app design company.  The director wishes to transfer the trade of the company to a new LLP, of which the company will be one of three member, and will receive a share of (hopefully) future profits.

Would the company be able to utilise existing losses against any future profit share from the LLP?  I have been referred to CTA2010 s673-675, and advised that use of the losses would be denied.  However, there would be no actual change in the ownership of the company, and no change in the nature of the trade, just that it would be conducted through an LLP rather than the existing company.

Any advice would be greatly appreciated!

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By asking
14th Mar 2013 11:21

there would
appear to be a change in the nature of the trade.

The company would no longer be trading for a start, would it? You have said the trade is going to be transferred out to an LLP.

You will also need to consider if the transfer will trigger a tax charge on the transfer of the business. If so, consider if the conditions for disincorporation relief are met.

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