Sell company with tax losses

Sell company with tax losses

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Client owns Company A which trades as a house builder. Loss anticipated upon completion of current project and no future activity envisaged.

Client also part-owns (but doesn't control) Company B. This was also intended to trade as a house builder but, in fact, has simply sat on some land and expects to profit from the appreciation.

Client would like Company B to buy shares of Company A, and then either transfer the trade and losses from B to A, or otherwise to benefit from the losses in A by way of group relief.

I'm definitely a novice on this sort of thing and wondered if it is likely to work. The trades are similar but not exactly identical; there is also the issue of a transfer between connected parties and not difficult for HMRC to argue that tax mitigation is the driver.

Many thanks for all and any answers.

Adam Reeves

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By billgilcom
23rd Apr 2007 18:03

Loss Buying is objectionable says S768
however by careful planning it might be possible to improve the fortunes of Company A by introducing more profitable development projects than have been there before. Maybe Company B would be interested in disposing of it's land bank in return for an interst in A or some other commercial transaction that didn't have tax avoidance at it's root

However have a look at this link which might help you get your head round it

http://www.hmrc.gov.uk/manuals/ctmanual/CTM06370.htm

regards
[email protected]


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By AnonymousUser
24th Apr 2007 14:28

Unlikely to work
As commented upon by the previous respondent, this scheme is unlikely to be successful. A lot of emphasis is put on the notion of the same trade.

Also, if group relief is intended to be utilised,trading losses can only be group relieved in the current year. It appears that this will not be the case for your client.

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