Introduction

It is often necessary to transfer a trade between companies under common ownership before or after a company sale or acquisition, or as part of a general group restructuring operation.

The succession to trade rules enable trades to be transferred under common 75% ownership with the ability to carry forward tax losses into the successor company and a tax-neutral transfer for capital allowance purposes. The transfer of a trade between group members is commonly also referred to as a ‘hive down’, ‘hive up’ or ‘hive across’.

The losses transferred to the successor company can be utilised as follows:

  • against profits of the trade to which the company has succeeded provided the losses were pre-1 April 2017 which have not been relieved under CTA 2010, s 37 (against total profits) or CTA 2010, s 45F (terminal losses)
  • against future total profits of the company provided the losses were post-1 April 2017 and were either incurred in the accounting period in which the predecessor ceased to carry on the trade or carried forward to that period and they have not been relieved against total profits or group relieved
  • group relieved provided the losses were post-1 April 2017 and were either incurred in the accounting period in which the predecessor ceased to carry on the trade or carried forward to that period and they have not been relieved against total profits or previously group relieved

CTA 2010, ss 944, 944A

From 1 April 2017, terminal loss cannot be claimed by the predecessor where that loss was made in the transferred trade. This restriction does not apply to pre-1 April 2017 trading losses carried forward where the trade was transferred before 13 July 2017. CTA 2010, s 944C

The rules apply where one company owns at least 75% of another or both companies are under the 75% common ownership of the same person or persons; a person can, in this situation, either be a company or an individual. The rules are compulsory where the conditions are met.

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