Loss streaming is necessary

Corporation tax losses on transfer of trade

L Ltd carried on a retail trade. It acquired the shares of C Ltd which carried on a similar business. The trade of C was transferred to L and its stores rebranded so that all of the stores traded under the L name. C had accumulated losses of about £3m. L claimed relief for those losses against the profits of its enlarged business in the year after acquisition. HMRC challenged the use of the losses. The First-tier Tribunal found in favour of the company and HMRC appealed .

The Upper Tribunal said the First-tier Tribunal had made an error when it decided that the successor should be treated as having incurred the losses transferred to it from C under TA 1988 s 343. That had led it to conclude that the transferred losses could be set against the entirety of L’s profit....