Restriction to former trade

Corporation tax losses on transfer of trade

 

Leekes Ltd carried on a retail trade. It bought Coles Ltd which operated a similar business but decided not to run it as a separate trading entity. Instead it rebranded the Coles stores under its name. Coles had accumulated losses of about £3m and Leekes claimed relief for these against its profits on the basis that it had succeeded to Coles’ trade (TA 1988 s 343). HMRC accepted that there had been a succession but said losses could be set off only against income generated by what was formerly Coles’ business. 

 

The First-tier Tribunal allowed the company’s appeal but the Upper Tribunal overturned that decision. The taxpayer appealed. The issue before the Court of Appeal was how s 343 applied in relation to carry-forward loss relief on losses...