Readers’ forum: Treatment of losses carried forward

ComCo was incorporated in the UK in January 2020 and acquired as an investment an office block which during 2020-21 it converted into residential dwellings other than a small commercial unit on the ground floor.

On 1 January 2022 newly incorporated ResCo which is a wholly owned subsidiary of ComCo acquired at market value the freehold interest in the entire building other than the commercial unit which remained with ComCo.

We are confident that the internal sale of the property is exempt from corporation tax and the query does not relate to this aspect.

The residential and commercial units are let by ResCo and ComCo respectively to third parties. Both companies have a 31 December accounting period and in 2022 generated rental income. The income of ComCo is very minimal.

While converting the property ComCo incurred very substantial borrowing costs which...