There has been a welcome amendment to the rules that prevent the carry forward of corporate tax losses where there have been significant changes to the underlying business activities. The rules apply when a company undergoes a change of ownership, and they make perfect sense in the context of a company takeover.
However, one would not expect tax losses to be restricted when the corporate group has undergone an internal restructuring. There is less justification for this, given that a restructuring doesn’t usually result in a change in the underlying economic ownership of the assets involved.
And indeed, as we shall see, the rules don’t apply when the target is a subsidiary that is being transferred from one group company to another. Unfortunately, the exception doesn’t extend to the introduction of a new holding company.
This situation is to be remedied in the next Finance Act. The changes will take effect from 1 April 2014.