Revenue Note for Guidance

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Revenue Note for Guidance

Schedule 9

[Sections 401 and 679(4)]

Change of Ownership of Company: Disallowance of Trading Losses


This Schedule sets out the rules for determining whether there is a change in the ownership of a company for the purposes of section 401. The Schedule also applies to supplement section 679(4) which deals with unrelieved losses of an exploration company.

Change in ownership of company

par 1 There is a change in the ownership of a company if —

  • a single person acquires more than 50 per cent of the ordinary share capital of the company, or
  • if 2 or more persons each acquire a holding of 5 per cent or more of the ordinary share capital of the company and the total of these holdings amount to more than 50 per cent of the ordinary share capital of the company.

In considering acquisitions by 2 or more persons, holdings of less than 5 per cent are to be disregarded unless they are in addition to an existing holding and the 2 holdings together amount to 5 per cent or more of the ordinary share capital of the company.

par 2 In identifying a relevant change in ownership, holdings at 2 points in time separated by not more than 3 years may be compared. A holder at the end of such a period is regarded as having acquired what that holder did not hold at the beginning of such period irrespective of intermediate acquisitions and disposals. The period of 3 years contemplated in the shareholding comparison test may not necessarily coincide with the 3 years in which the change in the nature of the trade may be identified, but the 2 periods must overlap. Permission is given for the comparison of holdings to be made in percentage terms to cover changes in capital structure (for example, as a result of a bonus issue). The possibility of “loss buyers” circumventing the provisions by dispersing the holdings which constitute a relevant change in ownership throughout a family or partnership or through groups of companies is countered. Shares acquired by inheritance or by way of an unsolicited gift are, however, to be left out of account in determining a relevant change in ownership.

par 3 If the possibility exists for the normal medium for exercising control over a company by way of holdings of ordinary share capital to be superseded by the holding of other kinds of share capital (including preference shares) or by a special kind of power, then such non-usual means are to be taken into account in place of ordinary share capital.

par 4 Where relief has been restricted under section 401 or 679(4) by reference to a relevant change in ownership, circumstances before that change cannot be taken into account in determining whether a subsequent change in ownership has taken place.

Groups of companies

par 5 A change in ownership of a 75 per cent subsidiary within a group is to be disregarded if the parent-subsidiary 75 per cent relationship still exists after the change. Where, however, there is a change in ownership of a company which has a 75 per cent subsidiary, there is also deemed to be a change in ownership of the 75 per cent subsidiary. The provisions remain fully applicable to loss-bearing companies entering or leaving a group and to loss-bearing companies within a group where there is a change in the ownership of the parent company.

Provisions as to ownership

par 6 All references to ownership are to be construed as references to beneficial ownership. The provisions of section 9(5) to (10) are to be applied in determining the amount of the ordinary share capital of one company owned by a second company through another company.

Time of change in ownership

par 7 As regards contracts made after 16 May, 1973, the time when the contract is made or the benefit assigned is to be treated as the date of the acquisition of the shares.


par 8 The registered owner of shares and securities when required by notice in writing from an inspector is to provide to the inspector the names and addresses of the persons who are the beneficial owners of the shares and securities registered in that person’s name.

Relevant Date: Finance Act 2019