The principles behind the ‘streaming’ of the allowance of CTA10/S45 carry forward losses in a CTA10/S940A company reconstruction are that:

the successor is only allowed loss relief for the losses belonging to the trade or part-trade which was transferred from the predecessor,

and

the transferred losses are only allowed against the profits from the trade or part-trade acquired from the predecessor.

The loss streaming rules do not apply where a whole trade is transferred and the successor either does not have an existing trade or carries on two separate trades after the transfer. The latter case is unusual, and there is guidance on it at BIM80535.

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