In Leekes Limited v HMRC [2016] UKUT 0320 the Upper Tribunal (UT) held that losses do have to be streamed following a transfer of trade from one company to another.

The case concerned the interpretation of s343 ICTA 1988 (now s944 CTA 2010) which allows brought forward trading losses to be transferred where there is a transfer of trade between two companies without a change in ownership. 

  • Leekes operates department stores, and in 2009 acquired the entire share capital of another company (Coles of Bilston) which carried on a similar trade.
  • The following day, the business of Coles was hived up into Leekes and Coles became dormant.
  • Leekes rebranded the Coles stores and operated them.
  • At acquisition Coles had brought forward losses of £3m.
  • After the hive up Leekes sought to set off these losses against the entire profits of its enlarged business.
  • HMRC rejected this claim, arguing that the losses transferred had to be streamed and offset against the future profits of the transferred Coles trade only.

The First Tier Tribunal (FTT) previously ruled in favour of Leekes, finding that s343 contained no requirement to stream losses and that HMRC's approach gave rise to practical difficulties in identifying the profits of the Coles trade after transfer.

This decision has now been overturned by the UT, who held that:

  • The purpose of s343 is not to put a successor company in a better position than the predecessor would have been if it had continued to carry on the trade.
  • There is nothing in the wording of s343 to suggest that it was intended to apply to the enlarged trade of the successor.
  • It isn't permissible to disregard the law because of a perception of practical difficulty: in any event this could be minimised by careful record keeping.

HMRC's appeal was therefore allowed.


The original FTT decision in this case caused some excitement in certain circles, particularly as the concept of streaming transferred losses had been fairly widely accepted up till then.  As a result some companies in similar positions put in claims of their own.

However, the UT has been quite clear and clinical in rejecting the FTT's conclusions in their decision (which at 9 pages is unusually short for them!).

It remains to be seen whether the taxpayer will look to appeal further or if this idea will have to be put to bed.


Our subscriber guide: Losses: trading and other losses

Case reference: Leekes Limited v HMRC [2016] UKUT 0320