Introduction Overview Overview
2141.Chapter 4 is the third of four Chapters dealing with various kinds of loss buying. It rewrites section 768C of ICTA and the corresponding provisions of sections 768D and 768E of ICTA.
2142.Section 768C of ICTA was inserted by FA 1995 to block the following scheme. A company is about to realise a chargeable gain on an asset. The company purchases a company with excess management expenses. Relief for these is not restricted by section 768B of ICTA, because the conditions in section 768B(1)(a) to (c) are not met. The asset is transferred to the newly purchased company at no gain/no loss under section 171 of TCGA. When the transferee company disposes of the asset and crystallises the chargeable gain, it can use its pre-acquisition management expenses to shelter the gain.
2143.Sections 768D and 768E of ICTA (inserted by FA 1998 and FA 2002 respectively) included provisions corresponding to section 768C to cover pre-acquisition property losses and pre-acquisition non-trading losses on intangible fixed assets: see sections 768D(1)(a)(ii) and 768E(1)(b).
2144.Section 768C(13) (inserted by FA 2002) extended section 768C to cover tax-neutral intra-group transfers of intangible fixed assets.
2145.Chapter 4 is similar in many respects to Chapter 3, but there are important differences of detail because, unlike Chapter3, Chapter 4 needs to cater for chargeable gains and realisation gains on intangible fixed assets.
2146.Chapter 4 has the following structure.
	Sections 692 to 694 lay down the conditions for the Chapter to apply and define some key terms.
	If the Chapter applies, section 695 (notional split of accounting period in which change in ownership occurs) sets the stage. It splits the period in which the change in ownership occurs into two notional accounting periods, and indicates that certain amounts need to be apportioned between these two periods.
	Sections 696 to 701 are a group of six sections restricting various kinds of corporation tax relief. If, having reviewed them, the reader is satisfied that in the case under review these sections makes no practical difference, the reader is able to conclude that there is in practice no need to make the apportionments required by section 695.
	Sections 702 and 703 contain the detailed rules for making apportionments of amounts for the purposes of this Chapter.