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GB 3BAB: Arrangements to inject income into companies carrying forward loss balances
or “Rules for shifting income to companies with past losses to avoid tax”
You could also call this:

“Rules against shifting expenses from companies with tax losses to avoid tax”

This section applies when a company has tax losses carried forward to a new tax year. If you and someone you know make a plan to move expenses away from the company, and this plan helps someone else get a tax deduction instead of the company, it might be seen as trying to avoid tax.

If this happens, the law says the company will be treated as if it actually had those expenses. The company will be seen as having spent the money while running its business to make income. This will be counted in the same tax year as the original plan.

The other person who was going to claim the deduction won’t be allowed to do so anymore. The law will treat them as if they never spent that money.

This rule is meant to stop people from moving expenses around just to avoid paying taxes. It makes sure that companies with tax losses can’t unfairly shift their expenses to others.

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Next up: GB 3B: Arrangements for carrying back net losses: companies

or “Rules for companies trying to use past losses to reduce earlier tax bills”
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Part G Avoidance and non-market transactions
Avoidance: specific

GB 3BACArrangements to shift expenditure from companies carrying forward loss balances

  1. This section applies when—

  2. tax loss components of a company are carried forward under section IB 3(2) (When tax loss components of companies carried forward despite ownership continuity breach) to a tax year; and
    1. a person (person A) enters into an arrangement with another person (person B); and
      1. person A and person B are associated persons at the time they enter into the arrangement; and
        1. an effect of the arrangement is that, in the absence of this section, a person other than the company is allowed a deduction for an amount of expenditure or loss the person incurs that, but for the arrangement, the company—
          1. would have incurred in the income year corresponding to the tax year; or
            1. would in all likelihood have incurred in the income year corresponding to the tax year; or
              1. might be expected to have incurred in the income year corresponding to the tax year; and
              2. the arrangement has tax avoidance as its sole or main purpose.

                1. The company is treated as having incurred the amount of expenditure or loss—

                2. in the course of carrying on a business for the purpose of deriving assessable income; and
                  1. in the income year corresponding to the tax year.

                    1. The person referred to in subsection (1)(d) that is not the company is treated as not having incurred the amount of expenditure or loss.

                    Notes
                    • Section GB 3BAC: inserted (with effect on 1 April 2020), on , by section 76(1) (and see section 76(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).