Paragraph 1

Except in so far as the context otherwise requires, references in section 87 of this Act (“the principal section”) and in this Schedule to a company ceasing to possess a source of income shall, in relation to a trade, include the company ceasing in respect of the trade to be within the charge to corporation tax under Case I or II of Schedule D; and references to a company carrying on a trade or any part or activities of a trade are references to its doing so in such circumstances as to be within that charge to tax.

For purposes of the principal section the cessation period in relation to a trade shall be taken to be three years, notwithstanding that the trade has been carried on for less than three years before the year 1966-67; but where the appropriate fraction (that is to say in this Schedule, the appropriate fraction under subsection (2)(b) of the principal section) is to be applied to income from a trade which has been carried on by the company for a period less than three years, the appropriate fraction shall be increased in the proportion which a period of three years bears to that less period

For purposes of the principal section, section 80(8) of this Act shall apply in relation to the whole period after the trade was set up and commenced (or is to be treated under section 19 of the Finance Act 1953 as having been set up and commenced) as, for other purposes of corporation tax, it applies from the end of the basis period for the year 1965-66, but (notwithstanding anything in section 80(8)) any allowance to the company in respect of the trade, in so far as it cannot be given to the company, shall be given to the company’s predecessors.