BKM301400 - Bank loss restriction: introduction: overview of the legislation – additional features

Losses in a company’s start-up period

Any reliefs arising in accounting periods prior to the one in which a company commences relevant regulated activity (BKM302450) are not included in the bank loss restriction. There is guidance on this at BKM306400.

Reliefs arising to new entrant banks in the five years from when a company began to undertake relevant regulated activity are not subject to the restriction (BKM306500). A company is considered to have begun relevant regulated activity at the point where any company in the worldwide group so began. Group takes its meaning from accounting standards (BKM302900).

Both types of relief are subject to the general loss restriction at CTA10/PART7ZA, with effect from 1 April 2017.

Allowance for building societies

Building societies (CFM14080) receive a one-off allowance of £25m, which they can use to designate relevant carried-forward losses as unrestricted. Any amount of allowance not used in one period will carry-forward to the next. BKM306700 contains an overview of the allowance and guidance on designation.

The building society can also allocate amounts from the £25m allowance to its subsidiaries, and may subsequently re-allocate the allowance under certain conditions. BKM306800 and BKM306850 provides guidance on an initial allocation and on a re-allocation.

This allowance does not affect the general loss restriction at Part 7ZA and does affect the deductions allowance used in calculating the general loss restriction (CTA10/S269(ZA) to CTA10/S269(ZZB)).

Targeted anti-avoidance rules

There are two anti-avoidance rules. The first one is an anti-forestalling provision to prevent a banking company accelerating the use of its reliefs before the restriction came into force (BKM307800). The other is the main anti-avoidance rule intended to prevent profit shifting within banking groups after the rules come into force (BKM307100).