BKM304300 - Bank loss restriction: calculation of carried-forward reliefs available: calculation of relevant profit accounting period ended 1/4/15 to 31/3/17 – steps 1 to 4

CTA10/s269CD

This calculation applies for periods prior to 1 April 2017. From 1 April 2017, relevant profits are calculated in accordance with the calculation at CTA10/S269ZF, in line with the general loss restriction (see BKM305100 to BKM305600).

Before calculating total profits and total taxable profits for the period under CTA10/S4, the banking company must calculate its relevant profits under CTA10/S269CD. The calculation is a staged process producing three separate figures: relevant trading profits, relevant non-trading profits, and relevant profits which are used in determining the amount of available relevant carried-forward losses (see BKM303200).

Step 1 – Calculate the banking company’s total profits excluding relevant carried-forward losses

The banking company makes a preliminary calculation of total profits, as if under CTA10/S4(3), but without including any deduction for the appropriate relevant carried-forward losses (pre-2015 carried-forward trading losses or pre-2015 carried-forward non-trading deficits)

If total profits are nil, no further steps are taken.

Step 2 – Divide the result into trading and non-trading profits

It is not usually necessary to differentiate between trading and non-trading profits when calculating “total profits” under CTA10/S4. However, step 2 of the calculation of relevant profits requires that total profits calculated at step 1 are split into trading and non-trading. Broadly, trading profits are those against which a company could in principle receive relief for carried forward trading losses (under CTA10/S45), and non-trading profits are the balance, that is total profits less trading profits.

Many banking companies only have trading profits and if this is the case, the company can move straight to step 4 of the calculation.

Step 3 – Calculate the trading and non-trading proportion

Taking the amounts produced by step 2, the banking company calculates the proportion of its total profits that are trading and the proportion that are non-trading.

Step 4 – Calculate amounts of relief available against total profits excluding certain reliefs

Reliefs given at this step will include reliefs that are given at step 2 of CTA10/S4(3) for example:

  • a claim for group relief (CTA10/S130 or S135),
  • a claim for a trading loss of the period against total profits (CTA10/S37), or
  • a claim to set a non-trading loan relationship deficit of the period against profits of any kind (CTA09/S459(1)(a))
  • relief for a loss in a UK property business (CTA10/S62)

The amounts that can be relieved against total profits are those that are available automatically or because the company has claimed them. It is not necessary to include amounts the company could claim, but has not.

Reliefs specifically excluded from the calculation are:

  • a claim in respect of a pre-2015 carried-forward management expenses
  • a claim to carry back any of the following:
    • trading losses
    • excess capital allowances on special leasing of plant or machinery, or
    • non-trading deficits on loan relationships

Total profits for the purposes of this step are the amount given by step 1. Because this figure is higher than the total profits would be had pre-2015 carried-forward reliefs been deducted, the banking company may be able to claim a greater amount of some reliefs than under the normal rules. There is more detail on this and an example at BKM304800.

Steps 5 to 7 follow at BKM304400.