CTM04840 - Corporation tax: CT loss reform: relaxation

CTA09/S463A to S463I, CTA10/S45A to S45H

The loss relaxation applies for carried-forward losses sustained on or after 1 April 2017.

Five types of loss are affected. These are trade losses, non-trading loan relationship deficits (NTLRDs), non-trading losses on intangible fixed assets (NTLIFAs), management expenses and UK property business losses.

The 1 April 2017 commencement date means that the rules applying to carried-forward losses depend partly on whether they were sustained before or after that date. Companies should make sure that their records reflect this and keep pre- and post-1 April 2017 losses separate, to avoid mistakes in their returns.

Trade losses and NTLRDs

In most cases, trade losses and NTLRDs sustained from 1 April 2017 can be carried-forward and set against total profits of the company (CTA09/S463G, CTA10/S45A). These losses may also be available for group relief for carried-forward losses (CTM82000).

However, companies continue to be more limited in the way they can use losses sustained before 1 April 2017 and certain other losses sustained after that date.

The following trading losses carried-forward can only be deducted from profits of the same trade, and cannot be surrendered as group relief for carried-forward losses:

  • Trading losses sustained before 1 April 2017,
  • Trading losses sustained on or after 1 April 2017 in certain particular circumstances, for example where the trade has become small or negligible (CTA10/S45A to 45E).

The following carried-forward NTLRDs can only be deducted from non-trading profits and cannot be surrendered as group relief for carried-forward losses:

  • NTLRDs sustained before 1 April 2017,
  • NTLRDs sustained on or after 1 April 2017 in certain particular circumstances, for example where an investment business has become small or negligible (CTA09/S463H).

There is further guidance on the relaxation for trade losses at CTM04100 onwards.

NTLIFAs, management expenses and UK property business losses

Companies continue to be able to set carried-forward management expenses, UK property business losses and NTLIFAs against their total profits.

Losses of these types sustained on or after 1 April 2017 may also be available for group relief for carried-forward losses.

Group relief for carried-forward losses is not available for any losses sustained prior to 1 April 2017.

There is further guidance on the relaxation for NTLIFAs at CIRD13540 and UK property business losses at PIM04236.

Scope

The changes set out above apply for all companies and unincorporated associations within the scope of CT.