Capital losses for businesses
Capital losses for businesses

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Capital losses for businesses
  • Using capital losses
  • Groups of companies
  • Special rules restricting the use of losses
  • Corporate capital loss restriction (CCLR)
  • Depreciatory transactions and value shifting
  • Schemes converting income to capital
  • Capital allowances
  • Connected persons (clogged losses)
  • Pre-entry losses
  • More...

A capital gain that would otherwise result in a charge to tax may be reduced or eliminated if the taxpayer has made capital losses and is able to set these against the gain. For set-off to be permitted, a loss must be an allowable loss.

In this Practice Note, CGT is used to refer both to capital gains tax and to corporation tax on chargeable gains.

Generally, if selling an asset for a gain would result in CGT, then selling that same asset for a loss will result in an allowable loss. Where an asset is exempt from CGT, and is disposed of for a loss, this will not normally be an allowable loss.

A capital loss is generally calculated in the same way as a capital gain (see Practice Note: How is a capital gain calculated?).

This Practice Note looks at:

  1. the mechanics of using capital losses

  2. rules that can restrict the availability of capital losses

  3. what happens if an asset is lost, destroyed, or becomes worthless

  4. the significance of where a taxpayer is resident, and

  5. what happens when taxpayers deliberately set out to create artificial capital losses

This Practice Note is written from a business tax perspective. For the similar issues that arise in a Private Client context, see Practice Note: CGT—utilising capital losses.

Using capital losses

Once it has been established that a loss is an allowable loss,

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