The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
An important restriction in the use of losses carried forward was introduced by Finance (No 2) Act 2017. Subject to a de minimis of £5m, most carried-forward losses are restricted to a set-off which is limited to 50% of profits.
The rules restricting losses apply to accounting periods beginning on or after 1 April 2017, but with straddling provisions as discussed below. It is important to note that the 50% restriction also applies to trading and certain other losses carried forward from periods before 1 April 2017.
HMRC guidance can be found at CTM05010 onwards.
Where a company’s accounting period straddles 1 April 2017, the periods before and after 1 April 2017 are treated as two separate accounting periods, and profits / losses are time apportioned or, where that would produce an unreasonable result, apportioned on a just and reasonable basis. Special commencement provisions apply where the company is also subject to the corporate interest restriction rules in TIOPA 2010, ss 372–498 (Part 10). Worked examples relating to these complexities are included in the HMRC guidance referred to above.
For an overview of the corporate interest restriction regime, see the Introduction to the corporate interest restriction guidance note.
It is important to appreciate that the restriction only impacts carried-forward losses and does not affect loss relief in the following scenarios:
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