Non-trading deficits on loan relationships

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Non-trading deficits on loan relationships
Overview of non-trading deficits
Relief for NTDs against current year profits
Carry back of non-trading deficits against non-trading profits of an earlier period
Carry forward of NTDs to future accounting periods
Surrender by way of group relief
Carried forward and surrender as group relief
Change in ownership provisions and companies with investment business

Overview of non-trading deficits

When a company’s debits on its non-trading loan relationships and derivative contracts in an accounting period exceed the credits on its non-trading loan relationships and derivative contracts in the same period (the deficit period), the surplus is a special category of loss which is known as a non-trading deficit (NTD).

This guidance note considers how companies can utilise their NTDs.

For guidance on determining a company’s debits and credits from loan relationships and whether these are trading or non-trading, see the Taxation of loan relationships guidance note.

Changes to non-trading deficits carried forward from April 2017

The reform of corporate losses within Finance (No 2) Act 2017 included a mixture of relaxations to the use of losses within the previous regime before 1 April 2017, and also a major restriction (50% for most companies) on the amount of profits that can be covered by the offset of most losses carried forward after 1 April 2017. For further details of the restriction on losses carried forward, see the Carried-forward losses restriction guidance note.

The rules applied with effect from 1 April 2017 and accounting periods straddling 1 April 2017 were treated as two separate accounting periods for the purposes of applying the rules.

HMRC issued guidance on 31 July 2017, which can be found here . This is a first tranche of guidance, focusing on the core rules and other aspects where guidance has been specifically requested. A second tranche of guidance was issued on 6 November 2017 and can be found here . The second tranche of guidance covers group relief for carried-forward losses and the relaxation of carried-forward non-trade losses. Further draft guidance on commencement provisions was issued on 7 December 2017.

Details of the changes in the utilisation of post April 2017 NTDs carried forward are detailed below.