Trading losses carried forward

By Tolley

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

  • Trading losses carried forward
  • Carried-forward trading losses arising on or after 1 April 2017
  • Carried-forward trading losses arising pre-1 April 2017
  • Future profits from the trade
  • Anti-avoidance on carried forward trading losses

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 which applied before 1 April 2017 and also a major restriction (50% for most companies) on the amount of profits after 1 April 2017 that can be covered by the offset of most losses carried forward, including pre-April 2017 losses.

This guidance note details the options for using trading losses carried forward and the 50% restriction is dealt with in the Carried-forward losses restriction guidance note.

HMRC guidance on the relaxation is at CTM04840 and on the restriction is at CTM04830.

Carried-forward trading losses arising on or after 1 April 2017

When a company incurs a trading loss on or after 1 April 2017 which has not been relieved against current or preceding year profits and also has not been surrendered as group relief, it can carry the loss (or the balance remaining after such claims) forward to the next accounting period for relief against total profits. The company must carry on a trade in the next accounting period and meet the following conditions in respect of the trade.

CTA 2010, s 45A

That the trade:

  • did not become small or negligible in the loss making period
  • is commercial in the loss making period and in the period in which the loss is relieved
  • was not carried wholly outside the UK
  • was not one of farming or market gardening which has made losses for the previous five years or more
  • was not a trade of dealing with commodity futures, and
  • does not fall within the rules for creative sector tax relief, see Television tax reliefs ― key provisions and subsequent

More on Trading losses relief: