Overview of the carried-forward loss restriction

There is an important restriction in the use of losses carried forward as set out in CTA 2010, ss 269ZA–269ZZB (Pt 7ZA). Most carried-forward losses can relieve profits up to the company’s available deductions allowance, plus 50% of the remaining profits after in-year reliefs. The normal deductions allowance is £5m for a 12-month period, shared where applicable by a group. The income loss restriction applies to profits arising from 1 April 2017, and the capital loss restriction applies to chargeable gains accruing from 1 April 2020, including where the losses arose before those dates.

It is important to note that the 50% restriction also applies to trading and certain other income losses carried forward from periods before 1 April 2017.

For further details, including increases in the deductions allowance for qualifying lease credits arising in corporate rescue arrangements (including onerous lease provision reversals, right-of-use asset impairment reversals and relevant remeasurement credits) and for companies in insolvent liquidation, see Simon’s Taxes D1.1108BA.

HMRC guidance can be found at CTM05010 onwards.