The following Owner-Managed Businesses 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 is 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.
It is important to appreciate that the restriction only impacts carried-forward losses and does not affect loss relief in the following scenarios:
These are referred to as ‘excluded deductions’ under CTA 2010, s 269ZF(5).
In addition, on policy grounds or for reasons of immateriality, certain losses carried-forward are exempted from the restriction so this means they can
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