Carried-forward losses restriction

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

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). Subject to a de minimis of £5 million (known as the deductions allowance), most carried-forward losses are restricted to a set-off which is limited to 50% of profits. The restriction also applies to carried-forward capital losses as set out below.

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 the increase in the deductions allowance for the reversal of an onerous lease and also for insolvent companies, see Simon’s Taxes D1.1108BA.

HMRC guidance can be found at CTM05010 onwards.

Losses unaffected by the restriction

The restriction only impacts carried-forward losses and does not affect loss relief in the following scenarios:

•
current year loss reliefs (although see below in respect of creative industries losses)
•
carry-back of trade losses, including pre-1 April 2017 terminal losses
•
terminal losses, augmented

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Carried-forward losses restriction

Carried-forward losses restriction