Commentary

D1.1108 Carry forward relief for trading losses—pre 1 April 2017

Corporate tax
Corporate tax | Commentary

D1.1108 Carry forward relief for trading losses—pre 1 April 2017

Corporate tax | Commentary

D1.1108 Carry forward relief for trading losses—pre 1 April 2017

Reform of loss relief for carry forward trading losses

The tax treatment of losses carried forward were reformed by Finance (No 2) Act 20171, with the aim of providing more flexibility in how losses arising on or after 1 April 2017 can be relieved (see D1.1106).

The key difference between the pre and post April 2017 rules is that the loss carry forward provisions are relaxed and companies are generally able to carry forward trading losses for offset against total profits of subsequent accounting periods whereas losses accruing before 1 April 2017 can only be carried forward and set against profits of the same trade. There are certain criteria that must be met before losses can be carried forward for offset against future total profits. Where they are not met, the losses are carried forward for offset against future profits of the same trade, see further details in 'Non-qualifying post 1 April 2017 trading losses carried forward' in D1.1106.

Where a company's accounting period straddled 1 April 2017, the periods before and after 1 April 2017 were treated as two separate accounting periods and profits/ losses were time apportioned or, where that would produce an unreasonable result, apportioned on a just and reasonable basis2. HMRC have provided examples of the calculation of loss relief for straddling periods at CTM04950 and CTM04960. Also see 'The new corporation tax carry forward loss reliefs' by Sarah Squires in Tax Journal, Issue 1455, 14, 6

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