D1.1108B Restriction on carried forward losses—general
With effect from 1 April 2017, there is a restriction on the amount of profits against which carried forward losses can be offset where a company or group has profits in excess of £5 million. A company's profits after any in-year reliefs such as current year loss relief (see D1.1104) or group relief (see Division D2.2) which are in excess of the deductions allowance (£5 million)1 can only be reduced by up to 50% by carried forward losses2.
HMRC guidance is at CTM04830 which covers the restriction and CTM04835 which gives guidance on the administration of the deductions allowance.
The deductions allowance is discussed in more detail below at D1.1108BA. Profits under £5 million are available for offset in full. The allowance is varied for accounting periods of less than 12 months and in group situations3.
The restriction applies to losses incurred before or after the changes to the rules on carry forward losses which were effected on 1 April 2017 and it applies to the following losses carried forward4:
• trade losses carried forward
• non trading loan relationship deficits carried forward
• non trading losses on intangible fixed assets carried forward
• management expenses carried forward, and
• UK property business losses carried forward
The restriction on losses carried forward also applies where the losses incurred on or after 1 April 2017 are carried forward and surrendered as group relief, further details are shown at D2.234.
The total amount of profits against which