Commentary

D1.1108BA Restriction on carried forward losses—deductions allowance

Corporate tax
Corporate tax | Commentary

D1.1108BA Restriction on carried forward losses—deductions allowance

Corporate tax | Commentary

D1.1108BA Restriction on carried forward losses—deductions allowance

Deductions allowance for a standalone company

For single (non-group) companies, the deductions allowance is £5 million for each accounting period, reduced proportionately if the period is less than 12 months1. Special rules can apply to adjust the deductions allowance for companies with a reversal credit on an onerous lease, those in insolvent liquidation and those with one day accounting periods (for example non-resident companies disposing of UK land that are not otherwise within the scope of UK corporation tax). These are discussed below.

The total amount of profits against which carried forward losses can be set, the relevant maximum, is the total of the company's deductions allowance and 50% of the company's relevant profits as discussed at D1.1108B.

Increase of deductions allowance for reversal of an onerous lease

Where a company's specified profits are greater than nil and a relevant reversal credit has been brought into account in respect of an onerous lease, then the company's deductions allowance for the accounting period is increased by the amount of the relevant reversal credit or, if lower, the amount of the specified profits2.

Specified profits means the sum of the company's total profits, calculated as detailed in Step 1 (see D1.1108B), plus any I-E profit of the accounting period3.

A relevant reversal credit is a reversal of a provision in the accounts that was required in respect of an onerous lease entered into on arm's lengths. Where the tenant and the landlord are connected a credit can still be

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