Commentary

D1.1108C Restriction on carried forward trading losses—examples

Corporate tax
Corporate tax | Commentary

D1.1108C Restriction on carried forward trading losses—examples

Corporate tax | Commentary

D1.1108C Restriction on carried forward trading losses—examples

These examples relate to the Restriction on carried forward trading losses commentary at D1.1108B.

Example 1—non-group company carried forward loss restriction calculation

A Ltd, which is not a member of a group, begins to trade on 1 April 2017. It has the following results for the two years ending 31 March 2018 and 2019.

y/e 31.3.18y/e 31.3.19
££
Trading profit/(loss)(9,000,000)8,000,000
Property income2,000,000

Taxable profits for the two years are computed as follows

y/e 31.3.18y/e 31.3.19
££
Trading profit8,000,000
Property income2,000,000
10,000,000
Less: loss brought forward from y/e 31.3.18 (restricted)(7,500,000)
Taxable profits2,500,000

The restriction on the set-off of the carried-forward loss against profits for the year ending 31 March 2019 is calculated as follows.

£
Qualifying profits 10,000,000
Less: deductions allowance(5,000,000)
Relevant profits 5,000,000
Relevant profits × 50%2,500,000
Add: deductions allowance5,000,000
Maximum set-off7,500,000

Loss memorandum

£
Loss y/e 31.3.189,000,000
Less: relieved y/e 31.3.19(7,500,000)
Carried forward to y/e 31.3.201,500,000

Example 2—carried forward loss restriction calculation with only pre April 2017 losses

For the year to 31 March 2018, A Ltd has £22m trading profits and £8m chargeable

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