Current year relief and carry back losses

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Current year relief and carry back losses
  • Current year relief for trading losses
  • Carry back relief for trading losses
  • Claims for current year and carry back of trading losses
  • Interest on repayments resulting from loss carry back claims
  • Companies accounting in foreign currency
  • Change in ownership

Current year relief for trading losses

Trading losses can be offset against total profits of the same period. Total profits covers, for example, chargeable gains or non-exempt dividends.

The maximum claim for relief is the lower of the available loss or the available profit. In other words, no partial claims are allowed and the claim must either use all of the loss, or eliminate all of the available profits.

CTA 2010, s 37(3)(a)

See Example 1.

Once trading losses have been relieved against profits of the same period in which the loss was generated, a claim may also be made under CTA 2010, s 37(3)(b) to carry back any remaining loss against profits of the preceding 12 months. This is explained in more detail below.

Potential restrictions on trading loss relief

Relief for losses against current or preceding year profits is not allowed in certain circumstances, as follows:

  • the losses are incurred in carrying on a trade outside the UK
  • the loss is incurred in a trade which is not carried out on a commercial basis with a view to the realisation of profits
  • the loss is incurred in a trade o

More on Trading losses relief: