The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
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.
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.
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 of farming or market gardening which has incurred losses in the previous five years
Losses may also be restricted where anti-avoidance rules apply, see the Trading losses and anti-avoidance guidance note.
The rules on the utilisation of losses carried forward changed from 1 April 2017. Unutilised losses, arising on or after 1 April 2017, after relief against current year and preceding year profits and also group relief surrenders are carried forward for offset against future profits or surrender as group relief. Losses arising prior to 1 April 2017 can only be carried forward for automatic set off against future profits of the same trade.
The changes also introduced a restriction such that only 50% of profits in excess of £5m can be offset by losses brought forward. For more information, see the Trading losses carried forward and the
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