Current year relief and carry back losses

Produced by Tolley
  • (Updated for Budget 2021)

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

  • Current year relief and carry back losses
  • Current year relief for trading losses
  • Potential restrictions on trading loss relief
  • Carry forward of unutilised current year losses
  • Carry back relief for trading losses
  • Temporary carry back extension for APs ending between 1 April 2020 and 31 March 2022
  • Standalone companies making an extended carry back loss claim
  • Group companies making an extended carry back loss claim
  • Group loss carry-back allocation statements
  • Claims for current year and carry back of trading losses
  • More...

Current year relief and carry back losses

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 loss is set against profits before any qualifying charitable donations have been deducted, see the Qualifying charitable donations guidance note.

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.

Potential restrictions on trading loss relief

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

  1. the losses are incurred in carrying on a trade outside the UK

  2. the loss is incurred in a trade which is not carried out on a commercial basis with a view to the realisation of profits

  3. the loss is incurred in a trade of farming or market gardening which has incurred losses in the previous five years

CTA 2010, ss 37(5), 44, 48

Losses may also be restricted where anti-avoidance rules apply, see the Trading losses and anti-avoidance guidance note.

Carry forward of unutilised current year losses

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 total 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

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