Foreign profits ― loss relief

By Tolley

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

Foreign profits ― loss relief
Trade carried on wholly overseas
Overseas permanent establishment of a UK trade

The treatment of losses of UK companies from foreign operations depends on the nature of the foreign operations.

Trade carried on wholly overseas

Losses of a UK company from a trade carried on wholly overseas by that company cannot be set against any profits from other sources, including other overseas businesses. The losses can only be carried forward and set against future profits of the same trade. This rule was not relaxed by the changes in the utilisation of losses carried forward arising from 1 April 2017 which apply for UK trading losses. These amendments allow losses carried forward to be offset against future profits or surrendered as group relief. For details of the rules on carried-forward trade losses from 1 April 2017, see the Trading losses carried forward and Group relief for carried-forward losses guidance notes.

CTA 2010, ss 37(5), 45B(1)

The carried-forward loss relief changes also introduced a restriction such that only 50% of profits in excess of £5m can be offset by losses brought forward. This applies for all losses carried forward both pre- and post-1 April 2017; details of these c