Group relief for carried-forward losses

Produced by Tolley
Group relief for carried-forward losses

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

  • Group relief for carried-forward losses
  • Development of the UK legislation
  • Accounting periods straddling 1 April 2017
  • Group relief for carried-forward losses
  • Restrictions and conditions on carried-forward group relief
  • Interaction of group relief for carried-forward losses with other loss reliefs
  • Interaction of group relief for carried-forward losses with management expenses in an investment company
  • Calculating the claimant company’s relevant maximum
  • Amended procedures where relevant profits are lower than the deductions allowance
  • Dealing with prior surrenders
  • More...

This guidance note examines in detail the relief available to groups for carried-forward losses. The scope excludes the treatment of specialist businesses such as banks, insurance companies and oil and gas companies.

From 1 April 2017, companies can surrender certain types of carried-forward losses to another company in the same group relief group. The rules are subject to several conditions and numerous anti-avoidance provisions, which are discussed below.

Prior to 1 April 2017, it was not possible to surrender brought forward losses of any description against profits of any other companies within the group relief group. The consequences of such a rule meant that certain types of losses could be ‘trapped’ within individual legal entities with little or no prospect of relief.

Development of the UK legislation

At Budget 2016, it was announced that the use of carried-forward losses would be relaxed to permit most brought forward losses to be surrendered to other companies in the group, subject to strict conditions. Subsequently, Part 5A was inserted into CTA 2010, which was modelled on the existing rules in CTA 2010, Part 5.

The legislation was introduced by F(No 2)A 2017, Sch 4, para 23 and applies generally from 1 April 2017. For anti-avoidance rules, see below.

Draft guidance on the loss relief commencement provisions was issued by HMRC on 7 December 2017.

More detailed HMRC guidance on group relief for carried forward losses can be found at CTM82000 onwards.

Accounting periods straddling 1 April 2017

Where a company’s accounting period straddles 1 April 2017, the periods before and after 1 April 2017 are treated as two separate accounting periods. Profits / losses are time apportioned or, where that would produce an unreasonable result, apportioned on a just and reasonable basis.

Complex commencement provisions apply in the straddling accounting period if the corporate interest restriction (CIR) rules in TIOPA 2010, ss 372–498 (Pt 10) applied to the company. Worked examples are included in the HMRC draft guidance referred to above. For an overview of

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