Losses carried forward

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Losses carried forward
  • Trading losses
  • Capital losses
  • Non-trading deficits on loan relationships
  • Excess management expenses
  • Property business losses

Trading losses

When a company incurs a trading loss on or after 1 April 2017 which has not been relieved against current or preceding year profits and also has not been surrendered as group relief, it can claim to carry the loss (or the balance remaining after such claims) forward to the next accounting period for relief against total profits.

CTA 2010, s 45A

For losses arising before 1 April 2017, the amount of any trading loss which was not relieved against current or prior year profits is carried forward for offset against future profits arising from the same trade. This is not a claim and the loss offset is automatic. Losses carried forward will be offset against all available profits from the same trade in perpetuity until the loss is exhausted.

CTA 2010, s 45

For further details, see the Trading losses carried forward guidance note.

In addition, subject to a de minimis of £5m, carried-forward losses are restricted to a set-off, which is limited to 50% of profits, see the Carried-forward losses restriction guidance note for details.

There are anti-avoidance provisions which prevent trading loss relief in certain circumstances where there has been a change of ownership of a company or under the ‘corporate loss refresh’ provisions. For more on this, see the Trading losses and anti-avoidance guidance note.

Multiple trades

If a company has more than one trade, then the income and expenses for the trades must be streamed when computing the trading profits or losses. Where a company has more than one loss-making trade, a separate loss memo must be kept for each trade where the losses arise before 1 April 2017.

According to HMRC’s Business Income Manual, it considers that the activities carried on by a company are only likely to amount to more than one trade

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