Non-trading deficits on loan relationships

Produced by Tolley

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

  • Non-trading deficits on loan relationships
  • Overview of non-trading deficits (NTDs)
  • Relief for NTDs against current year profits
  • Carry back of NTDs against non-trading profits of an earlier period
  • Carry forward of NTDs to future accounting periods
  • Carry forward of NTD’s arising on or after 1 April 2017
  • Carry forward of NTD’s arising before 1 April 2017
  • Surrender by way of group relief
  • Carried forward and surrender as group relief
  • Change in ownership provisions and companies with investment business

Non-trading deficits on loan relationships

Overview of non-trading deficits (NTDs)

When a company’s debits on its non-trading loan relationships and derivative contracts in an accounting period exceed the credits on its non-trading loan relationships and derivative contracts in the same period (the deficit period), the surplus is a special category of loss which is known as an NTD.

This guidance note considers how companies can utilise their NTDs. The topic is also explored in the Relief for other losses video, together with worked examples.

For guidance on determining a company’s debits and credits from loan relationships and whether these are trading or non-trading, see the Taxation of loan relationships guidance note.

Relief for NTDs against current year profits

Companies can claim for NTDs to be offset against other profits of the same period. Relief is given after the automatic set off of any trading losses brought forward but only where those trading losses arose prior to 1 April 2017. Trading losses brought forward that arose on or after 1 April 2017 do not have to be automatically offset against future trading profits (see the Trading losses carried forward guidance note). Relief for the NTD is given in priority to current year trading losses, property losses, trading losses carried back from a later period and loan relationship deficits carried back from a later period.

The claim can specify all or part of the NTD to be offset.

See Example 1, which is taken from CFM32060.

NTDs of the current period can be offset against profits of any description (except ring fence profits) but the claim must identify which profits are being offset. Usually this requirement is met automatically by tax computation schedules generated by tax return software. The deadline for the claim is within two years of the end of the deficit period, ie o

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