Corporation Tax

Property business losses for companies

Produced by Tolley
  • 19 Oct 2021 22:54

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

  • Property business losses for companies
  • Relief for property business losses in companies
  • Accounting periods straddling 1 April 2017
  • Property investment companies and losses
  • Anti-avoidance rules on carried forward property losses
  • Rules for ascertaining change of ownership
  • Significant increase in company’s capital
  • Anti-avoidance: tax loss refresh rules
  • TAAR
  • Further anti-avoidance provisions post-1 April 2017

Property business losses for companies

Relief for property business losses in companies

The rules in relation to corporation tax relief for property losses can be found in CTA 2010, s 62. Under these rules, loss relief may be provided in the current year or future years as follows:

  1. current year ― the loss should first be set off against the company’s total profits for the period concerned, or it may be surrendered under the group relief rules

  2. future years ― remaining losses can be carried forward for offset against total profits of the following accounting period or for losses accruing on or after 1 April 2017, group relief (referred to as ‘group relief for carried forward losses’). The use of group relief for carried-forward losses is subject to strict conditions. For example, the surrendering company’s losses are only able to be surrendered if the company is unable to deduct them from its own profits during that accounting period, see the Group relief for carried-forward losses guidance note

CTA 2010, ss 62, 99(1)(e), 102

This flexibility in respect of the utilisation of losses could be used to the company’s advantage to preserve double tax relief or charitable donations that would otherwise have been lost under the earlier rules. This aspect of the post-1 April 2017 regime is examined in Example 1 along with a comparison of the earlier rules.

In order for the property loss to be relieved, it must relate to a property business carried on either on a commercial basis, or in the exercise of a statutory function.

For losses arising on or after 1 April 2017, the carry forward relief is not automatic; a claim must be made within two years of the end of the accounting period for which the relief is claimed, or such later time as HMRC may allow. Prior to 1 April 2017, there was no need to make a claim.

HMRC has issued guidance covering property income losses. Capital losses and terminal losses

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