Trading losses and anti-avoidance

Produced by Tolley

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

  • Trading losses and anti-avoidance
  • Summary of trading losses anti-avoidance rules
  • Change in ownership and trading losses
  • Restriction of carry-forward and carry-back of trading losses
  • Extension of change in ownership rules post-1 April 2017
  • Rules for ascertaining change of ownership
  • Insertion of a new holding company
  • Major change in the nature or conduct of a trade
  • Corporation tax loss refresh prevention rules
  • Loss refreshing qualifying conditions
  • More...

Trading losses and anti-avoidance

Summary of trading losses anti-avoidance rules

There are several anti-avoidance rules involving the utilisation of trading losses which are summarised below:

ConditionsConsequences
Major change in nature or conduct of trade of the company, or the company’s activities become small or negligibleTrading losses arising after the change in ownership cannot be relieved against profits arising before the change and losses carried forward cannot be relieved against trading profits or total profits.
Relief is lost completely.
See below
Post-1 April 2017 change in ownership and major change in the business of the companyLosses eligible for carried forward relief against total profits are not available against post-change of ownership profits, including terminal losses.
Relief is lost for five years.
See below
Post-1 April 2017 change in ownership, and:Trading losses available for carried forward relief, including terminal losses, are not available against the gain.
Relief is lost for gains arising within five years.
See Simon’s Taxes D1.1127
– no gain, no loss transfer within a group or tax neutral transfer of an intangible, and a chargeable gain accrues or a non-trading chargeable realisation gain on an intangible accrues, or
– a chargeable gain accrues to the company under notional transfers within a group
Post-1 April 2017, change in ownership and then a trade is transferred to another company, with no change in ownership, and the companies are not related both before the change in ownership and at the time of trade transferNo loss relief for loss in transferred trade against total profits in successor company.
Relief is lost for five years.
See Simon’s Taxes D1.1127
The main purpose, or one of the main purposes, of an arrangement is to create profits to utilise the carried-forward losses and also generate an in-year deduction, sometimes called ‘loss refreshing’Restriction of carried-forward losses.
See below
Deductible amounts are included within the loss claims and these deductions are as a result of a qualifying changeRestriction of losses.
See Simon’s Taxes D1.1130
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