Corporation Tax

Trading losses carried forward

Produced by Tolley
  • 22 Dec 2021 16:11

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

  • Trading losses carried forward
  • Carried-forward trading losses arising on or after 1 April 2017
  • Non-qualifying losses carried forward
  • Group relief for carried forward losses
  • Carried-forward trading losses arising pre-1 April 2017
  • Future profits from the trade
  • Multiple trades
  • Anti-avoidance on carried forward trading losses

Trading losses carried forward

The reform of corporate losses by Finance (No 2) Act 2017 included a mixture of relaxations to the use of losses within the previous regime which applied before 1 April 2017 and also a major restriction (50% above a certain limit) on the amount of profits after 1 April 2017 that can be covered by the offset of most losses carried forward, including pre-April 2017 losses.

This guidance note details the options for using trading losses carried forward and the 50% restriction is dealt with in the Carried-forward losses restriction guidance note.

The Relief for trading losses (A) video provides an overview of the trading losses regime, including information on carried forward losses, the deductions allowance, application to groups and some of the compliance obligations. There are also several worked examples.

HMRC guidance on the relaxation is at CTM04840 and on the restriction is at CTM04830.

Carried-forward trading losses arising on or after 1 April 2017

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 carry the loss (or the balance remaining after such claims) forward to the next accounting period for relief against total profits. The company must carry on the trade in the next accounting period and meet the following conditions in respect of the trade.

That the trade:

  1. did not become small or negligible in the loss-making period

  2. is commercial in the

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