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HMRC internal manual

Banking Manual

Bank loss restriction: calculation of carried-forward reliefs available: calculation of relevant profit accounting periods ended 1/4/15 to 31/3/17 – steps 5 to 7

Calculate of relevant profits under CTA10/S269CD Steps 5 to 7 (see BKM304300 for Steps 1 – 4) 

Step 5 – Calculate relevant trading profits

If the banking company only has trading profits it takes the amount of relief available against total profits, as calculated at step 4 and deducts this from total profits at step 1, to arrive at the company’s relevant trading profits.

If the banking company has both trading and non-trading profits, it takes the amount of relief available against total profits, as calculated at step 4 and multiplies it by the proportion of total profits that are trading profits, as calculated at step 3.  This will give an amount for the trading proportion of the relief against total profits, which is then deducted from the trading profits calculated at step 2.  The resulting amount is the banking company’s relevant trading profits.

The company can use relevant carried-forward trading losses against 25 percent of this amount. (For accounting periods from 1 April 2015 to 31 March 2016 the company could use relevant carried-forward trading losses against 50 percent of this amount) (see BKM303200).

Step 6 – Calculate relevant non-trading profits

If the banking company only has trading profits it can ignore step 6.

If the banking company has both trading and non-trading profits, it takes the amount of relief available against total profits, as calculated at step 4, and multiplies it by the proportion of total profits that are non-trading profits, as calculated at step 3.  This will give an amount for the non-trading proportion of the relief against total profits, which is then deducted from the non-trading profits calculated at step 2.  The resulting amount is the banking company’s relevant non-trading profits.

The company can use relevant carried-forward non-trading losses against 25 percent of this amount.  (For accounting periods from 1 April 2015 to 31 March 2016 the company could use relevant carried-forward non-trading losses against 50 percent of this amount) (see BKM303200).

Step 7 – Calculate relevant profits

The banking company adds together the amounts of relevant trading profits calculated at step 5 and relevant non-trading profits calculated at step 6 to arrive at the relevant profits. 

The company can use relevant carried-forward management expenses against 25 percent of this amount but only after deducting any relevant carried forward trading losses and relevant carried forward non-trading losses allowed in that accounting period.  (For accounting periods from 1 April 2015 to 31 March 2016 the company could use relevant carried-forward management expenses against 50 percent of this amount but only after deducting any relevant carried forward trading losses and relevant carried forward non-trading losses used in the same accounting period) (see BKM303200).

See BKM310100 for an example of this calculation.