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HMRC internal manual

Banking Manual

Bank loss restriction: carried forward reliefs outside the restriction: overview

The bank loss restriction does not apply to the following carried forward reliefs:

  • Carried-forward reliefs arising after 1 April 2015
  • Carried-forward reliefs arising before a company begins relevant regulated activity (see BKM306400)
  • Carried-forward reliefs arising to a new entrant bank in its start-up period (see BKM306500) or
  • Carried-forward reliefs designated as unrestricted through the allowance for building societies (see BKM306700)

For accounting periods from 1 April 2015 to 31 March 2017, the rules that apply for those reliefs are as set out below. 

For periods from 1 April 2017, these reliefs are still not subject to the bank loss restriction. However, they are subject to the general loss restriction at CTA10/PART7ZA.

Accounting periods from 1 April 2015 to 31 March 2017

For periods prior to 1 April 2017, for carried forward reliefs not subject to the bank loss restriction:

  • Carried forward trading losses will be available in full and used automatically against profits of the same trade in the calculation of total profits (CTA10/S45; CTM04100)
  • Carried-forward non-trading loan relationship deficits will be available in full and used automatically against non-trading income in the calculation of total profits (CTA09/S457; CFM32040), subject to any claim under CTA09/S458(1) to carry all or part of the deficit forward to future periods (CFM32040)
  • Carried-forward management expenses will be treated as management expenses of the current period and be available in full and used automatically and first of all against total profits in the calculation of taxable total profits (CTA09/S1223 and S1219).

Prior to 1 April 2017, where these reliefs are available to a banking company which also has carried-forward reliefs subject to the restriction, the unrestricted reliefs will factor into the calculation of relevant profits in CTA10/S269CD.  This reduces the amount of relevant profits available for relevant carried-forward relief.   

Accounting periods from 1 April 2017

From 1 April 2017, the bank loss restriction calculation has changed to align with the general loss restriction, which applies to a broader range of carried-forward losses and deficits, regardless of when they were incurred.

In accordance with this calculation, reliefs that are subject to the general loss restriction are not deducted when calculating the company’s relevant profits for either the general loss restriction or the bank loss restriction.

Broadly, the carried-forward losses and deficits subject to the general loss restriction are carried-forward trading losses, non-trading loan relationship deficits, management expenses, UK property business losses and non-trading losses on intangible fixed assets.

This means that from 1 April 2017, these losses and deficits are not deducted when calculating the company’s relevant profits for the bank loss restriction. It does not matter whether the amount the company can deduct in respect of any of these losses and deficits is subject to the bank loss restriction or not. So long as they are subject to the general loss restriction, they are not deducted when calculating the relevant profits.

Depending on the level of the company’s profits, there may be a limit on amounts the company can deduct in respect of these losses and deficits in accordance with the general loss restriction. (See BKM305100 to BKM305600; draft guidance on the reform of corporation tax loss relief.)