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HMRC internal manual

Company Taxation Manual

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Corporation Tax: trading losses: general: restriction for Government investment written off

CTA10/S92

Where the Government writes off any amount of its investment in a body corporate, CTA10/S92 provides that the amount written off is set against that body’s tax losses at the end of the last accounting period ending before the date of the write-off. See the example below.

If the amount written off is more than those losses, the excess is carried forward for set-off against the body’s tax losses as at the end of the next accounting period, and so on. For this purpose, ‘tax losses as at the end of an accounting period’ are:

  • any losses which are available for relief under CTA10/S45 against trading income for the next accounting period,
  • in the case of an investment company, any expenses of management or charges on income which are available under CTA09/S1223 for carry forward to the next accounting period,
  • any allowances which are available under CAA01/S260 (1) and (2) for carry forward to the next accounting period,
  • any allowable losses for chargeable gains purposes available under TCGA92/S8 so far as not allowed in that or a previous accounting period.

Example

The Government lent Company B £40,000 in connection with a civil engineering project in 2000. Company B makes up its accounts to 31 March each year. In the year ended 31 March 2005 Company B had losses of £95,000. The Government wrote off £17,000 of the loan in July 2005. Under CTA2010/S92 the £17,000 written off is set against Company B’s losses at the end of the accounting period ending on 31 March 2005. And so the revised losses are £78,000.