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HMRC internal manual

Company Taxation Manual

Corporation Tax: trading losses - relief against total profits: preceding accounting periods: example showing losses of an earlier period used before losses of a later period

A company makes trading losses of £25,000 in its six month accounting period ended 30 June 2001 and £40,000 in its six month accounting period ended 31 December 2001.

The CT profits of the preceding periods were as follows.

Accounting period six months to 31 December 2000 £20,000
   
Accounting period six months to 30 June 2000 £10,000

Relief for the loss of the period ended 30 June 2001 is given before relief for the loss of period ended 31 December 2001. Relief is given as follows.

Loss for the period to 30 June 2001

Against profits of the period to 31 December 2000 £20,000
   
Against profits of the period to 30 June 2000 £5,000

Loss for the period to 31 December 2001

This loss cannot be carried back. This is because all of the profits for accounting periods in the twelve months immediately preceding the accounting period ended 31 December 2001 (that is the twelve months to 30 June 2001) have already been covered by loss relief from the earlier period.

The company would have preferred to claim relief for the period ended 31 December 2001 first. If it had been able to do this, relief for the period ended 31 December 2001 would have been given against the profits of the period ended 31 December 2000. The loss for the period ended 30 June 2001 could then have gone against the whole of the £10,000 profits for the period ended 30 June 2000. But the legislation does not allow this.