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HMRC internal manual

Company Taxation Manual

Corporation Tax: trading losses - relief against total profits: evidence of loss


The amount of a loss incurred in a trade in any accounting period is computed in the same way as trading income from the trade in that period would have been computed (CTM04005). In theory the usual accounts and computations should be supplied as evidence in support of a loss.

However, when a company collapses, accounts are often not prepared for the final period of trading, and yet it will often be clear that the company has made substantial losses for this final period. The question arises as to whether and to what extent these losses can be carried back to previous years under CTA10/S39.

Production of accounts should not be insisted on where there is no doubt that claimed losses would be significantly less than the losses actually suffered by the company, even after any possible adjustment of the computations for capital and disallowable expenditure, balancing charges, etc.

The amount of evidence needed that losses claimed are available will depend on the particular facts of each case. No hard and fast rules can be laid down, and many factors are relevant, not merely the results shown by, for example, management accounts or statements of affairs. These include factors such as the compliance history, other information about the company’s activities and so on.

At one extreme there will be cases where a company collapses with losses in the millions of which only the odd few thousand are claimed. Here it will probably be reasonable to allow the claim in full.

At the other extreme all the losses disclosed by unaudited or management accounts may be claimed. Here it is unlikely that such losses may be regarded as available unless audited accounts are produced.