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HMRC internal manual

Company Taxation Manual

Corporation Tax: trading losses - relief against total profits: restriction of relief for uncommercial trading


CTA10/S44 disallows relief under S37(CTM04505) where a trade is not carried on:

  • on a commercial basis, and
  • with a view to the realisation of profit (CTM04610).

The object of these provisions is to deny relief for losses from activities that are clearly not carried on with the view of making profits. Do not challenge relief simply because there has been a run of trading losses. A statement made by the Chancellor of the Exchequer in the course of a parliamentary debate on this subject is at BIM85705.

The onus of proving that a trade is carried on a qualifying basis is on the claimant.

If the claimant has taken steps by the end of the accounting period to carry on the activity on a commercial basis, the provision will not operate to deny relief in respect of the loss of any part of that period.

If it is claimed that S44 does not apply because the loss making trade formed of a larger undertaking see CTM04620.

Note that the ‘uncommercial trading’ restriction does not apply where the trade is carried on in the exercise of a statutory function (for example, a marketing board created by statute).