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HMRC internal manual

# Corporation tax: restriction on relief for carried-forward losses: overview of calculation

## CTA10/S269ZA to S269ZZB

The total amount of profits against which restricted losses (CTM05020) can be set is known as the relevant maximum (CTM05090).

To calculate the relevant maximum, the amounts listed below have to be computed in the following order:

1. Modified total profits (CTA10/S269ZF(3) step 1) (CTM05040)
2. Trade profits and non-trade profits (CTA10/S260ZF(3) step 3) (CTM05050)
3. In-year reliefs (CTA10/S260ZF(3) steps 2 and 4) (CTM05060)
4. Qualifying trading profits and qualifying non-trading profits (CTM05070) (CTA10/S260ZF(3) step 5)
5. Relevant trading profits, relevant non-trading profits and relevant profits (CTA10/S269ZF(1), (2) and S269ZFA(CTM05080)
6. Relevant maximum for trading, non-trading and total profits (CTA10/S269ZB(5), CTA10/S269ZC(3) CTA10/S269ZD(4)) (CTM05090).

The first four of these steps lead the company to calculate what are, broadly, net in-year results (qualifying profits) for trading, non-trading and total profits. The fifth step deducts the deductions allowance from the qualifying profits to find the relevant profits. The sixth step finds the relevant maxima using the relevant profits and the deductions allowance.

The following pages, from CTM05040 to CTM05090, explain how each of the amounts is computed.

### More than one relevant maximum

Where all of a company’s restricted losses are relevant deductions (CTM05020), then the company will only need to calculate its relevant maximum for total profits. Relevant deductions are, broadly, carried-forward losses that can be set against the total profits of the company.

However, some restricted losses are streamed losses (CTM05020), for example, trade losses incurred prior to 1 April 2017, carried forward under CTA10/S45 for relief against profits of the same trade only.

In cases where a company’s restricted losses include streamed losses, it may need to calculate more than one relevant maximum.

The legislation contains:

• The relevant maximum for trading profits, which sets the maximum relief a company can obtain for trading losses carried forward for relief against profits of the same trade only (CTA10/S269ZB),
• The relevant maximum for non-trading profits, which sets the maximum relief a company can obtain for NTLRDs carried forward for relief against non-trading profits only (CTA10/S269ZC), and
• The relevant maximum for total profits, which sets the maximum relief a company can obtain for all restricted losses carried forward, including losses carried forward for relief against total profits and losses carried forward for relief against trading or non-trading profits only (CTA10/S269ZD).

CTM05090 provides more detail on this subject.

A company that needs to calculate either or both of the relevant maxima for trading and non-trading profits will also need to show how it has allocated its deductions allowance between its trading and non-trading profits (CTM05080).