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HMRC internal manual

Company Taxation Manual

Corporation Tax: tax avoidance involving carried-forward losses: effect where the rules apply


Where the five conditions are met (CTM07520) the company will not be able to use any of its relevant carried-forward reliefs (CTM07515) against the profits of the arrangement.

Any deductions arising as a consequence of the arrangements (and meeting condition B) will still be available under the normal rules.  It is only the carried-forward reliefs that are denied, and only against the profits arising from the arrangement.


Company A has £5m of pre-1 April 2017 carried-forward non-trading loan relationship deficits.  It enters an arrangement meeting the conditions in CTA10/s730G in order to access these losses.

The arrangement gives rise to £1m of additional non-trading profits in company A, whilst also giving rise to £1m of non-trading debits in company B, which is a connected company.  In the absence of the arrangement company A would not have these £1m of profits, and company B would not have the non-trading debits in this accounting period.

CTA10/s730G(10) means that company A cannot use its carried-forward non-trading deficit against the £1m of non-trading profits arising from the tax arrangements.  Assuming the debit arising from the tax arrangement gave rise to a surrenderable loss in company B, company B may be entitled to surrender the £1m of non-trading loan relationship deficit arising from the arrangements against it.