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HMRC internal manual

Company Taxation Manual

Corporation Tax: tax avoidance involving carried-forward losses: commencement and apportionment

FA15/Sch3/Part 2 and F(No 2)A 2017/Sch4/Part12/Para190

The effect in CTA10/s730G(10) applies in accounting periods beginning on or after 18 March 2015 for carried-forward trading losses, non-trading loan relationship deficits and management expenses.  For accounting periods beginning on or after 1 April 2017 this is extended to carried-forward UK property business losses and non-trading losses on intangible fixed assets.

Where the rules apply to a company with an accounting period straddling 18 March 2015 or 1 April 2017, that period will be treated as two separate accounting periods for the purposes of calculating the company’s taxable total profits, and the restriction on relevant carried-forward amounts will apply in the split period treated as commencing 18 March 2015 or 1 April 2017.

The default is a split on a time basis in accordance with CTA10/s1172, unless that basis is unjust or unreasonable.

This treatment will apportion any profit for the whole accounting period into a profit in the two periods.  It is not possible to apportion on a basis that turns a profit for the whole period into a loss in one period and a profit in the other.

The split applies only so far as it is necessary for the purposes of the restriction.

When arrangements were entered into

The legislation will apply to tax arrangements entered into at any time.  So if a company entered an arrangement prior to 18 March 2015 or 1 April 2017, but with an ongoing effect that continued beyond that date, then the rules would apply to that arrangement with effect commencing as described above.