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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the penalty: Losses impact on potential lost revenue calculation: Losses not used

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

Where all or part of the wrongly recorded loss has not yet been used and so the tax effect is not yet known, the potential lost revenue (PLR) is calculated using a discounted rate of 10% (the discounted rate) of the unused loss.

The discounted rate recognises uncertainty about the current tax value of the loss when it is eventually used to reduce tax liability.

However, see CH82370 if there is no reasonable prospect of that portion of the loss being used in the future to reduce tax liability.