CFM32060 - Loan relationships: non-trading deficits: claims for set-off against profits of the same period
CTA09/S463B(1)(a) and S463B
Claims to set deficit against profits of the same period
A claim to set non-trading deficits against profits of the same period can be made under S463B(1)(a). The conditions for such claim are set out in S463D.
The company can set all or part of the current year’s deficit against the company’s current year profits of any description, whether trading or non-trading, except ring-fenced profits for oil companies.
A claim can be made for the whole or part of the non-trading deficit. This allows companies to maximise their double tax relief (see the example below).
Interaction with other reliefs
CTA09/S463D gives the order in which the reliefs are given. The non-trading deficit is set against the profits of the same period before relief for:
- trade losses, setting against profits of the same period or carried back from a later period under CTA10/S37, or
- property losses, setting against total profits of the same period under CTA10/S62, or
- non-trading deficit carried back from a later period under CTA09/S463B(1)(b).
Pre-2017 non-trading deficits
For non-trading deficits arising before 1 April 2017, there was an equivalent provision at CTA09/S461.
Where the non-trading deficit arise in an accounting period begins before 1 April 2017, the setting off against profits of the same period must also be after the relief for any amounts of deficits brought down from earlier periods.
Where a company has an accounting period that straddles 1 April 2017, the periods falling before and after that date are treated as separate accounting periods for the purposes of determining the pre-2017 and post-2017 amounts. See CTM04880 for further details.
Set-off in the year: example
A UK company has the following income and expenditure for the year ended 31 March 2018.
| Income or Expenditure | Amount |
|---|---|
| UK trading income | £400,000 |
| Overseas dividend | £200,000 (foreign tax paid £36,000) |
| Non-trading deficit | £500,000 from loan relationships |
To maintain maximum foreign tax credit relief the company claims for £400,000 of the deficit to be set against the trading profits and for a further £20,000 of the deficit to be set against the overseas dividend as follows.
| - | Trade profits | Dividend | Total |
|---|---|---|---|
| - | 400,000 | 200,000 | 600,000 |
| Part deficit claim (of year) | - 400,000 | -10,526 | -410,526 |
| Profits | 0 | 189,473 | 189,473 |
| CT@19% | - | - | 36,000 |
| Tax credit relief | - | - | 36,000 |
| CT payable | - | - | Nil |
The remaining £89,473 (£500,000 - £410,526) of the deficit is available to be carried back under S463B(1)(b). If the company does not make such a claim, it can be carried forward under CTA10/S463G.