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HMRC internal manual

Corporate Finance Manual

From
HM Revenue & Customs
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FA2010: risk transfer schemes: the losses pool

In order to calculate the amounts of any ring-fenced scheme losses (CFM63370) that can be offset against relevant scheme profits (CFM63380) in any accounting period, it is necessary to keep track of the pool of losses that have been ring-fenced. This is termed the ‘losses pool’ and the rules for calculating the amount at the beginning of any accounting period are at CTA10/S937I(2).

The losses pool is:

The amount of the losses pool at the beginning of the previous accounting period (or nil if the scheme did not exist until the current period), PLUS

Any ring-fenced scheme losses in the previous period that were not utilised in that period, LESS 

Any ring-fenced losses brought forward into the previous period that were utilised in the previous period.

Although this formula may appear complicated, in most circumstances the result will be relatively simple, as the following example demonstrates:

Example

Company X has made the following ring-fenced scheme losses and relevant scheme profits from a risk transfer scheme:

  y/e 31/12/10
£ y/e 31/12/11
£ y/e 31/12/12
£        
         
  Ring-fenced losses 300,000   ?
  Relevant scheme profits   100,000  

The losses pool at the start of the year ended 31 December 2012 would be as follows:

  £300,000, PLUS
     
  £0, LESS
  £100,000  
  =£200,000