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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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FA2010: risk transfer schemes: utilising ring-fenced losses: same period

The rules for the treatment of ring-fenced scheme losses in the accounting period in which the loss arose are at CTA10/S937G.

The overall concept is that ring-fenced scheme losses can only be utilised to the extent that they can match relevant scheme profits from the same risk transfer scheme.

In order to determine the amount of any relevant scheme profits, against which ring-fenced scheme losses can be offset, it is first of all necessary to determine the amount of the profits pool at the beginning of the accounting period (see CFM63400).

No profits pool

If there are no amounts in the profits pool at the beginning of the accounting period then no ring-fenced scheme losses are to be brought into account. Those losses would be added to the ‘losses pool’ for potential relief in future periods (see CFM63390).

Profits pool is less than ring-fenced scheme loss

Where the amount in the profits pool at the start of the accounting period is less than the ring-fenced scheme loss in the accounting period then only a ‘relevant proportion’ of the ring-fenced scheme loss can be brought into account.

The ‘relevant proportion’ is the amount of the profits pool at the start of the accounting period expressed as a percentage against the total of the ring-fenced scheme losses made in the period. In most cases this would result in the amount of the ring-fenced scheme loss brought into account being the same amount as the profits pool at the start of the period.

Profits pool greater than ring-fenced scheme loss

Where the amounts in the profits pool at the start of the accounting period are greater than the ring-fenced scheme loss in the accounting period then the full amount of the ring-fenced scheme loss is brought into account.

Bringing a ring-fenced scheme loss into account

A ring-fenced scheme loss brought into account in the same period as which it arose should be brought into account as a loan relationship or derivative contract loss (as appropriate) of that accounting period.