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HMRC internal manual

Property Income Manual

From
HM Revenue & Customs
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Losses: rules (CT)

Main principles

The CT Schedule A loss relief rules are contained in ICTA88/S392A.

CT Schedule A losses incurred by a company should be relieved as shown below.

  • The loss must, first of all, be set against the company’s total profits for that accounting period - ICTA88/S392A (1).
  • To the extent that such losses cannot be relieved against total profits of the same accounting period (and are not surrendered as group relief - see PIM4240), they should be carried forward for set-off against future total profits as long as the same Schedule A business is carried on in the succeeding accounting period - ICTA88/S392A (2).
  • Where an investment company or, from 1 April 2004, a ‘company with investment business’ (as defined by ICTA88/S130) with a Schedule A business ceases to carry on such a business, any unrelieved Schedule A losses are treated as management expenses (ICTA88/S75) of the next accounting period. They can be set against the profits of that or a subsequent period as long as the company continues to qualify as an investment company or, from 1 April 2004, a ‘company with investment business’ - ICTA88/S392A (3).
  • But a company which is not an investment company or, from 1 April 2004, a ‘company with investment business’ cannot carry forward unrelieved Schedule A losses beyond the end of the accounting period in which the Schedule A business ceases.

Uncommercial losses etc.

CT Schedule A losses may only be relieved as outlined above where a company carries on a Schedule A business:

  • on a commercial basis - see ICTA88/S392A (5)

or

  • in the exercise of statutory functions (as defined in ICTA88/S392A (7)).

ICTA88/S392A (6)(a) permits the exclusion from the Schedule A loss relief provisions of that part of a Schedule A business not carried on on a commercial basis (for example, a holiday property let at a nominal rent to directors of the company).

Other aspects of CT Schedule A losses

There is separate guidance on:

  • group relief at PIM4240
  • loss-buying rules at PIM4250.