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HMRC internal manual

Property Income Manual

Losses for CT: overview

CTA10/S62

CT property business 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 (CTA10/S62(3)).

  • 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 property business is carried on in the succeeding accounting period (CTA10/S64(4) and (5)).

  • Where an investment company or, from 1 April 2004, a ‘company with investment business’ (as defined by CTA09/S1218A), with a property business ceases to carry on such a business, any unrelieved property losses are treated as management expenses (CTA09/S1219) 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’ (CTA09/S63).

  • Otherwise, where a property business ceases, any unrelieved losses accumulated to that point cannot be carried forward any further and, to the extend that they cannot otherwise be utilised, are extinguised.

Reform of Corporation Tax loss relief

As of 1 April 2017, the relief available for trading losses carried forward has changed. Three sets of guidance have been published in draft: tranche 1, tranche 2 and draft guidance on commencement provisions.

Uncommercial losses

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

  • on a commercial basis (CTA10/S64(1)(a) and CTA10/S67(1)(a)), or

  • in the exercise of statutory functions (CTA09/S64(1)(b) and S67(1)(b))

CTA09/S64 and CTA09/S67 permit the exclusion from the property business loss relief provisions of that part of a property 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 losses

  • A loss made in a UK furnished holiday lettings business may only be carried forwards for use against profits of that same UK FHL business in a future accounting period (CTA10/S45 and S65).

  • A loss made in an EEA furnished holiday lettings business may only be carried forwards for use against profits of that same EEA FHL business in a future accounting period (CTA10/S45 and S67A).  

  • A loss made in an overseas property business (excluding any loss arising from an EEA FHL business as above) can only be carried forwards for use against profits of that same overseas property business in a future accounting period (CTA10/S66).

  • A loss made in a UK property business (excluding any loss arising from a UK FHL business as above) must first be set against the company’s total profits for that accounting period (CTA10/S62(3)).  

  • Guidance on loss-buying rules is available at PIM4250.