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HMRC internal manual

Property Income Manual

Losses for CT: setting losses against future profits

Reform of corporation tax loss relief

As of 1 April 2017, the relief available for trading losses carried forward has changed. A restriction has been introduced, limiting the total amount of relief available for carried-forward losses. In addition, most carried-forward trading losses incurred from 1 April 2017 can be set against total profits, and may be available for surrender as group relief for carried-forward losses. Three sets of guidance have been published in draft: tranche 1, tranche 2 and draft guidance on commencement provisions.

CTA10/S62 and S63

UK property business losses arising from 1 April 2017 that are not relieved in the accounting period in which they arise are carried forward and may be deducted from the company’s total profits of the next accounting period. The conditions for carrying forward the loss are:

  • the loss has not been surrendered as group relief under CTA10/S62(4)(a)

  • the company must continue to carry on the UK property business in the next accounting period (CTA10/S62(4)(b)).

Therefore, a claim must be made before relief can be allowed against the company’s total profits of the next accounting period. The claim can relate to all or part of the loss carried forward.

If the company is unable to use all the loss in the next accounting period or chooses not to make a claim for all or part of it, the unrelieved loss may be carried forward to the following accounting period providing:

  • the loss has not been surrendered as group relief for carried-forward losses under CTA10/S62 (5D)

  • the company continues to carry on the UK property business in that period (CTA10/S62 (4)(b)).

Again, a claim is required before relief can be allowed in that following period.