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BKM305600 | Bank loss restriction: Calculation of carried-forward reliefs available: calculation of relevant profit APs from 1/4/17 – relevant profits

From HM Revenue & Customs · Banking Manual

Relevant trading profits (CTA10/S269ZF(1))

The company’s relevant trading profits are its qualifying trading profits (BKM305400) less any trading profits deductions allowance.

The company can use pre-1 April 2015 carried-forward trading losses against 25 percent of the amount of its relevant trading profits.

Relevant non-trading profits (CTA10/S269ZF(2))

The company’s relevant non-trading profits are its qualifying non-trading profits (BKM305400) less any non-trading profits deductions allowance.

The company can use pre-1 April 2015 carried-forward non-trading loan relationship deficits against 25 percent of the amount of its relevant non-trading profits.

Relevant profits (CTA10/S269ZD(5))

The company’s relevant profits are its relevant trading profits plus its relevant non-trading profits.

The company calculates the amount of pre-1 April 2015 carried-forward management expenses it can use by finding 25 percent of the relevant profits and subtracting any deductions made in respect of

  • Trading losses carried forward under CTA10/s45 against profits of the same trade only,

  • Trading losses carried forward under CTA10/s45B against profits of the same trade only, and

  • Non-trading loan relationship deficits carried forward under CTA09/s457 against non-trading profits only.

From 1 April 2017, when the company subtracts the above deductions from 25% of its relevant profits, the result may be a negative number. That is because from this date, the company subtracts deductions for losses or deficits carried forward under CTA10/s45, CTA10/s45B and CTA09/s457 regardless of when the losses or deficits arose.

Losses and deficits arising from 1 April 2015 are subject to the general loss restriction (from 1 April 2017) (CTA10/PART7ZA) but not to the bank loss restriction, so the company may be able to make deductions for these amounts in excess of 25% of its relevant profits.

If the company reaches a negative number when it subtracts the above deductions from 25% of its relevant profits, the amount of relief available for pre-2015 carried-forward management expenses is nil.