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CTM04820 | Corporation Tax: CT loss reform: scope

From HM Revenue & Customs · Company Taxation Manual

The changes to relief for carried-forward losses in F(2)A17/SCH4 apply to all companies and unincorporated associations that pay Corporation Tax.

Relief for in-year losses (such as group relief under CTA10/PART5) and losses carried back from a later accounting period (such as trading losses under CTA10/S37 (3)(b)) are not affected.

Carried-forward losses affected

The restriction (CTM05000) and relaxation (CTM04840) apply to the following losses which are also known as relevant deductions (CTA10/S269ZD (3)):

  • Non-trading loan relationship deficits (NTLRDs) carried forward (CTA09/S463G)

  • Trade losses carried forward (CTA10/S45A)

  • Non-trading losses on intangible fixed assets carried forward (CTA09/S753)

  • Management expenses carried forward (CTA09/S1219 and CTA09/1223)

  • UK property business losses carried forward (CTA10/S62 and CTA10/S63)

The restriction (but not the relaxation) also applies to the following types of loss:

  • Pre-1 April 2017 trading losses (CTA10/S45 (4))

  • Post-1 April 2017 trading losses that can only be set against trading income (CTA10/S45B)

  • Pre-1 April 2017 NTLRDs and those that arise at any time to a company that is a charity (CTA09/S457 (3))

  • Post-1 April 2017 NTLRDs that can be set only against non-trading profits (CTA09/S463H (5))

For accounting periods beginning on or after 1 April 2020 the restriction also applies to:

  • Capital losses that arose at any time that are set against net capital gains (TCGA92/S2A)

Exclusions and special rules

For companies carrying on basic life assurance and general annuity business (BLAGAB), the policyholders' share of BLAGAB profits is excluded from the loss restriction (FA12/PART2/CHAPTER9 and FA20/SCH4).

The loss relief rules are modified in the way in which they apply to qualifying production/development companies that fall within the scope of creative industry tax reliefs (CTA09/PART15 to PART15E) (TTR30000).

Special rules apply to losses arising from ring fence activities and oil contractor activities in relation to the North Sea oil and gas regime (CTA10/PART8 and CTA10/PART8ZA).

Northern Ireland

Devolution of power to the Northern Ireland Assembly potentially allows the Northern Ireland Executive to set a lower rate of Corporation Tax for trading profits arising in Northern Ireland. This requires the exercise of various regulation-making powers and a resolution setting a rate by the Northern Ireland Assembly. The CT loss reform will apply to the Northern Ireland regime if it is implemented (CTA10/PART8B/CHAPTER3).