CTM07510 | Corporation Tax: tax avoidance involving carried-forward losses: loss refreshing

Loss refreshing arrangements

For periods before 1 April 2017, there was significantly more versatility in how reliefs could be used in the accounting period they were generated compared with periods to which they had been carried forward. For example, current period non-trading loan relationship deficits can be claimed against profits of any kind (CTA09/S459; CFM32050); whereas carried-forward pre- 1 April 2017 non-trading loan relationship deficits are only available against non-trading profits (CTA09/S457; CFM32040). This led to companies entering into arrangements that sought to convert their carried-forward losses into in-year deductions - effectively refreshing the old and streamed losses into new ones that can be used against total profits or surrendered as group relief. This is known as corporate loss refreshing.

Sometimes these arrangements form part of wider commercial arrangements undertaken in the normal course of business (see Arrangement 3 at CTM07550). In other cases the group will enter contrived arrangements for the purpose of obtaining a tax advantage through accessing the carried-forward relief and generating a new deduction, and that tax advantage will be the greater expected outcome of the arrangements (see Arrangement 1 at CTM07550) In these tax-motivated cases the rule will apply (see conditions at CTM07520).