CFM32070 | Loan relationships: non-trading deficits: claims for set-off against profits of an earlier period

CTA09/S463B(1)(b) and S463E

Claim to carry back deficit to previous accounting periods

The company can make a claim under S463B(1)(b) to carry back its non-trading deficit to the preceding 12-month period.

The non-trading deficit is set against non-trading profits of the preceding 12 month period that would otherwise be charged. These non-trading profits can arise from non-trading loan relationships or derivative contracts.

If there is more than one accounting period that falls within the preceding 12 months period, the non-trading profits from the later period must be utilised before the non-trading profits from the earlier period. If the earlier accounting period falls within but begins before the start of this 12-month period, the non-trading profits available are apportioned accordingly. These rules work in the same way as for trading losses carried back - see CTM90600

Although the legislation refers to a claim to ‘all or part’ of the deficit, S463E(2) specifies that the claim must be limited to the smaller of

• the profits available for relief

• the total deficit (to the extent it hasn’t already been surrendered as group relief), less any amounts claimed under S463B(1)(a) to set against profits of the same period.

Interaction with other reliefs

The relief for carried back non-trading deficits is given after:

• relief for any non-trading deficit which arises in that 12 months period

• relief for any non-trading deficit brought forward to that 12 months period from an earlier accounting period

• relief in respect of any qualifying charitable donations under CTA10/PT6

• relief under CTA10/S37 (loss deducted from total profits of the same or an earlier accounting period)

If the company is a company with an investment business, the following reliefs also get priority. Any

• deduction for capital allowances

• deduction for management expenses under CTA09/S1219

• non-trading deficit carried back from a later period (CTA09/S459(6)(b)).

  See CFM32080 for an example.

Pre-2017 deficits

For non-trading deficits that arose in an accounting period before 1 April 2017, companies there was a similar provision to carry back non-trading deficits under CTA09/S459(1). The conditions for such a claim are set out in CTA09/S462.

Where a company has an accounting period that straddles 1 April 2017, the periods falling before and after that date are treated as separate accounting periods for the purposes of determining the pre-2017 and post-2017 amounts. See CTM04880 for further details.