CFM32080 | Loan relationships: non-trading deficits: claims for set-off against profits of an earlier period: example

Claim to carry back loss to previous accounting periods: example

Hyck Ltd has the following results.

Year ended 31 December 2019

• Trade profit - £20,000

• Non-trade loan relationship deficit - £5,000

Year ended 31 December 2018

• Trade profit - £10,000

• Non-trade loan relationship profot - £7,000

If Hyck Ltd does not surrender any of the non-trading loan relationship deficit arising in year ended 31 December 2019 as group relief, or make a claim to set it against profits of the same period, any carry-back claim can be made for the full £5,000.

Interaction with deficit brought forward

If however, Hyck Ltd also has the following result in the year ended 31 December 2017

• Trade loss - £4,000

• Non-trade loan relationship deficit - £3,000

Relief for the deficit carried forward from earlier accounting periods has priority.

• Non-trade loan relationship profit - £7,000

• Non-trade loan relationship deficit b/f - £3,000

• Profit available for reliefs - £4,000

A claim for carry back of non-trading deficit for the year ended 31/12/19 to the earlier accounting period is therefore limited to £4,000.