Chapter 19: Corporation Tax losses

Question 1

What are total profits

Answer 1

Total profits include net chargeable gains but are before qualifying charitable donations

Question 2

Current year loss relief

Answer 2

Against total profits of the same accounting period

It is an all or nothing claim so may waste QCDs

Question 3

Prior year loss relief

Answer 3

If any loss remains after a current year claim set against total profits of the 12 months preceding the loss period

It is an all or nothing claim so may waste QCDs

Question 4

3 options for current year / prior year loss relief

Answer 4

(i) Current year only
(ii) Current then carry back
(iii) No claim

claim within 2 years of the end of the loss making period

Question 5

Carry forward losses

Answer 5

Total profits before QCDs

Loss can be restricted

Loss can be carried forward indefinitely

Losses can be carried forward:
(i) After a current year claim only, or
(ii)After a CY and PY claim, or
(iii) If no cy or py claim has been made

Claim within 2 years of the end of the accounting period in which the loss is relived

Question 6

Terminal loss relief

Answer 6

36 months carry back against total profits before QCDs on a LIFO basis

cannot be restricted

Question 7

Capital losses

Answer 7

Can only be set against chargeable gains , not any other profits

Question 8

Property losses

Answer 8

Property losses are automatically offset in the current year against total profits before QCDs, which may lead to the wastage (or part wastage as here) of the QCDs.

Carry back is not an option and carrying forward can be restricted for QCDs

Trading losses do not need to be offset in the current year (and would not be in this case, as this would waste QCDs and not save any tax). When trading losses are carried forward they are offset against total profits before QCDs, but partial claims are possible to avoid the wastage of QCDs.