Lecture 5: Corporation Tax Losses

Question 1

What happens to capital losses?

Answer 1

Set against current or future capital gains.

Question 2

What happens to property business losses?

Answer 2

Set against total profits (before charges) of the current accounting period.
Carry forward against total profits of future accounting periods.

Question 3

What happens to trading losses?

Answer 3

Set off against current profits - trade loss relief against total profits.

Carry back against earlier profits - trade loss relief against total profit

Carry forward against total profits of future accounting periods.

Question 4

What are the trade loss reliefs available to corporations?

Answer 4

1. A company may claim to set a trading loss incurred in an accounting period against total income (before charges) of the same accounting period.

In addition, a claim may be made to carry losses back against total income. Before charges of the 12 months before the period of loss.
(losses of a company’s final accounting period can be carried back 36 months)

Or loss can be set against future profits. The company can choose how much of the loss to relieve in each future year. There is a limit on carry forward losses that can be used in an accounting period of £5 million plus 50% of the company’s profits beyond £5million.