Topic 19 - Corporation Tax losses

Question 1

What are the options for trading losses
Carry forward relief
CY and PY relief
Terminal loss relief

Answer 1

Carried Forward
CF against total profits before QCD
Partial claim allowed
Claim within 2 years of AP in which loss relieved.

CY and PY Relief
- CY against totoal profits before QCD in full.
- Claim within 2 years of AP loss
and/or
- Can then carry back 12 months LIFO against total profits before QCD in FULL.
- Claim within 2 years.

• *Terminal loss relief:**
  1. Current period against total profits before QCD
  2. Carry back 36 months against total profits before QCD on a LIFO basis in FULL.

Question 2

What are the options for capital losses?

Answer 2

• Relieved against chargeable gains arising in the same accounting period.
• Excess loss then CF for relief against future gains.
• Partial claims NOT allowed

Question 3

What are the options for property losses?

Answer 3

• Offset against total profits before QCD for CY
• Excess CF against first available future total profits
• Group relief (CY and CF)
• CY claim in FULL
• CF claim can be partial.

Question 4

What are the options for Non-trade loan relationship (NTLR) deficits

Answer 4

• Relieve against total profits before QCD
• CB 12 months against non trading loan income after trading losses have been relieved
• CF against total profits before QCD
• Group Relief

PARTIAL CLAIMS ALLOWED

Question 5

What factors will influence the choice of loss relief?

Answer 5

• Tax saving
• Cash flow
• Wastage of relief for QCD payments

Question 6

When will there be a restriction on loss relief?

Answer 6

If trade become small or negligible can only carried forward losses against future profit of same trade.

If profits exceed £5m
CF losses are restricted to an allowance of £5m a year plus 50% of remaining total profits after deduction of this allowance.

Change of ownership
Losses cannot be carried forward where there is a change of ownership AND;

• a major change in nature or conduct of trade within 5 years (beginning no more than 3 years before the change in ownership)
• After a change in ownership there is a considerable revival of companies trading activities which at the time of change had become small or negligible.