Corporation tax update – new corporation tax loss relief rules

The Government recently published the 2017 Finance Bill which sets out the new corporation tax loss relief rules.

Key changes are:
  • Tax losses arising from 1 April 2017 will be carried forward and it will be possible to offset these against most types of taxable profits, irrespective of which activity the losses relate to. It will also be possible to offset these bought forward losses against taxable profits of other group companies (and consortia).
  • The amount of taxable profit that can be relieved by carried forward losses will be capped at 50% from 1 April 2017, once a £5 million annual loss allowance for each group is exceeded. 
Other points to note include:
  • Where a trade becomes small or negligible, trade losses will only be available to carry forward to offset against profits of the same trade.
  • Companies will only be able to surrender carried forward losses to group companies if the surrendering company has assets capable of producing income.
  • Companies which cease to trade will be entitled to offset the remaining carried forward trade losses against profits arising in the last 36 months without restriction. In this case however the carried forward losses cannot be offset against profits of accounting periods beginning before 1 April 2017.
  • The existing terminal loss relief rules are unchanged and will operate in parallel with these rules.
  • The original consultation documents suggested that these losses may expire when the company goes into liquidation. However, the Government’s response to the consultation confirms that this will not necessarily be the case, although the position will depend upon the circumstances.
For further information, please refer to our factsheet here or contact your usual Moore Stephens advisor.

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