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Corporation tax loss relief reform – draft guidance

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HMRC has published draft guidance on changes to the treatment of carried-forward corporation tax losses from 1 April 2017. This is described as an initial tranche of guidance, focusing on the core rules and other aspects where guidance has been specifically requested. Comments are invited by 25 September 2017, with amended and further draft versions to follow in due course.

The latest version of the draft legislation for Finance (No 2) Bill 2017 containing the new rules was issued on 13 July 2017.

The new rules apply to all companies and unincorporated associations subject to corporation tax and have two aims:

  • restriction: limiting to 50% the amount of profit which can be relieved using carried-forward losses for companies with profits above £5m; and
  • relaxation: allowing most carried-forward losses arising from 1 April 2017 to be used more flexibly against the total taxable profits of a company and its group members, without the strict distinction between trading and non-trading profits.

Some restrictions on the use of trading losses and non-trading loan relationship deficits may still apply to those incurred before April 2017, or where trades or investment businesses have become small or negligible. See

The legislation and guidance follows consultation during 2016. HMRC has also published a tax information and impact note.

Issue: 1365
Categories: News , Corporation tax