Chapter CTM05250
| Published date | 16 April 2016 |
| Record Number | CTM05250 |
Most trading losses and NTLRDs arising after 1 April 2017 will benefit from the relaxation, which allows relief against total profits of the company. In addition, companies with management expenses, property business losses or non-trading losses on intangible fixed assets that arose either before or after 1 April 2017 will generally be able to deduct these from their total profits.
Carried-forward trading losses and non-trading loan relationship deficits (NTLRDs) that arose before 1 April 2017 can only be set against trading profits and non-trading profits respectively. This also applies to certain post-1 April 2017 losses, for example where a trade or investment business becomes small or negligible (CTM04115).
Where a company has both:
- Streamed restricted carried-forward losses (CTM05020), which can only be set against a particular type of profit, and
- Restricted carried-forward losses that are relevant deductions and can be deducted from total profits,
Then it is necessary to calculate the relevant maxima for trading, non-trading and total profits.
The following example sets out the steps to be taken for each type of loss.
Example
Company B has an accounting period ending 31 March 2021. In that period, its profits are as follows:
- Trading profits of £35 million,
- A non-trading loan relationship credit of £15 million.
Its in-year reliefs (CTM05060) are:
- Management expenses of £5 million,
- Group relief claimed from a group company of £2 million.
This gives a total of £7 million. It chooses to set £3 million against trading profits and £4 million against non-trading profits.
The company’s carried-forward losses as at the beginning of the period are:
- Pre-1 April 2017 trading losses of £15 million,
- Pre-1 April 2017 NTLRDs of £1 million,
- Post-1 April 2017 trading losses of £8 million,
- Post-1 April 2017 NTLRDs of £2 million.
None of the circumstances which could remove the relaxation from the post-1 April 2017 trading losses or NTLRDs have arisen, so both can be deducted from total profits.
The company has been allocated the full £5 million of its group deductions allowance and it chooses to set the full amount against trading profits.
The company is not a life insurance company.
Steps 1 to 4The first four steps apply for the company’s calculation of its relevant maxima for trading, non-trading and total profits.
1- Calculate the modified profits (CTA10/S269ZF(3) Step 1, CTM05040). This is the total profits of £50 million before deduction of...
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