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Relaxing Corporation Tax loss relief

24th May 2017

Relaxing Corporation Tax loss relief


The government has introduced greater flexibility for company losses carried forward. In the past, it has been difficult for companies to access loss relief where there were different types of trade within a single company. This new change means that single companies in particular, where there is more than one type of trade contributing to the company, have more flexibility in terms of carrying losses forward.

Now, companies can set off a range of items against total profits, including:

  • UK property losses
  • Trading losses
  • Non-trading losses on intangible fixed assets
  • Management expenses
  • Losses from an individual company (set off against profits of other group companies)

This is called ‘loss relaxation’ and should be particularly useful to companies who augment their income streams by selling services or products in two or more trades. So for example, a business consultant who also renovates and sells furniture.

Where your financial year spans the period starting 1 April 2017, you will need to apportion losses accordingly. That’s why we recommend that you talk to your accountant or tax adviser to make sure you are able to take full advantage where it is available.

It is also worth noting that the legislation covering this corporation tax loss relief has been designed to ensure that companies cannot enter into agreements where the main purpose of the agreement is to benefit from the new loss reform rules. In addition, if your business ceases trading and has unused carried-forward losses, they can be set against profits from the final 36 months of trading without any restriction.

Contained in the same Corporation Tax reforms is the restriction of Corporation Tax loss relief, which is covered on our website in a separate article.

To find out more about these changes or to get advice on other corporation tax matters, contact Wise & Co today.

Please note that the proposed tax changes in this article may not now take effect from the date stipulated. The usual timetable to introduce the changes into legislation has been delayed due to the unexpected General Election. Please speak with your advisor in connection with any matters contained in this article.

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