UK and International Tax news

HMRC Consults On The Reform Of Rules For The Relief Of Corporate Capital Losses

Tuesday 6th November 2018

HMRC has issued a consultation document on the Government’s intention to reform the rules for the relief of corporate capital losses from April 2020, as announced in last week’s Budget.

The reform of corporation tax loss relief in 2017 applies to income losses and allows for their offset against the total profits of a company or another company within the same group arising in future accounting periods.  However, from 1 April 2017, the amount of profit that can be relieved by brought forward losses is limited to 50%, subject to an annual deductions allowance of £5m per group. The reform applies to trading losses and some non trading losses but not to capital losses.

The proposed reform of capital loss rules for companies will extend the corporate income loss restriction rules introduced in April 2017 to include carried forward capital losses. As with brought forward trading losses, companies will only be able to use carried forward capital losses to offset against up to 50% of future capital gains. To ensure that the restriction only impacts on companies making substantial gains, the condoc proposes to extend the allowance of £5m to capital losses as well.

According to HMRC, this will ensure that over 99% of companies remain financially unaffected by both restrictions.

The consultation will run from 29 October 2018 to 25 January 2019. Draft legislation will then be published in summer 2019, allowing a period of technical consultation ahead of its inclusion in the 2020 Finance Bill.

If you would like further information on the proposed reform, please contact Keith Rushen on 0207 486 2378.


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